Note: This excerpt is from a report that is available to subscribers of Stratas Advisors’ Geopolitical Risk Outlook and Middle East services.

As the civil wars in Iraq, Syria and southeastern Turkey continue to rage, the possibility of a sovereign state of Kurdistan emerging from the ashes appears from a bird’s eye-view closer than ever. This would have tectonic geopolitical implications for the Middle East and potentially dramatic consequences for energy producers in northern Iraq and beyond.

Whether the Kurds attempt to claim independence one year or 10 years from now, once the Iraqi military concludes its campaign against the Islamic State in Mosul and its surrounding territory, it will seek to reacquire territories disputed between Baghdad and the Kurdistan Regional Government. Securing the energy resources and infrastructure within those territories will be one of the primary objectives. Therefore, the elimination of the Islamic State will not bring peace and stability to Iraq.

Oil production from the Kurdistan Regional Government (KRG) averaged 527,000 barrels per day (bbl/d) in the first nine months of 2016—9.3% of Iraq’s total production of 5.66 million barrels per day (MMbbl/d) within the same time period but far short of the KRG’s 2015 target of 1 MMbbl/d. The KRG’s exports averaged 447,744 bbl/d in the same time period—13.5% of Iraq’s total exports of 3.31 MMbbl/d in the first nine months of 2016.

The KRG attributed the shortfall to Islamic State attacks and low international oil prices. These two challenges disrupted operations and discouraged foreign investment.

Islamic State attacks on oil infrastructure in the region include the Qaiyara oil field, located 70 km south of the Islamic State-occupied city of Mosul. The Islamic State forced Angolan oil company Sonangol out of Qaiyara in March 2014 under a force majeure declaration. The Iraqi government asked the company to return in January 2017 after Iraqi military forces cleared the area of hostile forces. Before the Islamic State seized them, the Qaiyara and proximate Najmah fields produced 30,000 bbl/d.

About 20 km southwest of Kurdish-controlled Kirkuk, explosions on two oil wells at the Khabbaz Field on May 4, 2016, disrupted production of about 10,000 bbl/d. The field has a reported production capacity of 15,000 bbl/d. Another attack on a gas facility in the area on August 2, 2016, killed five people. Both attacks were attributed to the Islamic State.

Northwest of Kirkuk, Islamic State forces stormed the Bai Hassan oil field on July 31, 2016, killing an engineer and detonating oil tanks. The tanks pump crude via pipeline to the city of Ceyhan in Turkey. Production at Bai Hassan was temporarily halted. On Feb. 25, 2017, the IS detonated four bombs in proximity to this pipeline, killing one member of the Kurdish security forces and wounding two others. The KRG exports 150,000 bbl/d from the Bai Hassan and Havana oil fields.

The Kurdish Question

The Kurds are estimated to number more than 28 million and the territories in which they reside include not only oil-rich areas of Iraq but also oil- and agriculture-producing regions of northern Syria, industry-concentrated areas of southern Turkey, and mountainous areas of northwestern Iran. These material and geographical resources could provide them with a considerable resource base upon which they might consolidate an independent state if they were able to acquire the weaponry and foreign patronage to do so.

Considering the current financial, economic, domestic and geopolitical variables, it is improbable that a state of Kurdistan will materialize in the foreseeable future. The Kurdistan Regional Government in northern Iraq—the most viable vehicle of sovereignty for this stateless nation—is burdened with debts to international energy companies and riven with political rivalries.

Its most important diplomatic patron, the United States, will probably remain too hesitant to aggravate neighboring governments that are far more powerful than the KRG—namely Iraq, Turkey, and Iran—to supply the weapons and other support the KRG needs to achieve independence. The U.S. national security establishment understands that the cooperation or at least not active resistance of these governments is critical to the U.S.’s counter-terrorism campaign against the Islamic State and associated Islamist extremist groups. These extremists still number in the tens of thousands despite an estimated 40,000-50,000 killed by the US-led coalition alone over the last two and a half years.

Nevertheless, the Kurds have leverage in the form of the U.S.’ dependence on them as one of the more formidable and cooperative ground forces against the extremists. How effectively they will exert that leverage to enable them to achieve their own objectives remains to be seen.