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Kurdistan
A worker checks pipelines at the Bai Hassan oil field in Kirkuk, October 2017. File photo: Ahmad Al-Rubaye / AFP
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ERBIL, Kurdistan Region – Baghdad should pay Erbil’s debts to international oil companies before the Kurdish administration agrees to send 250,000 barrels per day (bpd) of oil to Iraq in exchange for its share of the federal budget, Kurdish MPs have said.
According to 2017 data, the Kurdistan Regional Government (KRG) owed an estimated $3 billion to oil companies operating in the Kurdistan Region.
Iraq’s former prime minister, Nouri al-Maliki, cut the KRG’s share of the federal budget from 17 percent to zero in 2014 after the semiautonomous region began selling its oil independently.
This loss of revenues plunged the KRG into a debt crisis as its bills went unpaid.
Faced with a financial ruin, falling oil prices, a costly war with the Islamic State group (ISIS), and the burden of two million displaced Iraqis, the KRG was forced to introduce austerity measures, including the hated salary-saving scheme.
The wildly unpopular measure slashed the salaries of KRG employees and delayed payments for months at a time. Fed up with the austerity measures, public sector employees went on strike in early 2018.
Iraqi PM Adil Abdul-Mahdi, who took office in late-2018, reinstated the KRG’s share of the federal budget, albeit at the reduced rate of around 12 percent. In exchange, the KRG was asked to send 250,000 bpd of oil to Iraq’s state oil marking body SOMO.
To date, Erbil has not kept its end of the bargain, however. Talks are now underway to break the impasse.
Jamal Kochar, a Kurdish lawmaker in the Iraqi parliament, told Rudaw on Sunday that an agreement between Erbil and Baghdad on the oil-for-budget arrangement is not expected any time soon, as Baghdad has so far refused to pay the KRG’s debts owed to the oil companies.
“I’m not very optimistic about the talks between Erbil and Baghdad,” Kochar said. “Erbil believes that Baghdad should repay the KRG debts to the oil companies accumulated over the years.”
Baghdad thinks it is the KRG’s responsibility to repay its own debts, Kochar said.
The MP suggested one compromise could be for Baghdad to repay the debts gradually, and then deduct the amount from the KRG’s share of the federal budget.
The Iraqi government has $87 billion in reserves and can easily afford to repay the debts, he claimed.
Erbil-Baghdad relations have vastly improved since Abdul-Mahdi took office last year.
However, Iraqi lawmakers are pressuring Abdul-Mahdi’s government to implement the agreement, accusing him of being too soft on the KRG, which is yet to send a single barrel of oil to Baghdad in exchange of its 2019 budget share.
Falih al-Khazaali, an Iraqi lawmaker, has urged Abdul-Mahdi’s government to freeze the KRG’s share of the budget until oil deliveries are secured.
“We are pressuring the Iraqi PM to force the KRG to send the 250,000 barrels to Baghdad and implement the 2019 budget agreement efficiently or else cut the KRG share,” Khazaali told Rudaw on Sunday.
“We will keep on putting pressure on the Iraqi government to force the KRG to implement the budget agreement – otherwise we will start working on withdrawing confidence from Abdul-Mahdi’s cabinet.”
Khazaali does not believe the 2020 budget bill will pass easily.
Kurdish lawmakers in the Iraqi parliament have advised the KRG to start sending Baghdad the 250,000 bpd to avoid losing out in the 2020 budget.
“In order to minimize the pressures on Adil Abdul-Mahdi in Baghdad, the KRG should hand over the 250,000 barrels of oil every day to Baghdad in order to gain economic and political stability in Kurdistan Region,” Sherwan Mirza, a Kurdish lawmaker in the Iraqi parliament, told Rudaw.
“However, the KRG should receive at least a 12.67 percent share from the federal budget when the export of 250,000 barrels of oil begins through SOMO.”
According to Mirza, Baghdad is currently sending the KRG just 454 billion IQD – enough to cover public sector salaries. Under the 2019 budget agreement, Baghdad is supposed to send the KRG an additional 68 billion IQD to pay the salaries of its Peshmerga armed forces.
According to the Kurdistan Region’s Energy and Natural Resource Parliamentary Committee, Erbil and Baghdad also disagree over precisely how much oil the KRG is exporting to the Turkish port of Ceyhan via its pipeline.
The KRG claims it is exporting 435,000 bpd, while Baghdad believes the figure is closer to 500,000 bpd.
“The oil and gas committee in the Iraqi parliament has established a committee consisting of seven MPs in order to investigate about KRG’s oil exportation,” Balin Ismael, head of the KRG’s parliamentary committee, told Rudaw on Sunday.
“The committee is expected to visit the Kurdistan Region soon to investigate the number of oil barrels the KRG exports every day,” he added.
Ismael also says the KRG should send Baghdad the 250,000 bpd it asked for as soon as possible to secure its share of the 2020 budget.
“The KRG, by securing its share of the 2020 budget, will bring more political and economic stability to the Region,” Ismael said.
A KRG delegation will also soon visit Baghdad to thrash out the issue, after Abdul-Mahdi returns from a high-level visit to China.
Relations between Baghdad and Erbil turned sour after Erbil went ahead with its referendum for independence from Iraq in September 2017, a move that culminated in an embargo on international flights in and out of the Kurdistan Region and Iraqi security forces retaking the disputed territories previously controlled by the Peshmerga.
Correction: Earlier versions of this story stated that $24 billion is owed to oil companies operating in the Kurdistan Region.
After being alerted to the figure's inaccuracy, Rudaw English sought clairification from a number of Kurdish parliamentarians. While some failed to respond to our requests for data, others gave $24 billion as the overall debt figure for the Kurdistan Region - including, but not exclusive to, money owed to oil companies. KRG debt owed specifically to oil companies stood at an estimated $3 billion in 2017; the article has been corrected to include this data.
The correction was made at 9:07 pm on September 23, 2019.
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