Kurds hope oil boom will fuel prosperous independent future

Inside the lobby of Kurdistan's parliament, flanked by guards in traditional baggy trousers, is a giant portrait of Mustafa Barzani. The Barzanis have been fighting for Kurdish independence since the 1880s. They battled the Ottomans, the British and Baghdad. In a colourful life, including exile in Iran and the Soviet Union, Barzani tried to establish a Kurdish state. He died in 1979, in the US. Now, it seems, his moment has finally arrived.

On one floor, technocrats are discussing how to manage Kurdistan's enormous oil wealth. On another, the referendum announced last week by Barzani's son, Massoud, the current president of Iraqi Kurdistan, who asked the parliament to set up a new election commission. The vote – to be held later this year or early next – will determine whether disputed regions taken last month by Kurdish troops should join Kurdistan, and sets the stage for Kurdistan's exit from a crumbling federal Iraq.

"A greater Kurdistan is the dream of every Kurd. But for now we want to set up a state in this country," said Dr Farsat Sofi, an MP from Barzani's dynastic Kurdish Democratic Party (KDP). He added: "We never wanted to be in Iraq in the first place. It's been forced upon us." Sofi said the door was closing on agreement with Nouri al-Maliki, the prime minister in Baghdad, and his Shia-dominated government. "If he continues like this we will use this right to self-determination," he said.

Since 2003, Kurdistan's regional government in Irbil, the KRG, has been locked in a bitter dispute with Iraq's federal leaders in Baghdad. The row encompasses revenue sharing, the implementation of the 2005 constitution – which is supposed to determine what happens to contested territories outside the autonomous Kurdish region – and al-Maliki's alleged dictatorial tendencies. "He would do anything to stay in power. He wants to rule Iraq in a centralised way," Sofi said.

This row has dramatically worsened with the rise of Isis, the Sunni insurgent group that now calls itself the Islamic state, and controls a swath of northern Iraq after a lightning offensive last month. The Iraqi army vanished in the face of the jihadi advance, but Kurdish fighters moved into the predominantly Kurdish city of Kirkuk, and other disputed areas, saying they were defending them from Isis. The KRG says it had repeatedly warned al-Maliki of the Isis menace to Mosul, Iraq's second city – only to be ignored.

But the dispute is as much about money as Kurdish demands for statehood – specifically who gets Iraq's oil. "For the past eighty years the Iraqi state has been stealing Kurdish oil," Hemin Hawrami, head of the KDP's foreign relations committee, said bluntly. "They [Baghdad] used it to buy weapons to bomb the Kurds." According to Hawrami, Kurdistan has the ninth largest oil reserves in the world – an estimated 45-50bn barrels. It is currently exporting 125,000-130,000 barrels a day via a new spur that links to an existing pipeline in Turkey.

Under the constitution, Kurdistan is meant to get a 17.5% share of Iraq's oil revenues. The KRG accuses central government of underpaying. Baghdad's oil ministry, meanwhile, says the Kurds are illegally stealing the nation's oil. In February al-Maliki refused to hand over any money for Kurdistan's budget. The Kurds say they are legally entitled to sell oil, and need it to pay public salaries. They have exported it, on and off, since 2009, cutting deals with oil giants such as Exxon Mobil, Chevron and Gazprom.

On Friday the KRG took another significant step in its feud with Baghdad, seizing two major oilfields near Kirkuk: Bai Hassan and Makhmour. The regional government says it was forced to act after Baghdad instructed staff at the oil fields to sabotage production. Iraq's main oil pipeline to Turkey, which crosses territory held by Isis, has not worked since early March, when an armed group in Nineveh province bombed it. Baghdad has also lost control of its Baiji refinery. The central government is furious with Irbil. But with the Iraqi army in disarray it is powerless to act.

The Kurds say they have tried repeatedly – but unsuccessfully – to reach a deal over oil revenues with al-Maliki. "It's Iraq that is disintegrating. Our independence is the result of Iraq's collapse," said Sardar Aziz, a senior adviser to the cross-party energy committee of Kurdistan's parliament. Aziz said he wanted a sovereign Kurdistan to use its oil wealth wisely – like Norway – rather than become a rentier state – like Venezuela or Saudi Arabia. "Overall Iraq's economy is wasting resources. The corruption and patronage in Baghdad is sky high. We have it here [in Kurdistan] too but not to the same extent," he said.

Sitting in the KDP's politburo, in a mountain resort outside Irbil, Hawrami said the Kurds were pursing a "two-track" political process. For the moment, he said, they were trying hard "to help our Sunni and Shia brothers put an end to the fighting in Iraq". But for this to have any chance of success there had to be a new government in Baghdad, he said, adding: "Maliki must go. He is part of the problem, not the solution."

At the same time, "preparations" were underway for an independent Kurdistan. The west – "our friends", as Hawrami put it – should get used to the idea that Iraq as a federal entity is finished. The new Kurdistan would be bigger than the old one – having gained 40,000 square kilometres. It would include Kirkuk, with its oil wells, and the disputed territories occupied by Kurdish troops, he said. "This area is de facto ours. Geographically and historically it's ours. It's going to be de jure as well," he said confidently.

For the moment, though, the international community opposes Iraq's break-up. On a visit to Irbil late last month, US secretary of state John Kerry met with Barzani, and urged Kurdish leaders to support a new national government in Baghdad. Since then, though, al-Maliki has accused the Kurds of hiding Isis fighters in Irbil – an unlikely claim that left the Kurds furious. On Friday the Kurdish political bloc pulled out of his government, though it is still in the federal parliament. Twitter buzzed with photos from the 1990s of al-Maliki standing with Kurdish leaders, when the Kurds offered him sanctuary.

Hawrami said tactfully that Washington now has a "better understanding" of Kurdish positions. "If they don't support it [independence], privately they don't reject it," he claimed. Influential regional players are also opposed – most notably Iran. Last week Iran's deputy foreign minister, Hossein Amir-Abdollahian, described Iraq's apparent break-up as a "Zionist plot". This is not true, but Israel has come out in support of Kurdish independence, seeing a moderate, democratic Kurdish state, as a bulwark against Arab terrorism.

In the past Turkey – with its own large, restive Kurdish minority – has been vehemently against to an Iraqi Kurdish nation. But over the past five years Anakara has undergone a major strategic shift. It no longer regards Irbil as a threat, rather as a commercial and diplomatic partner. In 2011 the Turkish prime minister, Recep Tayyip Erdogan, even opened Irbil's gleaming new international airport; and Turkish companies have helped build the pipeline pumping Kurdish/Iraqi oil to the Turkish port of Ceyhan.

Back at the parliament building, with its decorative fountain, the Iraqi and Kurdistan flags were both still flying – at least for now. There was optimism that statehood was very close. "We can change the future of this country," Sofi said.