KRG awaiting Iraqi government’s response to new budget deal proposal: Finance Minister

“We hope to receive a positive response soon.”

ERBIL (Kurdistan 24) – Kurdistan Region Finance Minister Awat Sheikh Janab said on Sunday that his ministry had submitted to the Iraqi government a proposal that outlines a mechanism to resume sending the region its share of the national budget.

This came after local Iraqi media reported that the federal Iraqi government had issued a request to its Finance Ministry to stop funding the salaries of the Kurdistan Regional Government's (KRG) employees. The order was signed Secretary­­-General of the Iraqi Council of Ministers Hamid al-Ghazi and dated April 16.

This was three days ahead of a high-level KRG ministerial delegation visit to Baghdad, where they met with senior Iraqi government officials to discuss issues of mutual concern, including the KRG share in the national budget, and oil and gas affairs.

Related Article: KRG 'reiterates its commitment' to oil, financial agreement with Baghdad

After a protracted and near-total breakdown of ties between Erbil and Baghdad following the Kurdistan Region's September 2017 independence referendum, the governments eventually converged on a range of issues, especially after Abdul Mahdi came into office in late 2018.

This included a comprehensive oil agreement that requires Erbil to hand over 250,000 barrels per day (bpd) in return for, among other things, securing the region's allocation in the Iraqi federal budget. The Kurdistan Region did not implement the oil handover. Oil and budget have been the major source of dispute between the central government and KRG since the region began to export its oil independently.

The Sunday press conference came after the delegation met with Kurdistan Region Deputy Prime Minister Qubad Talabani. According to a KRG statement, they briefed Talabani "on the outcome of their recent visit to Baghdad, as well as the current economic conditions in Iraq."

The delegation said, "Iraqi oil revenues have shrunk substantially, causing a financial deficit," also warning that "there is political pressure in Baghdad to ignore previous agreements between the KRG and the federal government on the budget due to the deficit."

The deputy PM said "the KRG will neutralize political efforts aiming to compromise the Kurdistan Region’s financial entitlements," the statement affirmed.

Read More: Erbil-Baghdad oil agreement to go into effect on Jan. 1, 2020: Minister

Following the meeting, Sheikh Janab said during the joint press conference that the KRG delegation—of which he was a part—was able during its recent meetings to reach a formula of understanding with the General Secretariat of the Iraqi Council of Ministers. The team had reportedly submitted a proposal to Abdul Mahdi to release the financial dues of the Kurdistan Region.

The Kurdish minister noted that Abdul Mahdi received the proposal on Thursday, adding, "We hope to receive a positive response soon."

Kurdistan Region Planning Minister Dara Rashid—who was also a part of the KRG delegation—stated in the press conference that Erbil's consultations with Baghdad are ongoing, in efforts to reach a "decisive solution" regarding the salaries of the region's employees.

He also affirmed KRG's readiness to hand over "all of the Kurdistan Region's oil" to Baghdad in exchange for the federal government paying the salaries of KRG's employees "in full" as well as financial dues of oil companies operating in the region.

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Finance Minister Sheikh Janab also noted, "Our discussions were not limited to the budget and salaries alone, but also included other topics, including an agreement on joint production of electricity, increasing natural gas production, border customs, and others."

Nearly 40 percent of Iraqi electricity is generated with natural gas imported from Iran, despite Iraq being a significant source of natural gas, which Baghdad burns due to the lack of the necessary infrastructure to utilize it.

Related Article: US imposes new sanctions, as it renews limited Iraqi waiver for Iranian electricity

These developments come amid the coronavirus pandemic that is crippling governments worldwide, an ongoing protest movement that continues to demand systematic change in the national political system, potential economic repercussions of falling oil prices, and an uptick in attacks by remnants of the Islamic State.

At the same time, a political stalemate that began in late 2019 when Abdul Mahdi stepped down due to the protests continues, as disputes plague negotiations over the cabinet of Prime Minister hopeful Mustafa al-Kadhimi.