A view of Erbil, Iraqi Kurdistan's capital. (photo: موقع حكومة اربيل)
The year is drawing to a close and the financial crisis that the semi-autonomous region of Iraqi Kurdistan has been labouring under, does not look to be ending anytime soon.
One of the ways in which this crisis could be solved would be to return to Baghdad to negotiate another agreement on how, and how much, oil Iraqi Kurdistan, which has its own government, military and borders within Iraq, can sell through the federal government, rather than by itself. In the past, Iraqi Kurdistan has claimed a percentage of the national budget in return for supplying the country with oil to sell. Since this deal broke down in 2014, the region’s finances have been in a bad way, and getting worse.
Officials in Iraqi Kurdistan say they don’t want to start selling oil through Baghdad again unless all parties sign a new deal on the subject.
Safeen Dizayee, the spokesperson for the Iraqi Kurdish government, has told NIQASH that there must be a new agreement negotiated before Iraqi Kurdistan starts selling oil via Baghdad again. “But as yet there have been no practical steps taken to negotiate and there is no visit scheduled for any delegation from Iraqi Kurdistan to visit Baghdad to discuss this subject,” Dizayee said.
The last agreement on oil sales between Iraqi Kurdistan and the Iraqi government in Baghdad was signed in December 2014. But it has never been implemented.
Back then the Iraqi Kurdish authorities complained that they were unable to fulfil their side of the deal. In Baghdad, the government said that it didn’t have enough money to pay the Iraqi Kurdish anyway.
Apparently, Baghdad has since allocated 17 percent of the federal budget to Iraqi Kurdistan, in keeping with the 2014 deal – this is even though they are running a major deficit. But to get the money, the Iraqi Kurdish must supply the promised oil.
However this may prove difficult as Iraqi Kurdistan’s Minister of Agriculture, Abdul-Sattar Majid, points out. “The region’s government has debts, some of which are two years old, that it has to pay back to other companies,” Majid told NIQASH. “So it wouldn’t be able to send the required amount of oil to Baghdad anyway.”
“In the draft budget, Iraqi Kurdistan is promised their share of the federal budget on the condition that they sell 550,000 barrels of oil a day through the national Iraqi oil company,” says MP Ahmed al-Haj Rashid, the rapporteur for the Iraqi Parliament's Finance Committee in Baghdad. “The government has allocated its share of the budget, which means it is ready to send that amount. But in return they want the Kurdish to send oil. But,” Rashid continued, “I do not think they will be able to do this because that means the Iraqi Kurdish would have to abandon contracts and partnerships they entered into with oil companies, independently of Baghdad, over the past few years.”
It’s going to be very difficult to reach an agreement but agriculture minister Majid says other sectors in Iraqi Kurdistan may provide the region an income, things like agriculture, industry and tourism.
But, Majid also says, “I believe this financial crisis is going to continue. In fact, I believe it may get even worse.”
The lack of cash flow has seen the Iraqi Kurdish government unable to pay civil servants’ salaries and to suspend infrastructure projects. A month ago most of the schools, universities and government departments in Sulaymaniyah and Halabja closed. There have been a series of ongoing protests by teachers and other civil servants, who have basically stopped turning up for work.
Day by day it is becoming more and more evident to the protestors that the authorities here have no idea how to resolve this financial crisis, says MP Ali Hama Salih, a member of the anti-corruption Change movement. “And I believe we will see those demonstrations intensify over the coming weeks,” Salih told NIQASH.
“The citizens of the region simply don’t believe the figures the government gives out,” says Majid, who agrees with Salih’s prognosis. “So they will continue to protest.”
Majid, a member of the Kurdistan Islamic Union, says he isn’t sure about the veracity of official figures on the subject himself and he suggested the formation of a special taskforce to give out accurate financial information to the general public and to explain it properly.
As for the Iraqi Kurdish authorities themselves, Dizayee insists that the financial information given out is accurate and that the regional government wants to be transparent about its budget. One thing Dizayee was unable to comment on though, was exactly how the Iraqi Kurdish authorities he represented planned to solve the ongoing financial crisis.