Baghdad’s budget offer to the Kurdistan Region

If something is too good to be true, it usually means that it is. That is a reasonable conclusion to draw from the Iraqi Prime Minister’s recent offer to the Kurdistan Region to pay its civil servants’ salaries in return for putting its oil exports under the control of the federal government. A little history is needed to understand why this particular gift horse is not all it seems.

Ever since Saddam Hussein was ousted in 2003 and a new, federal and democratic Iraq was agreed in a referendum in 2005, the government in Baghdad has failed to provide the Kurdistan Region with its full budget entitlements. Instead of receiving 17% of the national budget, the actual figure has been nearer to 10%.

The budget was arbitrarily and entirely cut by Prime Minister Nouri al Maliki in 2014 and a deal in December with his successor Haider al Abadi lasted one month before Baghdad reneged on it and the KRG began independent exports of oil in June 2015.

The KRG received $2 billion from Baghdad in the first half of 2015 and made $4 billion in independent oil sales in the second half of the same year, despite falling prices.

On the face of it, Abadi ‘s offer would mean $750 million per month or $9 billion a year. For those who have gone, and not for the first time, without salaries for many months or whose salaries are being temporarily reduced on a progressive basis, it seems a very tempting offer.

But could Abadi actually deliver it? Indeed, Abadi told the KRG in recent discussions that it cannot afford to fund the KRG anyway given that the oil price slump has slashed federal government revenues.

Abadi failed to mention the offer in direct discussions with the KRG, whose Prime Minister and his Deputy recently visited Abadi in Baghdad, and in a further meeting with President Barzani at the Munich Security Conference.

The KRG has nonetheless immediately accepted the offer to call Baghdad’s bluff and there has been no response to this. But Baghdad must do better than this transparent student union politics if it is serious about trying to keep the Kurdistan Region in Iraq.

This is a personal view by Gary Kent

This entry was posted in General. Bookmark the permalink.

Comments are closed.