Iraq halted payments to the Kurdish Regional Government (KRG) until a final oil deal is reached between the central government in Baghdad and the KRG's seat of power in Erbil, the country’s finance ministry said on Monday.
On Friday, the ministry released a document showing the government's latest payment of 400 billion dinars ($333 million) in financial dues to the region.
"After the KRG government approved the ministry's final solution proposal, it was agreed to pay wages. Unless a final [oil] agreement is reached, this amount will be the last payment Baghdad sends to the KRG," the ministry said in a statement.
The former Iraqi Prime Minister Adil Abdul-Mahdi in April decided to stop payment to the KRG's budget after Erbil failed to fulfill its financial pledges which were in breach of a deal reached at the end of 2019 to deliver the region’s oil to Iraqi State Petroleum Marketing Company (SOMO) from 2020 onwards.
Last month, the KRG declared its commitment to hand over 250,000 barrels of oil a day to the federal government and to turn over all financial revenues to the state treasury.
In May 2014, the Baghdad administration started to slash 17% of the KRG's spending, which is its constitutional right for payment of civil servants' salaries, in reaction to KRG's decision to export oil independently of the Iraqi central government.
- The crisis between Baghdad and Erbil
The oil crisis between Baghdad and Erbil started during former Iraqi Prime Minister Nuri al-Maliki's tenure and came to an impasse with the emergence of the Daesh (ISIL) terrorist organization, the withdrawal of Peshmerga forces in Kirkuk, and the ban on international flights in KRG airports.
In March 2018, payment of civil servants’ wages in the KRG began on a regular basis when Prime Minister Haidar al-Abadi was in power.
- Fresh deal with new PM Abdul-Mahdi
A new deal was reached to solve the crisis after Shiah politician Adil Abdul-Mahdi became prime minister in October 2018.
In line with the agreement made on Nov. 25, 2019, the KRG was due to deliver to Baghdad 250,000 barrels of oil exports from January 2020. However, the KRG failed to make revenue payments from monthly oil exports to SOMO.
Consequently, the central government ordered the finance ministry to cut the monthly budget, including civil servant salaries, allocated to the KRG.
By Sibel Morrow