Baghdad is cutting KRG budget to ‘punish’ Kurds, PM Barzani tells UNAMI chief

ERBIL, Kurdistan Region – Baghdad is withholding the Kurdistan Regional Government (KRG)’s share of the Iraqi federal budget to “punish” the Kurdish people, Prime Minister Masrour Barzani told the United Nations special representative to Iraq during her visit to Erbil on Monday. 

In a statement following his meeting with UNAMI chief Jeanine Hennis-Plasschaert, the KRG prime minister lashed out at Baghdad for using the Region’s share of the budget as a “political trump card”.

“The federal government should not use the matter of salaries and the financial entitlements of the Kurdistan Region as a political trump card to punish the people of the Region,” Barzani told Hennis-Plasschaert, according to the KRG statement.

On April 16, Iraq’s caretaker Prime Minister Adil Abdul-Mahdi called on the finance ministry to halt budget transfers to the KRG and to take back all transfers made since January 1, 2020. 

Baghdad said the KRG has failed to deliver its quota of 250,000 barrels per day (bpd) of oil to the state marketing firm SOMO in exchange for its share of the budget. 

Erbil has not delivered a single barrel of oil since the agreement was reached in December. However, Barzani called the move “politically motivated”. 

“The decision to cut the Kurdistan Region’s budget, half of which goes to civil servants, is politically motivated and against the people of the Kurdistan Region,” Barzani added.

Hennis-Plasschaert was in Erbil to discuss several burning topics with KRG officials, including the formation of a new government in Baghdad and the Region’s response to the coronavirus outbreak. 

UNAMI is likely providing external mediation in the renewed Erbil-Baghdad confrontation. 

Monday’s meeting was also attended by Dr. Adham Rashad, representative of the World Health Organization (WHO) in Iraq, who has supervised the national response to the coronavirus outbreak. 

According to the KRG statement, Hennis-Plasschaert commended the KRG’s “unprecedented” response to the pandemic. 

She also met with health minister Saman Barzanji and minister of state Khalid Salam Saeed.

A separate statement on the UNAMI Facebook page confirmed Hennis-Plasschaert and Barzani discussed the Erbil-Baghdad tensions but did not elaborate on the substance of the discussion. 

The oil-for-budget agreement between the KRG and the Iraqi federal government had been years in the making.

The KRG started exporting its oil independently of Baghdad via its own pipeline to the port of Ceyhan in 2013.

The independent oil sales infuriated the Iraqi government of Nouri al-Maliki, which cut the Kurdistan Region’s share of the federal budget from 17 percent to zero in 2014. 

The move coincided with the outbreak of war with the Islamic State group (ISIS), a massive displacement crisis, and the collapse of world oil prices, which coalesced to plunge the Kurdistan Region into financial crisis. 

The Region has been steadily recovering since former Iraqi PM Haider al-Abadi reinstated a portion of the KRG’s budget in late 2018 and Abdul-Mahdi secured a bigger lump sum under the 2019 budget. 

In return for its 12.67 percent share of the 2019 federal budget, the KRG was supposed to send SOMO 250,000 bpd, but has consistently failed to do so, claiming contractual arrangements and debts owed to foreign oil companies prevented the handover.

The arithmetic behind the December deal has no doubt been shaken in recent months by the ongoing political crisis in Baghdad, the collapse of world oil prices, and the economic slowdown sparked by the pandemic.

Iraq depends on oil sales for 90 percent of its state revenues. Painful austerity measures are expected if Baghdad is to weather the financial storm.