Wednesday, March 2, 2016

Kurdistan and Iraqi Central Governments Still Arguing Over Budget

Baghdad and Irbil are still arguing over the national budget. Prime Minister Nouri al-Maliki cut off money to the Kurdistan Regional Government (KRG) over its independent oil sales. Then at the start of Premier Haidar Abadi’s administration a temporary deal was made whereby the Kurds delivered oil for the central government, but that eventually broke down when neither side met their obligations. In February, PM Abadi said that Baghdad would pay KRG salaries in return for Kurdish exports, which Irbil then accepted. It didn’t appear that either side was serious about their remarks showing the continued divide between the two.

On February 15, 2016 Prime Minister Haidar Abadi was being interviewed on state-run Iraqiya TV when he offered a new budget deal to the Kurds. He said that Baghdad would pay the salaries of Kurdistan’s government workers if it exported oil for the central government again. Kurdish state employees have not been paid for months leading to protests across the region. The problem with Abadi’s offer was that it wasn’t clear that he was serious. Baghdad is facing its own financial crisis due to the drop in oil prices and has discussed cutting its own public salaries as a result.

Surprisingly two days later the KRG said that it accepted Abadi’s proposal. It said that there were 400,000 government workers in the region, which needed roughly $747 million a month. It then went on to list all the times that Baghdad broke deals over the budget, and claimed that it made more in 2014 from their independent oil sales than it received from the central government. Just like Baghdad it was pretty clear that the KRG was not serious either. Kurdish Premier Nechirvan Barzani said as much when he claimed that Abadi’s offer was just political theater. They only took up his offer in an attempt to embarrass him because they knew that he could not follow threw.

The central and regional governments are still far apart over the budget. They are each following their own paths in the face of the financial crisis caused by the collapse in world oil prices. Both have built up a massive public sector with hundreds of thousands of workers, which the ruling parties use as part of their patronage networks to stay in power. Neither has a large private sector either to get them through this as they have based their entire economic platforms on their petroleum industries. To make the situation worse they are doubling down on their energy sectors instead of trying to carry out any meaningful reforms. The result is that the two will continue to drift apart on the budget and national policy.


Agence France Presse, “Iraq PM offers cash-strapped Kurds salaries for oil,” 2/16/16

eKurd, “Iraqi Kurdistan News in brief – February 18, 2016,” 2/18/16
- “Iraqi Kurdistan News in brief – February 20, 2016,” 2/20/16
- “Kurdistan says will accept Iraqi PM’s oil for salaries deal,” 2/17/16

Osgood, Patrick and Tahir, Rawaz, “New rhetoric underscores Erbil-Baghdad oil disputes,” Iraq Oil Report, 2/17/16

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