Lacking enough funds to stay afloat and honor commitments to the foreign oil companies in the region, the KRG has passed a law that would allow it to raise funds through a bond issue, a move that could be interpreted as Erbil acting as a state within a state. It has retained Deutsche Bank and Goldman Sachs to act as managers and arranged a series of meetings with international fixed income investors in London, “with a view to a potential transaction in the near future.”

Baghdad has yet to comment on the planned bond issue and it is far from certain that investors will flock to subscribe to an untested investment vehicle at a time of such turmoil in the country and the Middle East region as a whole. With Europe now focused on the Greek debt crisis, potential investors are likely to be more risk averse despite the apparent benefit of supporting the KRG, which has proved an effective buffer against a further advance by IS in the north. Its main draw is the promise of what Erbil claims is 40-45bn barrels of proven oil reserves, much of which might remain in the ground as foreign operators have slowed both production and exploration activity as a result of the financial crisis. (CONTINUED - 213 WORDS)