Page 4 - MEOG Week 39

MEOG Commentary MEOG
Baghdad, Erbil to seek
budget agreement as
exports rise
The Federal and Regional governments appear to be closing in on an agreement over the Iraqi budget, though the lack of Kurdish oil flowing through SOMO could cause major issues.
IraQ
What:
The state budget remains a major bone
of contention between the two administrations and arguments about oil exports are a key sticking point.
Why:
It is in the interests of both Baghdad and Erbil to come to an agreement on the national budget and oil sales.
What next:
Negotiations for the 2020 budget are likely to be influenced by the lack of Kurdish crude flows via SOMO this year, despite Baghdad having transferred the budget funds.
IRAqI Oil Minister Thamir al-Ghadhban this week said he was hopeful that the Federal and Kurdistan Regional governments (KRG) could reach an agreement on the state budget next month.
Speaking at an economic and security forum in Baghdad, he told Kurdish media outlet Rudaw: “We are close to reaching an agreement with Erbil regarding oil and the budget ... I hope that we will reach an agreement during the month of October.”
He added that “very detailed” discussions would take place between delegations from the two governments in the next few weeks.
The fiscal plan provides for record spending of $111.5bn and projects a $23bn deficit on the basis of assumed exports of 3.88mn bpd at an average sale price of $56 per barrel.
Baghdad cut the KRG’s 17% share of the Iraqi budget altogether in 2014 in retaliation for Erbil conducting independent oil sales; this led to a financial crisis in the semi-autonomous region. The KRG began receiving a cut of the budget again in 2018, though at a reduced rate of roughly 12%.
Relations between the two administrations have improved since the 2017 Kurdish inde- pendence referendum, which saw Iraqi forces
take control of Kurdish oil assets.
Iraq’s 2019 state budget, passed by the
National Assembly in January, called for the KRG to allow 250,000 barrels per day (bpd) of the territory’s crude to be sold by Iraq’s State Organization for the Marketing of Oil (SOMO) at the Turkish port of Ceyhan, with a chunk of the authority’s allocation of federal funds being contingent on this.
In June, Rudaw quoted Bashir Haddad, sec- ond Deputy Speaker of the Iraqi Parliament and member of the KDP, as saying that if the KRG failed to meet these obligations, the federal government would “cut a part of the budget for investments and projects proportional to that amount.”
He suggested that the KRG show ‘goodwill’ and ‘commitment’ to Baghdad by shipping oil through SOMO in order to secure its share in the 2020 budget, adding that Kurdistan has failed to fulfil this obligation since the budget was passed.
At that time, Jamal Kochar, a Kurdistan Islamic Union (KIU) MP, was quoted as saying: “If we don’t give anything to [Iraqi Prime Min- ister] Adil Abdul-Mahdi, he will surely not do anything for us in drafting the 2020 budget.”
Kochar suggested sending 100,000 bpd in July, 150,000 bpd in August, 200,000 bpd in
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w w w . N E W S B A S E . c o m Week 39 01•October•2019