Kurdish region faces ‘financial’ crisis as Baghdad refuses to transfer oil royalties

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By Shaymaa Adel

Azzaman, February 22, 2014

The regional government of Iraqi Kurdistan is unable to pay of hundreds of thousands of its staff, said a senior Kurdish official in Baghdad.

The official Mahmoud Othman said it was the first in more than a decade the Kurdish authorities find themselves in such a financial crisis.

The crisis is the result of differences between the semi-independent Kurdish region and the central government in Baghdad over the sale of oil originating in newly developed oil fields in Iraqi Kurdistan.

“The central government is refusing to transfer the share of the (Kurdish) region” from oil royalties, said Othman.

Othman leads the Kurdish bloc in the Iraqi parliament and has been directly involved in negotiations between the sides

Every year the government in Baghdad earmarks 17 percent of oil royalties to the Kurdish region, which comprises the three provinces of Arbil, Dahouk and Sulaimaniya.

But this year, it is refusing to funnel the money to the region, which it accuses of developing oil fields, exporting oil and collecting its own royalties without Baghdad’s consent.

“The central government is trying to exploit the Kurdish region’s share of the budget to extract concessions from the regional Kurdish government in relation to their oil differences,” Othman said.

The Kurds have constructed a pipeline to Turkish terminals on the Mediterranean and are reported to be pumping oil to storages there but they have stopped short of selling it.

However, they have been illegally exporting crude and oil by-products via a fleet of hundreds of tanker trucks mainly to neighboring Turkey.

Othman said the sides were holding high-level talks in a bid to solve their differences.

Other Iraqi provinces have been demanding their own share of oil revenues in line with the annual allocations earmarked for the Kurds.

Some deputies in the parliament reject the allocation of 17 percent to the Kurds, saying the percentage was too high.

The government has said it would only transfer the Kurdish region’s share of royalties if the Kurdish authorities place their oil industry under the jurisdiction of the Oil Ministry in Baghdad.