Baghdad not sincere about KRG budget

Tags: Iraq Budget ISIS
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By Ari Mamshae

The financial dispute between Erbil and Baghdad that started last year appears to be continuing. This crisis has several dimensions: a financial crisis in Baghdad, a Shiite centralization policy and lack of trust.


The illegal decision by former Iraqi premier Nouri Maliki to cut the entire budget of the Kurdistan Regional Government in early 2014 was aimed at both the Kurdish people and the KRG itself. The rulers in Baghdad want the Kurdistan Region to remain in crises in order to push the Kurds into rethinking their policy towards Baghdad and to forego their ambitions of greater autonomy and independence.


Although both governments reached a deal in December, Baghdad is finding excuses not to implement the deal. When the last KRG delegation visited Baghdad, it was told that the government literally has run out of money.


Iraq’s Premier Haidar Abadi’s inauguration was accompanied by a sharp decrease in the price of oil, on which Iraq relies heavily. That made a significant impact on Iraq’s revenue. However, prior to that, Maliki had plundered all the wealth of the country and his reign was rigged by an extremely high degree of corruption.


Throughout his eight-year rule, he wasted hundreds of billions of dollar. From 2004 to 2014, Iraq has had revenues of over $750 billion, in addition to all those billions of international contributions. After deducting the Kuwaiti compensation fund, government primary expenditures and a small portion of its investment budget -- all approximately and on average totaling 70 percent of the budget -- at least $200 billion has disappeared.

Touring around Iraq, that huge amount of revenue is nowhere to seen.


A month before Maliki left office, there were $18 billion in the Development Fund for Iraq at the New York Federal Reserve Bank, plus the KRG’s share of 2014’s budget. When Abadi was sworn into office, there was only $1 billion left. Sadly, the rivalry between the Shiite groups as well as the ongoing sectarian war between Sunnis and Shiites prevents holding the former Iraqi premier and its officials accountable for all the corruption. 


Letting the exploiter move around freely will only worsen the country’s future. Even worse is that Maliki still has a high leverage on the politics of the country.


Among those impacts are his bloc’s attempts to crush the Kurdistan Region and heavily centralize Iraq. The Kurds and Shiites are now at a crossroads and in a battle of wills. The latter has a strong grip over Baghdad and other parts of Iraq, except for the fully Sunni areas which are under ISIS control now, but might soon become more heterogeneous with the sectarian cleansing led by the Shiite Mobilization Forces. 


They want to exercise the old Middle Eastern game of a centralized state where the government will have the highest share over almost all the issues of the country. That is opposite to the KRG, which seeks the highest degree of autonomy in all policies. The dispute is not about oil and gas per se, as this has remained unresolved between the KRG and Baghdad for the last 11 years: it is a fight over power, control and centralization. 


In the concurrent state, Kurds are not partners in Baghdad, and neither are the Sunnis. Baghdad is under the full control of the Shiites and Iran. Eventually, the KRG delegation was told in Baghdad that resuming the KRG budget flow requires a Shiite decision.


Nonetheless, the Iraqi government still can send the salaries of KRG civil servants – if not the entire KRG budget. Has it not funded the unconstitutional fully-sectarian Shiite militias, and even those civil servants in ISIS territories, not to mention its own government employees?


With a barrel of oil at an estimated price of $60, the Iraqi government has a daily income of at least $150 million. In five days, Baghdad can accrue $750 million, just enough for the KRG’s operating expenditure budget. That includes the civil servants’ loans, which is also equivalent to the monthly income of the KRG’s 500,000 barrels oil exports.  Apparently, Baghdad claims to be bankrupt in the meetings only when it comes to the Kurds.


Eventually, not paying the KRG civil servants and loan-dependents will also threaten the Kurdish tolerance of the Arabs, particularly as there are 1.5 million residing in the Iraqi Kurdistan Region. As the unpaid Kurdish employees witness that Baghdad is still paying non-resident Arab civil servants, tolerance might fall and problems arise.


The government in Baghdad, particularlyAbadi himself, must know that if Baghdad wants to manipulate and control the KRG with these policies, it will only drive the separation between both capitals further and faster away. Sadly, Abadi is weak, impotent, lacking support and with many antagonists. It is in Abadi’s best interests to seek the Kurdish support amid this difficult time, something he has requested.


The KRG-Baghdad oil deal was struck after many requests by the international community. Therefore, those countries also have an obligation to monitor developments. The war against ISIS and providing shelter to the internally displaced and refugees requires huge funds.


For its part, the KRG has to seriously start an economic diversification policy to minimize the risk from global oil price fluctuations and avoid coming under pressure  from Baghdad and other regional countries.  


Ari Mamshae is a graduate of International Studies at the University of Kurdistan-Hewler with a focus on Oil Economy and Democratic Development. 


The views expressed in this article are those of the author and do not necessarily reflect the position of Rudaw.


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