ERBIL, Kurdistan Region - The government in Baghdad owes the Kurdistan Regional Government $6 billion for the six months it has not paid the Kurds its share of the Iraqi budget, KRG Spokesman Safeen Dizayee told international businessmen at a conference in Erbil.
Foreign and Iraqi businessmen at the second Kurdistan Projects conference were briefed about the opportunities in a region where investments have already passed the $30 billion mark, and about as much are needed for investments over the next six years.
As their incentive to spend money is highly influenced by the political situation, the speeches of the only two ministers attending were eagerly awaited. Ministries were mainly represented on a lower level because, some nine months after elections, the new Kurdistan cabinet is still under construction.
Their presentations showed that projects are suffering from the present conflict between Baghdad and Erbil over sharing the revenues from oil produced in the Kurdistan Region, which led to the budget freeze for Kurdistan.
A number of water management projects are delayed because of lack of government funds. Commercial enterprises are suffering, too: Steelworks in Kurdistan, for instance, stopped receiving scrap metal from Baghdad. As the Kurdish scrap is not sufficient, the scarcity has led to a doubling of the price.
While spokesman Dizayee stressed that the Kurds would like a settlement “to contribute to the future budget of Baghdad for all Iraqis to profit,” at the same time he painted a picture of an Iraqi government unwilling to cooperate with the Kurds.
Baghdad had not expected oil to be found in Kurdistan, said Dizayee, and when it was, it called the Kurds “not fit” to extract it, warning oil companies even about the “family business” they would have to deal with – a reference most probably to the ruling Barzani family.
“And now that we have the pipeline to Turkey, they put us in the draft budget for 2014 for 400,000 barrels a day, an amount we do not have.”
Kurdistan now produces around 120,000 barrels a day, the conference heard. That Baghdad would cut the budget has long been a Kurdish concern, admitted the spokesman.
“We feared Baghdad would someday use the financial pressure card. That future is today. We are trying hard to increase our own revenue to pay the salaries and our payments to the oil companies,” Dizayee said.
Based on the 2013 budget, Kurdistan should receive $1 billion dollars a month.
Dizayee admitted that, for the first two months, Baghdad had paid the part of the budget for the salaries of civil servants.
At the same time, Kurdistan suffers from the bad security situation outside the region, he pointed out. “For the past seven years flows of people have left Iraq, be it Sunnis, Christians or others, and now again from Mosul and Anbar. We consider them as internally-displaced and cater for them.”
“No other entity would accept to be deprived of part of its legal budget,” Foreign Relations Minister Falah Mustafa Bakir pointed out. Both he and Dizayee stressed their conviction that Kurdistan is in the right: Cutting the budget is illegal under the Iraqi Constitution and the budget laws.
If no solution is found for the conflict -- and both ministers showed little hope that it would -- the Kurds will for six more months have to bridge financial gaps. According to Dizayee, by the end of the year they expect to produce the 400,000 barrels per day needed to cover the money from Baghdad.
Yet that will only work if Kurdish oil can be sold. A first shipment of 100,000 barrels of Kurdish crude was stopped recently on its way to the US, and got stranded in Morocco, as minister Bakir admitted. Earlier, the Americans stopped Kurdish oil to be transported out of Turkey, and denounced it being sold outside the Iraqi system.
The role of the Americans, whom the Kurds considered as friends, is a bitter one. “The Americans say they are neutral, but they are putting more pressure on us than on Baghdad,” said Bakir, who spoke of an “economic war against the region.”
One of the experts at the conference made the assumption that once the oil was transferred from the storage in Turkey to the tanker, it was paid for. That is why, what happened to the vessel did not really need to concern the Kurds anymore.
Confirmation for this was not to be had, but Bakir made clear that there is no turning back -- not to the dark past of isolation and poverty, but also not on Kurdish oil endeavors.
“We have started this now, and will not give up,” he vowed. “For us this is a turning point, and one not without challenges. Our policy is to continue exporting oil.”