On the potholed road into Erbil, just after the final checkpoint, a battered advertising board boasts: ‘Erbil – 2015 Capital of Tourism’. As the drive takes you into the city, evidence mounts that this bold statement may have come too soon. The dusty streets do not lack in liveliness or colour, but the slapdash architecture is without charm, and the hotels needed to accommodate greater numbers of tourists are hulking shapes of grey, construction sites with little sign of activity.

There are reasons for the mismatch between ambition and reality. The Kurdish region of Iraq, long regarded as a beacon of progress in a country mired in sectarian strife, has not been able to escape the conflict that has raged since the jihadists of the Islamic State of Iraq and Syria (Isis) surged into Iraq last year.

Still mistrustful of Baghdad after suffering under Saddam Hussein’s brutal regime for decades, the Kurds suddenly found themselves with a new threat at their border, and Isis lodged only 50 kilometres from Erbil.

Stalled investment

An advance on the capital was beaten back with the help of US air strikes, and the front lines have firmed, but deteriorating security has caused investment into the region to stall, and Erbil to be removed from the destination list of any but the most hardy of travellers.

More than anything, it is the oil industry that has suffered. The Kurdistan Regional Government (KRG) has confidently promoted the exploitation of its abundant hydrocarbon resources, striking contracts independently of the central government and building an export pipeline to Turkey.

A protracted legal wrangle with Baghdad over independent Kurdish exports has already dampened the enthusiasm of oil men with a stake in the KRG’s energy sector, and the Isis risk premium has further reduced commitments. This has hit local companies hard. Kurdish oil field service providers bemoan the lack of tenders, and their bidding strategy has degenerated into a desperate scattergun approach.

Refugee camps

The pullback by energy companies is juxtaposed by the inflow of Syrian refugees and internally displaced persons that have fled the civil war in Syria or the advancing jihadists. The western tip of the autonomous region, in particular, is littered with refugee camps: vast tent cities or sprawling container complexes.

With the humanitarian crisis came the aid workers, changing the complexion of the expatriate scene. Erbil’s bars and hotels, once frequented mainly by grizzled oil workers, are now filled with a more idealist, younger crowd. Where talk of rigs and drilling logistics once predominated, the chatter is now about food aid, sanitation and education programmes. Private security contractors have also flocked to the region, adding a smattering of bearded, rugged-looking types.

In spite of the menace of Isis, life in Erbil goes on largely as normal. Security has been beefed up, but groups of Kalashnikov-wielding uniformed Peshmerga militia are nothing new. The omnipresence of firearms in everyday life seems quite normal in a corner of the world where an assault rifle is part of most households.

Even the car bomb that shook the US consulate on 17 April only briefly shattered the calm in Ainkawa, the Christian district. Just days after the explosion that killed two, attention had moved onto other issues; in times of crisis the past is rarely as important as the future.

Terrorism setback

That future will be dominated by the fight against terrorism, a setback for a city that lapped up the ‘New Dubai’ moniker bestowed on it in the boom years. In truth, Erbil is light-years behind Dubai, and would be even if Isis had not come knocking. The KRG territory may be an upgrade on the rest of the country, but its infrastructure ranges from dilapidated to non-existent, and it is still in the lower reaches of the ease of doing business index.

A visit to any government ministry reveals a worrying level of competence, and a bloated bureaucracy that leaves little doubt as to where the bulk of state revenues end up.

But it is not all bad. Late last year, the KRG and Baghdad hammered out a revenue-sharing deal that unlocked Kurdish oil exports. It is no more than a first step towards resolving a protracted dispute that has blighted the prospect of hydrocarbon riches for Erbil, but it does offer hope. If the Kurds manage to fulfil their production potential, they have a shot at becoming if not Dubai then the new Abu Dhabi.