Erbil-Baghdad Agreement: Deal or No Deal?

Despite the dramatic shift in policy, the KRG has not closed the door on reaching a solution with the Iraqi authorities, possibly in the form of renegotiating a new deal, a number of Kurdish officials told Al-Monitor.

“This was a decision forced on us by circumstances,” Sherko Jawdat, chairman of Kurdistan parliament’s Energy Committee, told Al-Monitor. “However, we’re still ready to make a deal with Baghdad on the condition that Kurdistan’s financial dues are guaranteed and paid.”

Baghdad and the KRG signed a deal on Dec. 2, 2014, whereby the latter agreed to provide a total of 550,000 bpd from the fields in the Kurdistan region and Kirkuk. The KRG’s peshmerga forces have been in control of Kirkuk after Iraqi army units deserted their positions there in June 2014 in the face of an onslaught by Islamic State (IS) militants.

Iraq’s budget law for 2015 stipulates that if either the KRG or the federal government fails to honor its “oil or financial” commitments in the law, the other side does not have to abide by it either. The budget law stated that the KRG was entitled to 17% of the country’s total budget after certain amounts are deducted, including but not limited to the expenses of the office of president, prime minister, parliament speaker and the military.

The KRG claims it has received less than half of what it was due. In the first three months of this year, it did not deliver the agreed-upon amounts of oil to SOMO. However, KRG officials told Al-Monitor that even when the Kurdish government delivered 562,633 bpd in April and 557,621 bpd in May, the Baghdad government still did not pay its total dues. In May, for instance, Baghdad’s Finance Ministry paid the KRG around $420 million, which Iraq’s finance minister said was just around half of what the KRG was owed.

“The Iraqi government has not honored its commitments in the deal. They say they are short of cash,” Gardi told Al-Monitor. “And if we go by the budget law, if one side does not abide by its obligations, the other side can back off, too.”