Baghdad-Erbil Deal Silent on KRG's Surplus Oil

Shaban said the KRG has not been willing to place all its produced oil under Baghdad’s control so it could export some oil on its own if Baghdad failed to provide the KRG its payments due from the 2014 budget. The Iraqi government has not paid the KRG its share of the national budget since February, amounting to 16 trillion Iraqi dinars, approximately $13 billion, according to Kurdish sources.

The current deal appears to have resulted from a dire need for cash by both the KRG and Iraqi government.

Amid an intensifying fight against the Islamic State (IS) militants and plummeting oil prices in global markets, Baghdad and Erbil are struggling to pay the bills.

Due to the circumstances surrounding the deal, it has made some question the agreement’s survival should more favorable conditions for the KRG and Baghdad emerge.

“Both sides needed that agreement. For Kurdistan, it was difficult to be able to provide for its budget through internal revenues and [independent] oil sales,” said Shaban, the Kurdish MP. “As long as we live within Iraq, such an agreement is the best.”

Struggling to pay its civil servants and fund public projects, the KRG in the previous months had borrowed around $4 billion from foreign companies operating in Kurdistan, Shaban said.

Under an earlier deal signed in November, the KRG has so far received a payment of $500 million and is due to get a similar amount this week or next, according to Shaban.

An important fact often overlooked in media debates regarding the deal is that it is not envisioned as a comprehensive long-term pact, but rather as a one-year deal meant to facilitate the ratification of Iraq’s 2015 budget law.