And with this, the federal budget is also swelling – so is Iraqi Kurdistan’s 17 percent share. However due to disagreements over oil policy, revenue sharing and Baghdad’s refusal to pay oil company costs, Iraqi Kurdistan is pursuing its own oil production agenda.
However in Iraqi Kurdistan, this sector is still largely underdeveloped. And, due to this and aforementioned disputes, the state is not contributing as much as it can to Iraq’s oil exports. Which is why many Iraqi politicians have already argued that the Kurdish are getting an unfairly large share of the country’s income even while they’re not contributing as much.
The most obvious move for the Kurdish would be to annex the disputed area of Kirkuk, where much of the northern oil is currently being produced, and get full use of the Kirkuk-Ceyhan pipeline to Turkey’s Mediterranean coast.
The northern Iraqi city of Kirkuk has actually been one of the flash points of the struggle between the Iraqis and the Kurdish over the past few decades. During former Iraqi leader Saddam Hussein’s regime, the Kurdish population was driven out of Kirkuk so that Arab Iraqis could control the oil rich area. Today Kirkuk remains largely Kurdish and the government of Iraqi Kurdistan claims it belongs to them. Although legally it belongs to Baghdad, currently the city is, in fact, under the de-facto control of the Kurdish government.
Even in the unlikely scenario that such an annexation happens, in the short term Iraqi Kurdistan would still struggle to generate as much income as Baghdad sends them. Putting the required infrastructure into place would take time and would need the consent of neighbouring countries, like Turkey.
The economic consequences of losing the over US$11 billion that the Kurdish receive from Iraq would be devastating for the region; the whole economy could implode, which in turn would lead to many political and social problems.