In one of my columns earlier this month (“Iraqi Nationalists Should be More Careful What they Wish for”), I sounded a warning about Prime Minister Nuri al-Maliki’s increasing monopolization of power in Baghdad. Since then, some better news emerged: Baghdad and Erbil appear closer to resolving their dispute over hydrocarbons. It seems that Baghdad is finally coming around to Erbil’s point of view on the issue.

The Kurds never disputed the principle that oil revenues be shared proportionally by all Iraqis. They just insisted that management of Iraqi oil resources be conducted jointly by the central government, the regions and governorates, rather than by Baghdad alone. This also happens to be what Iraq’s Constitution demands: Article 112 of the Constitution states that “The federal government, with the producing governorates and regional governments, shall undertake the management of oil and gas extracted from present fields...” and “The federal government, with the producing regional and governorate governments, shall together formulate the necessary strategic policies to develop the oil and gas wealth in a way that achieves the highest benefit to the Iraqi people...”

Baghdad appears to have finally conceded the issue, and a committee with representatives from the Kurdistan Alliance, al Iraqiya (a mostly Sunni Arab list of parties) and Maliki’s State of Law party was just formed to draft a hydrocarbons law that might actually get ratified this time.

This is very good news, and only leaves two issues of major contention between Baghdad and Erbil (besides Prime Minister Maliki’s efforts to unconstitutionally monopolize power, that is). The first is easy enough to resolve: Kurdistan’s National Guard, the peshmerga, are supposed to be paid for by the central government’s Ministry of Defense. During the past five years, no funds were forthcoming. The amount of money required is not that large, however, and Baghdad was probably just stonewalling out of greed or as a way to pressure the Kurdistan Regional Government (KRG) on other issues. There is now finally serious talk of starting the payments, which Baghdad should have viewed as good policy a long time ago: It would in a sense make the KRG more dependent on the central government.

This only leaves the “disputed territories” issue, otherwise known as “Article 140" of the Iraqi Constitution. This articles stipulates three things: 1) People expelled from Kirkuk and other regions during previous governments’ Arabization campaigns be allowed to return and compensated for their losses, and settlers brought in under previous regimes return to their places of origin in the south – a process called “normalization”; 2) A census be conducted in the disputed territories; and 3) A referendum be held to determine of the people of these areas wish to remain under Baghdad’s federal authority or become part of the Kurdistan Autonomous Region.

One can see why they have left the best for last. The first deadline for this article to be enacted was December 31, 2007, and since then a number of others were missed as well. Nothing seems to happen when it comes to moving Article 140 forward. That’s because of several problems. First, the article remains terribly ambiguous – what proportion of the people need to vote ‘yes’ for joining the Kurdistan Region? What if an entire subdistrict votes ‘no’ but a province as a whole votes ‘yes’? How shall the question be phrased, and who gets to vote (people expelled during the Arabization campaigns who have not returned, settlers, or just “bona fide” residents?)? Second, both a census and a referendum threaten to turn disputed territories into powder kegs of political violence as various groups try to influence or derail the process. Third, the whole issue is politically toxic: no Arab politician at this point can afford to be seen as “giving Kirkuk” (or other territories) to the Kurds. Doing so would amount to political suicide for them. Finally, no Kurdish leader feels like they can afford to retreat on Article 140, given how much they already said and staked on the issue.

Although I know that this will be an unpopular thing to say in Kurdistan, conceding something on Article 140 is nonetheless exactly what Kurdish leaders need to do now. Baghdad is in the process of essentially giving in to Kurdish demands regarding the oil law and the peshmerga. If they give a bit, Kurdistani leaders need to consider doing the same.

The concession need not be a real loss for Kurdistan, however. Iraqi federalism currently suffers a possibly fatal weakness: there is only one region in Iraq. Kurdistan stands alone vis-a-vis Baghdad on these disputes, especially as long as the governorates fail to achieve much in the way of autonomy. Some twenty per cent of the country’s population (mostly Kurds) find themselves and their region face-to-face with a federal government that directly represents the remaining eighty per cent of the country (mostly Arabs). In states like Canada, Switzerland and India, three or more regions together make up federal systems that work.

Kirkuk could thus keep its present governorate boundaries and become a region (via a governorate-wide referendum, as permitted in the constitution). If Kirkuk really does have a majority of Kurds, the Kurdistan Region would then have an ally in its relations with Baghdad and arguments about decentralization. What’s more, Kirkukis (whether Turkmen, Arab, Kurdish or Christian) would enjoy their own distinct autonomy rather than more dictats from Erbil instead of Baghdad. Currently, the Kurdistan Region has a fairly centralized government – surely the same arguments about why Baghdad should cede power to local governments could apply to other cases as well?

If other disputed territories formed regions, or even if Anbar or southern governorates did so, a Federacy Council might also finally be formed (as the constitution envisioned in Article 65, but never happened). That Council could wield real power, including on issues such as oil and gas, and thereby help make Iraqi federalism work the way it was supposed to.

* David Romano has been a Rudaw columnist since August 2010. He is the Thomas G. Strong Professor of Middle East Politics at Missouri State University and author of The Kurdish Nationalist Movement (2006, Cambridge University Press).