Breakthrough in Baghdad-Erbil budget dispute, says finance minister Zebari

ERBIL, Kurdistan Region - The Kurdish Regional Government and Baghdad have reached a breakthrough deal to help resolve an almost year-long dispute over budget payments and oil sales, Hoshyar Zebari, Iraq’s Kurdish finance minister, told Rudaw on Thursday.

Zebari, speaking by phone from Abu Dhabi, said the deal involved an upfront payment of $500 million by Baghdad to pay the salaries of Kurdish civil servants as part of the central government’s constitutional obligation.

In return, Kurdistan would hand over to the federal government 150,000 barrels of Kurdish oil a day  exported through Kurdistan’s pipeline to the Turkish port of Ceyhan.

“This covers the month of October. In November, there will be another payment of $1 billion and the KRG will again hand over 150,000 barrels of oil a day to the federal government.”

He said the deal was reached today in Erbil where Iraqi Oil Minister Adil Abdul-Mahdi met KRG Prime Minister Nechirvan Barzani and Deputy Prime Minister Qubad Talabani in a closed-door meeting.

Zebari credited his “good” relationship with Abdul-Mahdi with having facilitated the agreement. In negotiations that involved Iraq’s new prime minister, Haidar Al Abadi, it was made clear that the dispute had to be settled otherwise there would be a total breakdown in the relationship and the KRG would withdraw its co-operation with Baghdad at all levels including ministers, diplomats and other civil servants.

Zebari, the former foreign minister who took up the finance portfolio in Baghdad in September, said his ministry had sorted out the figures on what Iraq was capable and not capable of spending.

“Iraq is going through a difficult financial crisis,” he said. “I want to decide next year’s budget and I couldn’t do that unless I had something in hand.”

He said: “It’s a reasonable deal and removes a major obstacle. Both sides needed this deal but this is only the beginning.”

He stressed Iraq has no control over oil in northern Iraq or in Kirkuk because pipelines had been damaged and the only way for it to be exported was through the Kurdish pipeline.

Zebari and other Kurdish ministers had only finally agreed to join the Baghdad government after Abadi pledged he would immediately make a payment to the KRG, which was not forthcoming.

Kurdish officials had also been heartened by Abdul-Mahdi’s appointment because of his past close ties with the Kurds. The former vice president replaced Hussein al-Sharhistani, who had fiercely opposed Kurdistan’s independent oil ambitions.

The government urgently needed to secure income in the absence of federal budget transfers, as it has paid out of pocket for the region’s vast number of civil servants, whose salaries consume roughly 75 percent of the KRG’s budget.