The nightmare began for Sherwan Sherwani when six police cars pulled up outside his family home on the outskirts of Erbil, capital of Iraq’s Kurdistan region. At least 10 officers stormed the house and chased the 38-year-old freelance journalist upstairs, eventually pinning him down with a gun to his head. The arrested man was later accused by the region’s prime minister of espionage.

His wife, Rugash Izzadin Muhaeiddin, who witnessed the October 7 arrest alongside two of their children aged eight and 12, describes it as “terrifying and brutal”. She says she knew her husband had a dangerous job. For nearly 15 years he had written articles criticising the Kurdistan Regional Government, which holds semi-autonomous rule over Iraq’s majority Kurdish territories.

He had brushed off earlier pleas from his wife to stop writing. And ignored his family’s traditional support for the ruling Kurdistan Democratic party — controlled by the powerful Barzani family — to continue reporting on anti-government protests, alleged human rights abuses and land grabs by officials. “[The authorities] had been accumulating what they call these crimes, [his criticism], for a long time,” says Muhaeiddin, an economics teacher.

Sherwani was one of five people from north-west Iraqi Kurdistan to be rounded up and arrested in October. What they had in common was their involvement in either organising or reporting on anti-government protests over unpaid public sector wages in 2020. All were later charged with threatening national security. A week before their trial opened in February, Masrour Barzani, KRG prime minister, told reporters that the detainees were “neither activists nor journalists. Some of them were spies, they spied for other countries”.

All five were subsequently sentenced to six years in prison for offences ranging from spying to trying to organise armed struggle, after a trial that was condemned by Human Rights Watch as “marred by serious violations of fair trial standards as well as high-level political interference”.

The espionage charges hinge on links between the accused and German and US officials, as well as American lawyers, and a social messaging group the five men had used to share information about protests. The US Embassy in Baghdad said it had “followed [the case] closely”, but stopped short of criticising its regional ally which was crucial in the defeat of jihadist group Isis.

Yet the convictions have sparked rare international condemnation, putting a spotlight on the authoritarian drift of a quasi-state dominated by two families, the Barzanis in the west of the region and the Talabanis, who control the Patriotic Union of Kurdistan, in the east. Their influence extends deep into the business and security apparatus of Iraqi Kurdistan — an oil rich region of 5m people.

Iraqi Kurdistan map

The convictions were upheld at an appeal hearing last week, when the KRG insisted the judiciary had acted independently of government. However, in a rare display of public frustration with the KRG, the German consulate in Erbil slammed the appeal court decision.

“Free exchanges with journalists [and] activists are part and parcel of [a] diplomat’s daily work, also of tweeted the consulate. “The court’s reference today” — to the accused having met with German officials — “is absurd [and] goes against the spirit of our close and friendly relations between [Germany] and [the KRG].” The judgment, said the Germans, lacked “clear proof of punishable crimes”.

In a 2020 report, Freedom House, a human rights monitor, said the KRG authorities had “intensified the persecution and harassment of media outlets and journalists, particularly those covering anti-KRG protests relating to economic hardship and corruption.” The authorities have previously denied such claims.

Jotiar Adil, a spokesperson for the KRG, says the government is “committed to freedom of speech,” describing Kurdistan as “a beacon of tolerance in a turbulent region”.

Iraqi Kurdistan won semi-autonomy from Saddam Hussein’s Iraq thanks to a western-backed no-fly zone imposed in 1991. It was designed to halt the Iraqi dictator’s genocidal campaign to crush an uprising by Kurdish fighters in the late 1980s that killed almost 200,000 people. The no-fly zone helped the Kurdish leadership — with the Barzani and Talabani families at the top — to carve out a form of autonomous rule over the oil-rich enclave stretching along Turkish, Iranian and Syrian borders.

The region “has had a government in some form for 30 years”, says Megan Connelly, a US-based expert on Kurdish issues. But where once the Kurds had publicly committed to developing democratic government, she says: “This generation [of leaders] are more committed to the idea of authoritarian governance . . . they are discarding this idea that democracy has an important role.”

