Page 6 - MEOG Week 18

MEOG Commentary MEOG
Iraq moves to resolve oil dispute with Erbil
After months of impasse, the simmering dispute between Baghdad and Erbil has reached a point of either deadlock or resolution.
Iraq
What:
baghdad and Erbil’s dispute has reached a crisis point.
Why:
The fall in oil prices has undermined previous negotiating stances.
What next:
If baghdad and Erbil can reach agreement that will help them both.
AMID political inertia in Baghdad while Mustafa al-Kadhimi is awaiting election as the new prime minister, the federal Iraqi govern- ment stopped all payments towards the Kurdis- tan Regional Government (KRG) last week. This is the latest move in a recurring dispute over oil resources, which are the country’s only signifi- cant currency asset.
The KRG needs around $900mn every month to ensure essential government functioning. Of this, some $380mn used to come from the fed- eral government in Baghdad which pledged to include regional government officials and the Peshmerga on its payroll.
Even before coronavirus (COvID-19) struck the world and before oil prices plummeted by 60% compared to February 2020, Erbil had per- sistent issues with paying the salaries of people on its payroll – for instance, the money that pub- lic sector workers received this April was in fact arrears for December 2019.
Differences over energy resources have been a long-running feature of Iraqi politics since the Kurdish administration began officially export- ing oil through Turkey in 2009.
A spokesman from Iraq’s Council of Minis- ters cited the failure of the KRG to share oil with the central government since at least October last year and noted that the KRG is obliged to hand all of its revenue from the export of at least 250,000 barrels per day (bpd) of oil to the central government in Baghdad.
Once the revenue from the 250,000 bpd is with the Baghdad government, the KRG can take its share of the budget, the letter said. last year the central government agreed to give the KRG a 12.5% share.
Iraq exports more than 3mn bpd, which ranks the country among OPEC’s top five exporters. Most of Iraq’s oil is produced in the south, and in Kirkuk, a disputed northern region from where Iraqi Shiite militias expelled their Kurdish counterparts in 2017.
The latest spat assumes an added importance, as Iraq’s prime minister-designate is seen as close to the Kurds, which could affect his efforts to form a government.
Intelligence chief Mustafa Al Kadhimi was the third figure asked by Iraq’s President Barham
Saleh to form a government. Two previous nom- inees failed to be approved by the parliament.
Al Kadhimi is facing increasingly opposi- tion from Shiite groups associated with militias backed by Iran, despite having indicated that they would not hinder his path to form a gov- ernment. When he was in exile in london in the 1990s and early 2000s al-Kadhimi supported the Kurdish cause and remains on very good terms with many of the Kurdish politicians on the national and local scene.
Iraq’s care-taker prime minister, Adel Abdul Mahdi, has been running the government despite having been forced to resign under pressure by a grassroots protest movement in November.
At the same time, rapidly declining oil prices now threaten to undo Kurdistan’s gains and also force Erbil into a weaker position in discussions with Baghdad. The Kurdish region was supposed to receive a 17% share of the Iraqi budget but this has systematically been cut since 2014, on the premise that crises in Baghdad and the war on ISIS made it difficult to pay the Kurds their fair share.
The budget battle has eroded trust between Baghdad and Erbil. Initially it was a temporary problem imposed by the war on ISIS. ISIS had threatened Kirkuk and cut off the Kurdish region from Baghdad, leading the region to be increas- ingly linked economically to Turkey and Iran and to export its own oil.
These oil sales have helped the Kurdish region to make up for the budget shortfall, but the recent collapse in the price of oil makes everything so much more difficult to resolve.
The Kurdistan region is now challenged by the incredibly low oil prices, so that its 250,000 bpd of exports are worth far less than the money it expected to get from Baghdad. But Baghdad is also being bled white by the oil crisis. Around 95% of its federal budget comes from oil, a fact that has not been remedied for decades. Iraq’s federal budget increased from around $72bn in 2010 to $88bn in 2018.
The Kurdistan region now realises its pre- dicament. It has said it is prepared to hand over 250,000 bpd of oil to Baghdad, oil that is now largely worthless because of the global oil price
P6
w w w . N E W S B A S E . c o m Week 18 06•May•2020