Budget Problems go Beyond Erbil-Baghdad Crisis

By Harith Hasan for Al-Monitor. Any opinions expressed are those of the author, and do not necessarily reflect the views of Iraq Business News.

The Iraqi parliament still has not been able to approve the draft general budget for 2014, prompting Prime Minister Nouri al-Maliki to warn of the possibility of a major financial crisis and a disruption of state institutions.

This delay in ratifying the budget is mainly because of the continuing dispute between Baghdad and the Kurdistan Regional Government (KRG) regarding Iraqi Kurdistan's share of the budget. According to a member of the Maliki-led State of Law Coalition, the Kurds are demanding a 17% share of the budget, without deducting the revenues they obtain from the approximately 400,000 barrels of oil the region exports daily according to Iraqi government’s calculations.

Baghdad is demanding that Iraqi Kurdistan places its oil exports under the direct supervision of the State Oil Marketing Organization (SOMO), which is under the authority of the central Iraqi government. The Kurdistan Region of Iraq, however, refuses to do this. For their part, the Kurdish forces argue that the central government is disregarding the constitution, which grants the region the authority to supervise its own resources, and that Baghdad is trying to deduct from Iraqi Kurdistan's share, which was decided upon in previous budgets.

These forces held a meeting in Erbil on Feb. 23 and issued a statement confirming the region's right to "receive its share of Iraq's revenues." The statement noted that negotiations with Baghdad on this issue are ongoing and called on Maliki to abandon this "illegal and unconstitutional policy."

An "independent" report on the Iraqi budget prepared by the Movement for Change (Gorran) noted that the actual share the budget grants to Iraqi Kurdistan is 9.9%, and that the government expects the region to export what amounted to 400,000 barrels per day under its supervision, compared to 250,000 a day last year.

According to the report, the government is demanding that auditing agencies from both Baghdad and Erbil identify and calculate Kurdish oil revenues, and that Erbil sends the amount to Baghdad on a monthly basis. These are conditions that the KRG considers to be unfair.

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