Western nations are reluctant to be openly critical, say diplomats, because they rely on Iraqi Kurdistan as a bulwark against Islamist terrorism. In 2014, when Isis rampaged across Syria and Iraq hundreds of thousands of refugees fled northwards to Kurdistan. The Kurdish authorities pulled together a resistance, with western support, to protect an area which has prospered from relative stability compared with chaos-wracked central Iraq.

Iraqi Kurds were seen as the “‘good Kurds’ according to the Americans,” says Dara Salam, lecturer at London’s School of Oriental and African Studies and originally from Iraqi Kurdistan. “These two parties [the KDP and the PUK] were never anti-American, and for that reason America is still familiar with these political leaders,” he adds.

The Iraqi Kurds’ good graces with the invading Americans in the early 2000s, when they helped oust Saddam, earned them official autonomy and power to negotiate oil contracts separately from the central government. It was not an independent state and constantly squabbled with Baghdad over money and security issues. Yet the Kurds’ long cherished dream of self-rule took shape, marketed as a business-friendly fledgling democracy: “the other Iraq”.

But rather than a pluralistic democracy flourishing under western auspices, there are today in effect “only two families that rule, each of them in its own zone,” says Ali Hama Salih, an MP with the opposition Gorran party, “The parliament, ministers, all those things you see,” says Salih, “it’s just for show.”

Qubad Talabani, deputy prime minister of the KRG, points out that there are other major politicians not related to the Talabani or Barzani families in government, and that he and other top level party members had gained their positions through elections.

“Given how prominent the families are and how heavily involved they’ve been in the Kurdish political resistance movements over the last 60, 70 years, obviously that has opened doors for us,” he adds, “but doors that we’ve had to walk through.”

The region was ripped in half by a 1994 civil war between the populist KDP and leftwing PUK, co-founded by Jalal Talabani. And although the two parties have since formed a united regional government, in practice, both still administer their own half of the region: western Kurdistan is still called the “yellow zone,” after the dominant colour on the KDP flag, while the PUK-dominated east is the “green zone”.

The KDP holds the most seats in parliament — 45 out of 111 to the PUK’s 21 — and members of the Barzani family occupy the offices of KRG president and prime minister.

Since the 2000s, says Salam, the two parties “domination of the region’s economic resources” has allowed them to “exert their influence through both repressive means and creating a mass of party loyalists [via jobs]”.

Those resources are considerable: gross crude oil sales from the region were estimated at $4.5bn in 2020, according to analysis by the Institute of Regional and International Studies at the American University of Sulaimani.

But anti-corruption campaigners and opposition MPs ask where the oil money has gone. Farman Rashad, an anti-graft activist, analysed a Deloitte audit of the oil sales for the first nine months of 2020. “We found out only 29 per cent of oil money has gone back to the government,” he says.

Talabani, the deputy prime minister, says that the KRG is doing “everything we can to bring down costs”.

The oil contracts’ chief negotiator was former prime minister and now president Nechirvan Barzani — the international face of the family. Rosneft, Russia’s largest oil producer, has invested more than any other oil major in Kurdistan, some $3.5bn, controlling 60 per cent of the KRG’s main oil pipeline. Other groups including ExxonMobil, Total and Chevron also pump Kurdistan’s oil. There is a perpetual dispute over the distribution of revenues, with Baghdad insisting that the KRG share its oil exports in return for its slice of the federal budget.

Yet the KRG’s oil production contracts mean most proceeds go to foreign and local oil businesses, including fees for using a pipeline that pumps the oil to a Turkish port and to pay down debt owed to the companies. The IRIS study calculated that in 2020 40 per cent of total oil revenues were paid to oil companies, with a further 21 per cent spent on transportation costs, leaving the Treasury with an estimated $1.6bn of the $4.5bn gross sales.

Barzani supporters say the family keeps Kurdistan safe while nurturing prosperity. Critics that security has come at too high a price: “You don’t talk about the [Barzani] family itself,” says medical worker Namiq, whose second name the FT is withholding. “You can criticise the party, but the family is sacred.”

