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Dispute between Baghdad and KRI over Oil Revenues Continues

By: MECRA Correspondent in Iraq

Date: February 9, 2021

Place: Baghdad

A key issue facing relations between the Iraqi government and the Kurdistan Region of Iraq (KRI) is that of revenue from oil sales, and sharing of federal budget revenue. The KRI’s share of the federal budget is an issue of contention, with Baghdad wanting Erbil to stick to a previous agreement to receive revenue in exchange for the transfer of Kurdish oil to Baghdad. The KRI has its own agreements with international oil companies and markets and sells its own oil, transporting it via the Kirkuk-Jihan pipeline to Turkey. Negotiations are now set to take place between the KRI and the federal government regarding the KRI’s share of the 2021 fiscal budget, and the amount of the KRI’s oil to be transferred to Baghdad in return for a share of revenue.

The 2021 draft federal budget stated that the KRG must hand over 250,000 barrels per day of its crude to Baghdad, to receive its share of the federal budget. But the KRG claims it cannot hand this crude over, because it sold the marketing rights to five companies against loans it has received. The Iraqi ministry of finance therefore intends to deduct a sum representing the KRI’s oil revenues from its share of the 2021 budget. The KRG produces around 415,000 b/d. The Iraqi government is also angered that KRI sells oil at lower prices than the Iraqi central government.

The issue is unlikely to be resolved in the near future. While the details relate to the oil issue, the underlying and deeper question concerns the extent of the KRI’s autonomy from Baghdad, and thus touches on the unresolved issue of Kurdish national aspirations. MECRA’s Iraq correspondent spoke on this issue to two members of the Iraqi parliament with differing perspectives on this matter, and to a spokesman for the Sadiqoun parliamentary bloc, which is associated with the pro-Iran Shia militias.

Mahmoud Ali Othman, Member of the Iraqi National Assembly, founder of the Kurdish Alliance for Baghdad, which consists of the Kurdistani List, Change List, Reform and Services List, and Islamic Parties, now an independent politician.

There are many issues between KRI and Baghdad, and they both say that the Iraqi constitution is a guarantee for any agreement. But, each one of them interprets the constitution as they see fit. And there is no high supreme court to explain each of the articles of the constitution.

So, there is no guarantee for any agreement between them without having third party involvement.

It's a long running ‘series’ that we’ve been involved with for 17 years. They make an agreement on paper, but neither side is committed to complete or implement it.

A third party could be the United Nations. They are responsible for many agreements related to conflicts all over the world, and they could be an effective third party between the KRI and Baghdad.

But Turkey and the Iraqi Federal government don't want the UN be a part of anything related to Iraq. By contrast the KRI want a third party to be involved in any agreement related to their issues with Baghdad, and they have demanded this many times.

They (Baghdad) are always bringing the constitution as an excuse to be a guarantee but in reality they are the first ones to break any agreement. They interpret the constitution based on what they want.

Iraq bears responsibility for this situation, not any other country.

But, there are countries that have an interest in Iraq, such as the USA, but they don't intervene in Iraqi matters. But they are trying to protect their interest and presence in Iraq, in areas related to the economy, military and political matters.

Since the 2003 invasion, the USA has never developed a clear and coherent methodology to manage and rebuild Iraq as it should be and to make it better. They have failed in all such efforts, and as a result they are losing control of Iraq.

Iran has a role in all the conflicts that are going on in Iraq. The Shia have a strong relationship with them. Iran’s interest is that Iraq remains weak and not united.

I believe that Iran has the main control over Iraq and that can be seen through the role of the pro-Iranian militias. The Iraqi government is weak, as was the previous government of Adil Abdul Mahdi . And they are not able to stop militias controlled by other countries.

Likewise, in the KRI there are issues between the Kurdish parties inside of Kurdistan. They are not united. The reason behind of it are unresolved political issues.

It's in the Iranian interest that the Kurds remain divided. There are millions of Kurds in Iran, without even basic rights. A single word mentioning the Kurds cannot be found in the Iranian constitution. Iran doesn’t want to have another strong Kurdish authority on its border. The situation is the same for Turkey.

Iraq, for Iran, is like a backyard controlled via its militias, elections and politics and other activities. The pro-Iran militias have political, economic and military power, that no-one can stand against. They even have foreign affairs departments.

The US gave Iraq to Iran like a piece of cake. It was a stupid policy by the USA. They had no clear program and system that could be implemented toward Iraq so that it would not be lost.

Iraq will remain in its current situation - with a bad economic situation, illegal and unregistered weapons, militias and the killing of activists. Security issues, corruption, and political issues will keep Iraq weak and fragile.

Mahmoud al-Rubaie, member of Hizballah al Nujaba, and spokesman for the Sadikoun bloc

The negotiation is a normal process between us and the KRI, and we as Sadiqoon with agreement will resolve all outstanding issues between KRI and Baghdad for the sake of the Iraqi people. In political terms, it's important for us to bring security, stability and a good life to Iraqi people.

The reason for the issues between the KRI and the federal government relates to unresolved matters going back many years, such as the lack of legislation covering the oil sector and oil revenues distribution.

There are some issues in regard to some of the Kurds’ demands related to the number of employees and salaries. We have doubt re the number of employed people in Kurdistan region compared to the total population number of the region.

We see the figure given for the number of employees as too high. Since 2003, every year we have this issue. We cannot get access to the public sector of KRI to know the right number of the population and employees.

Kurdistan region must provide Baghdad with a correct figure and statistics on the number of its employees. Also, the revenue of natural resources of KRI has not been sent to the federal government from 2003 until today. The oil, customs, and other revenues are still in the hands of the KRI.

The KRI is in debt, and is demanding that the federal government pay these debts which we reject as Iraq is going through a tough era, and economic crisis.

There are many issues with the KRI, but we can solve them step by step as long there is good will. We are working on it and it cannot be solved in one day or two, but it will take a long time to overcome. We believe there is a line linking us and the KRI - and that is the constitution of Iraq.

We don't believe there is any military issue between KRI and federal forces, but only disputed areas which contain Hashd Al-Shaabi (PMU) and Iraqi forces.

The issues can be solved with the wisdom of the leaders of KRI and Baghdad.

Whoever is trying to make KRI weak is making Iraq weak. Since 2003, Iraq has been the main ground for various interventions by neighboring countries.

Walid Abdul Hassan Abboud Sahlani - 1974, Parliamentary Bloc: Badr, Parliamentary Committee: Services and Reconstruction.

KRI is part of Iraq. It's our duty to ensure the rights of our people in Kurdistan. It's not right that employees should remain three months without their salaries. It will be an obligation to pay all salaries without cuts, as we had agreed with the KRI government. Otherwise, we will cut money from the Kurdistan region.

The KRI must give all oil revenues which it has derived via Jihan, to the Somo company ( the Iraqi national company responsible for marketing Iraq's oil.) Then it all be distributed based on agreement.

We have agreed on the financial budget with different political parties, to hand over all revenues from the KRI side. Financial control means access to all customs borders of KRI and supervising all border crossings in order to know the revenues of KRI, and based on that Baghdad will help the KRI financially. (these demands are rejected by KRI, which sees them as an effort to effectively terminate its autonomy – ed).

The issue with the KRI has be solved. We can’t just continue as we have for years. The officials in the KRI cannot provide salaries to their own people, while they are exporting oil at lower than market prices. It will be a benefit for all if they come under the authority of Somo which will sell at a higher price.

We don't have any other option other than agreement, and our guarantee is the Iraqi constitution.

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