Analysis: No funds from Baghdad, if Erbil doesn’t send oil revenue

Increasingly, Kurdish lawmakers and intellectuals have expressed that Erbil has no other option but to reach an overarching deal with Baghdad that would provide the KRG with funds in return for the KRG handing over all of its oil revenues and committing to federal control of borders and points of entry.

“It has become clear to us that as long as the Kurdistan Region is a part of Iraq, we have no other way but going into dialogue and reaching agreements with Baghdad. Some constitutional articles vest total authority in Baghdad for dealing with such circumstances, the borders, the airports, and printing new money. These are all under the authority of the Iraqi government. As such, the Kurdistan Region cannot reach agreement with Baghdad,” Izzat Sabir, the head of the Kurdistan parliament’s finance committee, told Rudaw.

After six months of strained relations between Baghdad and Erbil following Kurdistan’s independence referendum, and the total breakdown following Iraq’s deadly military offensive into the disputed territories, both sides reached an agreement to reopen Kurdistan’s airports in mid-March. 

“Every agreement [reached] between two sides brings hope for people. As a result, it restores people’s confidence in itself, the surroundings and the market,” Sabir explained. Nevertheless, he underscored the current agreements are not wholesome and more work is needed.  

After the referendum, Western powers and the United Nations have urged the regional and federal governments to resolve outstanding issues through dialogue and based on the Iraqi constitution — echoed by both prime ministers, Haider al-Abadi and Nechirvan Barzani.

However, the agreement may have come to fruition because of external pressure from the United States and tangentially this year’s Iraqi elections.

“The cards are mostly external pressure. It is mostly American pressure for the existence of a strong Region in Iraq, because America does not want a Shiite crescent be formed. And it will not allow the Iraqi government surrender to Shiites,” Professor Awara Bakhtiyar from Salahaddin University told Rudaw.

Bakhtiyar further argued that “the only country that can exert pressure on Iraq is America because they want a strong region in the Middle East to be able to fend off the momentum of Iran in ruling Iraq.”

Before Newroz, Baghdad sent 317 billion dinars to the Kurdistan Region to the salaries of civil servants. While initially it was expected that the amount would be paid as full salaries to the region’s health and education ministries, the fund was distributed to all of KRG’s civil servants — including top earners.

This sparked a wave of protests and work strikes by health and education sector employees. Hoshyar Abdullah, a Gorran MP in the Iraqi parliament, strongly rebuked the Iraqi Prime Minister, saying they had asked the Iraqi government not to deal with the KRG government directly and instead deal with provinces. 

The MP even claimed that PM Haider al-Abadi was afraid of a political rapprochement between Dawa Party leader Nouri al-Maliki and the Kurdistan Democratic Party for elections, and that made him rush to agreeing with the KRG.

“There might have been a secret agreement, not revealed by the media, concerning the Iraqi budget sending that amount of money. One cannot wrap their head around how he sent this 317 [billion Iraqi dinars]. We have listened to Abadi’s statements before: That as long as oil is not handed over to the Iraqi government, the border crossings, the airports and customs are not handed over to Iraq, then they would not send any salary,” Bakhtiyar also told Rudaw.

He added that an article of the Iraqi budget bill states if the Kurdistan does not hand over its oil revenues to Baghdad, the Iraqi government will send a part of the budget the Kurdistan Region, and the remainder must be provided by the KRG from its oil revenues.

The Kurdistan Region is yet to give Baghdad its oil revenues.

“What is there is related to the elections, and if KRG does not hand over its oil to the Iraqi government, the Iraqi government will certainly cease sending that amount of budget. I think the Iraqi government will send another 317 [billon dinars], then it will wait for Kurdistan Region [to see] whether   it hands over the revenue of its oil or not. And if it does hand it over to Baghdad, then it [the Iraqi government] will not send it [the budget],” Sabir further added.

Sabir believes reaching agreement with the Iraqi government is the only way out. 

“The optimal solution is that just as it [the Iraqi government] deals with us based on constitutional articles, then we must deal with it on the basis of constitutional articles. There are many constitutional articles in the interest of the nation of Kurdistan which the regional government is yet to sufficiently work on,” Sabir posited. 

Sabir pointed to some constitutional articles in favor of the Kurds, but lamented that the KRG has not insisted on their implementation. 

For example, according to the Iraqi constitution, the Iraqi government must compensate Kurdish political prisoners imprisoned by the previous Iraqi regime and the Halabja chemical attack victims. Also, areas ravaged by the previous Iraqi regime must be allocated funds for rebuilding. 

Whether KRG officials are willing to give up their strongest bargaining chip, oil revenues, remains to be seen. However, in an Iraqi election year as protests continue, Erbil’s choices may be increasingly limited.