The region’s security is overseen by sprawling military and intelligence agencies loyal to either the KDP or PUK. Masrour Barzani was head of intelligence for decades. The KRG relies on western powers for military support, asking the US — which set aside $126m in stipends for Peshmerga fighters in 2020 — to increase funding for the officially recognised militia as recently as February, despite the fight against Isis having slowed.

For western powers that use Kurdistan’s military bases, stability has always been the top priority. But given this unconditional financial support, says Connelly, “it seems like we should wield a little bit more clout than we actually are” on the issues of corruption and human rights.

The allegations of widespread corruption are not wholly new. A 2006 US diplomatic cable described “extreme corruption,” boosting the two parties and deterring foreign investors. Disclosed by WikiLeaks, the cable described the economy as “tightly wrapped in the tentacles of the KDP and PUK” — sentiments which diplomats and businesspeople still share in private.

“The corruption is worse than Baghdad,” says one Lebanese businessman who owns companies across the region, when asked why he would not do business in Kurdistan. “I won’t play by those rules.”

Foreign investment, which flooded into Kurdistan after Saddam’s downfall, has not bounced back since the Isis crisis in 2014. Figures published by the region’s Investment Board show that foreign investment into licensed projects hit a high of $2.4bn in 2013, before crashing to just $25m the following year. It recovered slightly in 2015 and 2016, but since 2017, the Investment Board shows no record of any foreign capital investment.

“Kurds did not invent corruption,” says Sadi Ahmed Pire, a PUK spokesperson. But, he adds: “We recognise the existence of corruption within governmental and political party institutions and we are committed to confronting and minimising it.”

With the threat from Isis diminished, the biggest external security threat to Erbil this year has been a spate of rocket attacks by Iran-backed Iraqi Shia militias, targeting bases hosting US troops and Turkish soldiers. The region’s internal order, however, is being buffeted by frequent protests over living standards. A heavy crackdown on demonstrations in PUK-ruled Sulaymaniyah late last year killed at least eight people, according to local news reports.

It is not the first time that the KDP and PUK have faced street protests, but the spark for the recent unrest was unpaid government salaries.

An estimated 1m people in Kurdistan — or about one in five — receives a state salary or pension. Analysts say the hiring boom — which began in the mid-2000s with both parties using their positions in government to influence recruitment — was designed to buy political support. “Once you get benefits, you have to be loyal,” says Rasho, a former intelligence officer who asked not to give his second name. Others complain that without political connections, you cannot access government employment.

Payment problems, which first arose during the 2014 oil price crash, hit again in 2020 with another fall in crude prices due to the pandemic. By February, the government had cut public sector wages by 21 per cent and blamed Baghdad for not sharing oil revenues. With the whole economy dependent on salaries, traders say business is down, but the deputy prime minister says a new budget deal with Baghdad should help “stabilise the salary situation”.

Public sector employees including teachers and doctors have organised demonstrations. But activists say they face harassment and intimidation.

Shayan Askary, a physician, was prosecuted over a video she posted online from a 2018 wage protest in Erbil. Askary, since elected to parliament as a Gorran MP, alleges she received indirect threats from KDP members over the video which showed a man knocking a phone out of her hand. “The [security authorities] are taking our rights and taking our freedom also to complain also about these rights,” says Askary, who lost her case and was fined.

For its part the KRG says it is weeding out hordes of what it describes as non-working “ghost employees”, people who collect state salaries without performing any duties. It is part of a reform programme designed to slim government, transfer management of key services to the private sector and increase tax collection.

“The two main sides who have profited from this situation in the past are the Barzani and Talabani families,” says Rashad, referring to the parties’ alleged control over access to jobs. “Some question whether they are the right people to do reforms.”

As for those who tried to call out corruption, Muhaeiddin says her husband Sherwani had long faced attempts to silence him: “He was offered any salary he wanted [by officials] just to stop his writings . . . If he had listened to them, maybe we would be living in Dream City”: a $300m Erbil housing development. Sherwani had been trying to find a non-journalism job — but his wife says his applications were unsuccessful.

Now raising four children alone, she still thinks Sherwani was right to keep publishing, quoting a Kurdish saying: “to be oppressed is better than to be an oppressor”.