U.S. policy in Iraq since the early 1990s has been a cascade of disasters. Not only did Washington’s campaign against Saddam Hussein remove the principal regional strategic counterweight to Iran, but it set into motion developments that have turned Iraq into a cauldron of chaos. The rise of ISIS is only the most recent and devastating manifestation. Less obvious, but still depressing, developments include the evisceration of Iraq’s once-vibrant Christian community and the erosion of women’s rights in the portion of the country controlled by the Shiite-dominated regime in Baghdad.

One consistent bright spot in this wreckage of a policy was the emergence of what appeared to be a prosperous, democratic Kurdish region in northern Iraq. True, the notion that Iraqi Kurdistan was merely a semi-autonomous region within a united Iraq was little more than a convenient diplomatic fiction. The reality was that Kurdistan was an independent state in everything but name, with its own military force (the Peshmerga), its own flag and its own currency. As time went on, the Kurdistan regional government (KRG) in Erbil increasingly bypassed the central government to strike lucrative deals with foreign corporations, especially to sell oil on the international market—often over Baghdad’s explicit objections.

Washington viewed Erbil’s actions with a mixture of admiration and uneasiness. On the one hand, Kurdistan was the one portion of Iraq that was consistently pro-American and seemed committed to both democratic and capitalist values. On the other hand, Erbil’s increasingly brazen displays of independent behavior undermined the official U.S. fiction that Iraq remained a united country. The existence of a de facto independent Kurdish state also greatly agitated Washington’s NATO ally, Turkey. Ankara regarded Iraqi Kurdistan as the probable embryo of a Greater Kurdistan that would eventually seek to incorporate Turkey’s own restless Kurdish minority. The KRG’s apparent willingness to provide safe havens to armed insurgents of Turkey’s Kurdistan Workers Party (PKK), which launched numerous attacks into Turkey, further angered the Turkish government and has led to repeated punitive expeditions inside Iraqi Kurdistan by Ankara’s troops.

Despite those problematic factors, Kurdistan has acquired a growing roster of proponents in the United States. Indeed, some opinion leaders have urged Washington to downgrade its support of the Baghdad government and place greater reliance on relations with Erbil. A few outspoken supporters even view Iraqi Kurdistan as second only to Israel as a reliable, democratic U.S. ally in the Middle East—a view encouraged by influential Israelis.

The ability of the Peshmerga to defend Kurdish territory from ferocious ISIS military assaults, and even inflict significant defeats on the Islamist insurgents, increased the ranks of American admirers. The Peshmerga’s tenacious resistance, despite having to rely on antiquated military hardware, stood in stark contrast to the pathetic performance of the well-equipped, U.S.-trained Iraqi army that ignobly fled encounters with ISIS and relinquished control of major urban prizes like Mosul and Ramadi with scarcely a fight. In recent months, the Obama administration has stepped up direct military assistance to the Peshmerga.

Recent developments, though, have cast severe doubt on the narrative of Kurdistan as a stable, prosperous, democratic entity. The Erbil government has faced increasing financial woes over the past year. One reason has been the plunge in global oil prices, which greatly eroded the KRG’s principal source of revenue. But another cause is blatant cronyism and corruption. The government has been late on meeting its payroll on several occasions, and domestic critics are now pressing for greater transparency, especially wanting officials to account for millions of dollars in mysteriously missing oil revenues.

As Kurdistan’s economic success story has faded, so too has the region’s reputation as a bastion of democracy. Human Rights Watch slammed the government’s recent behavior, especially that of the dominant political party, the Kurdistan Democratic Party (KDP) headed by Masoud Barzani, who has been the president of the KRG since 2005. Joe Stork, deputy Middle East director for Human Rights Watch, is especially caustic. “The KDP claims to be rights–respecting,” he notes, but it “has a history of shutting down critical voices.”

The political trend is certainly not encouraging. Barzani has remained in office despite the expiration of his legal mandate. Worse, his government has engineered a crackdown on the two opposition parties, the Patriotic Union of Kurdistan (PUK) and Goran (“Change”). The culmination occurred in late October, when the KDP unilaterally removed four opposition ministers from their government posts and replaced them with KDP loyalists. Critics immediately slammed the move as illegal, but Barzani did not relent. At the height of the controversy, KDP-controlled security forces even prevented the speaker of the regional parliament from returning to Erbil. Those forces also closed down two television channels, including one controlled by Goran, which had been repeatedly critical of Barzani.

Much to the dismay of Kurdistan’s American supporters, the KRG increasingly looks like a Putin-style illiberal democracy, riddled with cronyism and corruption. The fond hopes so prominent even a few years ago that the region was the one American success story in an otherwise dismal Iraqi misadventure now seem to have been largely an illusion. Iraqi Kurdistan has not emerged as an island of prosperous democratic stability in a hostile, unstable region. Instead, it is yet another U.S. client that has failed to live up to the hype put forth by admirers. What has emerged is a stereotypical, autocratic third-world kleptocracy. U.S. leaders need to face that unpleasant reality as they formulate policy going forward.