Just a few days ago it seemed that the financial oil-for-budget standoff between Baghdad and the semi-autonomous northern region of Iraqi Kurdistan had reached a conclusion: Iraq's oil sales had slumped and the Iraqi Kurdish looked to be going it alone, exporting oil produced within their region and keeping the funds from sales.
At the beginning of the year the country's Kurdish region had been trying to keep up their end of a bargain – they export their oil and send the proceeds to Baghdad and in return, Baghdad promised the region's authorities 17 percent of the national budget. Although there have been conflicting reports about who sent what and when, what was clear was that neither party had kept up their side of the deal exactly.
And by October, there was no Kurdish oil included in federal Iraq's oil exports. The Iraqi Kurdish government justified their independent sales by saying that, if Baghdad didn't pay them their share of the national budget, then they needed to look out for themselves. And to many observers it seemed as though Iraqi Kurdistan was readying for some version of economic independence.
However that doesn't seem to be the case. Recently Safeen Dizayee, spokesperson for the government of Iraqi Kurdistan, announced that a senior delegation would soon be visiting Baghdad to discuss controversial issues related to oil and the federal budget.
“No date has been set,” Dizayee told NIQASH. “And the names of the members of the negotiating team have not yet been announced either. But all this is going to happen soon.”
During a meeting with Marc Eichhorn, the new German consul in the capital of Iraqi Kurdistan, the Kurdish Prime Minister Nechirvan Barzani also mentioned this. Barzani said that the region's authorities were ready to send a delegation to Baghdad to resolve problems.
The plan to go back to Baghdad is seen as a sign that Iraqi Kurdistan's bid for economic independence has failed, suggest local observers.
“Since May this year there's been no discussions between the Iraqi kurdish government and Baghdad regarding the region's share of the Iraqi budget or regarding oil sales,” confirms Iraqi Kurdish politician, Ali Hama Salih, a member of the anti-corruption Change movement and deputy head of the Iraqi Kurdish Parliament's Committee on Finance and Economics. “It is unfortunate that the region wasn't successful in attempts to sell oil independently, without going back to Baghdad.”
Hama Salih, who used to front a television show unmasking local corruption, was critical of Iraqi Kurdish authorities, saying there was a lack of transparency in oil sales.
The decision to sell oil independently was a bad one, argues Kamal Raouf, an activist, senior journalist and independent editor in Iraqi Kurdistan, mainly because of the way it was done.
“Erbil basically gave the Iraqi government full freedom to punish Kurdistan,” Raouf says. “It allowed the Iraqi government to suspend budget payments as well as any payments to local provinces. This has only made Iraqi Kurdistan's financial crisis worse. So yes, we can say that the move [toward economic independence] has failed.”
Government spokesperson Safeen Dizayee denies this. Returning to Baghdad is a normal thing to do, he says. “The [Iraqi Kurdish] region has not failed. It's main concern now is falling oil prices on the international market. That was the main obstacle as the region tried to sell its oil,” he insists.
So why are Iraqi Kurdish politicians seeking another round of negotiations in Baghdad? Senior sources inside the Iraqi Kurdish government say there are political pressures at work. The decision to start selling oil independently is being blamed on the most powerful of Iraqi Kurdistan’s political parties, the Kurdistan Democratic Party, or KDP. Other political parties in the government apparently approved the KDP's plan but only under certain conditions. They also approved it, believing that the move would help pay salaries and prevent Iraqi Kurdistan's financial problems from getting any worse. But the plan doesn't seem to have worked.
“I believe there is now a lot of internal pressure on the KDP, to return to Baghdad to solve the oil and budget issues,” says Arez Abdullah, a senior member of Iraqi Kurdistan's next most powerful party, the Patriotic Union of Kurdistan, or PUK. “Other political parties have a right to pressure the KDP because the plan to sell oil independently hasn't worked,” the politician, who is also an MP in the federal Parliament in Baghdad, told NIQASH.
Additionally sources in the Iraqi Kurdish government are speculating about external pressure.
In mid-October, Iraqi Kurdish Prime Minister Nechirvan Barzani was in Tehran for a conference with other international leaders. During that time he met with senior Iranian officials, including the Minister of Defence, Ali Shamkhani, and Foreign Minister Mohammad Javad Zarif. During two meetings the senior Iranians asked that the Iraqi Kurdish reconsider their independent oil exports and discuss it with Baghdad again, according to a statement published by the Iraqi Kurdish government afterwards.
In his first public appearance upon returning from the conference, Barzani said he was ready to go back to the negotiating table in Baghdad.
Meanwhile in Baghdad, the draft of the federal budget for 2016 also sets out a number of conditions for Iraqi Kurdistan's oil.
“During past negotiations, Baghdad wanted Iraqi Kurdistan to fulfil certain conditions before it would send the region its share of the federal budget,” explains MP Ahmed al-Haj Rashid, the rapporteur for the Iraqi Parliament's Finance Committee in Baghdad. “Those conditions were reasonable. However the conditions in the 2016 budget are tougher. There is a strong possibility that an agreement will not be reached,” he told NIQASH.
Iraqi Kurdish officials are returning to Baghdad to negotiate because they are under pressure, a senior Kurdish source working in Baghdad told NIQASH; the source could not be named because they were not authorised to speak on the matter. Iraqi Kurdish officials had signed deals with several oil companies and the source believed these contracts should be honoured. However the source also thought that if the contracts were presented in Baghdad, the Iraqi government would never accept them because of the way the deals were done.
“They will discuss the issues around oil and the budget but the negotiations won't succeed,” the official predicted. “Even if they do come to some kind of agreement, nothing will happen – there can be no tangible results.”