I'm European-Kurd, and had to travel to Kurdistan Region (northern Iraq) for my sister's wedding a few years before I had to go to the US. I was denied my ESTA without a refund (it was $20 iirc, so not a huge amount but as someone who had just graduated, every penny counted for me) due to this exemption. Had to get a full visitors visa to go which took a lot longer, and was way more expensive. The exemption, which was put in place due to ISIS in 2013, seems reasonable though unfortunate.