InterRegional for Strategic Analysis

On September 2, 2024, the Prime Minister of the Kurdistan Region of Iraq, Masrour Barzani, met with Sheikh Ahmed Suhail Bahwan, Chairman of Bahwan Holding Group, and Louay Jassim Al-Kharafi, CEO of Al-Kharafi Group, to discuss opportunities for joint cooperation in renewable energy with government and private entities in the region. They held bilateral meetings with high-level governmental and economic entities in the region to explore enhancing Omani-Kuwaiti investments in Kurdistan, in accordance with the requirements of USAID and the UNDP.Various Motives There are several reasons why Oman and Kuwait are seeking to increase their investments in Kurdistan. These can be reviewed as follows:1- Strengthening relations with Kurdistan: Kuwait and Oman are seeking to strengthen ties with the Kurdistan Region, with Kuwait making concerted efforts to diversify its interests there. For example, recent high-level meetings involved Nechirvan Barzani, President of the Kurdistan Region, meeting Kuwait's Foreign Minister Abdullah Ali Al-Yahya at the Munich Security Conference in February 2024. Likewise, Masrour Barzani met with Kuwait's ambassador to Iraq, Tariq Abdullah Al-Faraj, to discuss cooperation in May 2024. Oman also aims to boost ties with Kurdistan but prefers to do so in partnership with other states, focusing on economic cooperation. Oman focuses on economic partnerships with Kurdistan, even though this might cause tension with Baghdad. Kuwait and Oman are utilizing Kurdistan’s pivot to strengthen cooperation with Arab Gulf countries. Kurdistan has allowed in February 2024 citizens of 53 countries, including GCC countries, entry to its territory without visa. This aims to boost tourism between both sides.2- Engagement with broader Iraq: Increased Kuwaiti and Omani involvement in Kurdistan opens pathways to build relationships with broader Iraqi political factions. Baghdad’s recent efforts to engage more openly with Gulf countries, and reduce reliance on Iran, have created opportunities for Kuwait and Oman to align their regional activities.3- Benefitting from mineral resources in Kurdistan: Oman and Kuwait see opportunities to exploit Kurdistan's rich mineral resources, which include iron, chrome, nickel, gold, and other minerals critical for industrial development in the Gulf. The minerals are in high demand globally, making them an attractive area for investment, particularly amid possible declining oil demand. Moreover, continued tensions over oil between Baghdad and Erbil will shift the focus to other resources, particularly mineral wealth. It is expected that mineral resources will become an area of contestation between countries of the region.4- Involvement in regional transport projects: Oman and Kuwait are looking to participate in regional transport projects announced in recent years. These projects include the IMEC economic corridor, connecting India, the Middle East, and Europe. Although Kuwait is not directly on this route, it can still benefit from Iraq’s Development Road passing through Kurdistan, giving Kuwait access to Turkey and Europe. This increases the region’s significance as an investment hub, particularly for renewable energy.Relying on Kurdistan as a hub to link Iraq and Turkey via the Iraq Development Road will increase the importance of the region and make it more attractive for investments, which will then boost the revenues of the Omani-Kuwaiti alliance that wants to invest in renewable energy. This will also increase economic activities in Kurdistan, especially with establishing a railway line connecting it with Turkey. The Ministry of Transport and Communications in the Kurdistan Regional Government, the Director General of Iraqi Railways, and the Italian company implementing the railway project, signed a Memorandum of Understanding on May 23, 2024 regarding the Iraqi "Development Road."5- Expansion of Kuwaiti and Omani companies abroad: The growing interest of the Kuwaiti-Omani alliance to invest in renewable energy in Kurdistan underlines its interest to increase the two countries’ presence abroad, with a focus on areas where there may not be strong competition. The Omani and Kuwaiti companies work in diverse sectors and many countries.The partnership between Omani and Kuwaiti companies like Bahwan and Al-Kharafi also aims to minimize investment risks in a region that experiences political and security instability. This investment will likely improve diplomatic ties with the Kurdistan Region and provide a springboard for further ventures in sectors like tourism, agriculture, and mining.Kuwait and Oman view Kurdistan's growing renewable energy sector as a promising investment. The Iraqi parliament is currently drafting a new bill for renewable energy in order to overcome its electricity shortage. Government figures show that Kurdistan needs 4,500 MW of electricity, of which only 3,400 MW is currently generated. This highlights a significant opportunity for renewable energy investments. The Kurdistan government aims to increase renewable energy's contribution to its energy mix from 20% to 80%.In conclusion, despite the economic gains that both Kuwait and Oman seek from their investment in the Kurdistan Region, there are also some political considerations, as both sides aspire to increase their presence in the region. Kuwait strives to balance its relations with Baghdad, whereas Muscat aims to boost its presence in larger parts of the Middle East.&nbsp;

Why Are Kuwait and Oman Increasing their Investments in Kurdistan?