Oil-for-budget proposal agreed on in Erbil-Baghdad talks

ERBIL, Kurdistan Region – Discussions between Iraq’s oil ministry and the KRG may set the ground for an oil-for-budget agreement, a Kurdish official stated.

A delegation from the oil ministry, including Alaa Khidir al-Yasri, director general of the national oil marketing company SOMO, met with Kurdish officials in Erbil on Monday as part of a wider Iraqi government visit to the Kurdish capital to discuss a range of disputed issues.

"The agenda of the meeting was about setting a mechanism for exporting oil from the oil fields of the [Kurdistan] Region in return for the financial and fuel entitlements of the Region," Amanj Rahim, secretary of the KRG Council of Ministers, said in a statement on his Facebook page Monday night.

"The two sides had a joint understanding over the issues discussed during the meeting and it was decided that the delegation of the Federal Government would present the demands of the Region to the Council of Ministers of the Federal Government," he explained, without providing specifics of the KRG’s demands.

He said the meeting was a "good start" to resolving issues related to oil.

Reaching an agreement over oil would pave the way for solving the financial problems of the Kurdistan Region, in particular paying salaries of state employees.

Erbil has said they are ready to reach an agreement with Baghdad regarding oil exports in return for 17 percent of the federal budget.

Iraqi Prime Minister Haider al-Abadi has insisted that he will not allow Erbil to receive 17 percent of the budget, arguing that the Kurdistan Region’s share should be based on its population size.

Kurdish officials reported that the Iraqi government has suggested allocating 12.6 percent to the Kurdistan Region, an amount the International Monetary Fund says is not enough to cover the KRG's expenses.

The Kurdistan Region has been suffering from an ongoing financial crisis, mainly caused by Baghdad’s decision to cut the budget in early 2014 when the KRG planned to export oil independently.

The Kurdistan Region says it lost half of its oil revenue when losing Kirkuk’s oil fields to Iraqi forces in mid-October making it difficult for the government to pay the salaries of its 1.249 million employees.

The Monday meeting between the Iraqi delegation and the KRG in Erbil included five focused discussions on the issues of "security, borders, airports, customs, border entries, dams, and oil," according to a statement from the Iraqi government.

The meeting took place in an atmosphere of "trust and understanding," the Iraqi government statement said, adding that the Baghdad delegation will present recommendations agreed on by the two sides to the office of Abadi for approval.

One item they agreed on was reopening Kurdistan Region’s airports to international flights, according to Rudaw sources, more than three months after Baghdad introduced the flight ban in response to Kurdistan’s vote for independence.