18 March 2015 – REUTERS – BAGHDAD,— Iraq’s government will make a budget payment to Kurdish authorities “within days”, the finance minister said, playing down concerns that an oil export deal that helped thaw bilateral relations could collapse.Hoshiyar Zebari told Reuters in an interview on Wednesday the delay in what is meant to be a monthly transfer of over $1 billion from Baghdad in exchange for oil from the semi-autonomous Kurdistan region was due to a fiscal crisis rather than political factors.
He said both sides were still committed to the deal though he declined to reveal the size of the forthcoming payment. The minister, a Kurd, cited poor fiscal management, the costly battle against Islamic State militants, and the sharp fall in oil prices as reasons for the federal government’s cash shortfall. Iraq’s Kurdish region has been battling a financial crisis since Baghdad authorities cut budget payments in January 2014 as punishment for its attempts to export oil independently. The payments resumed in December along with Kurdish oil deliveries. But so far this year, Baghdad has paid only a fraction of the money, arguing that the oil handed over to Iraq’s State Oil Marketing Organization does not match the volumes the Kurds committed to.
The oil deal was hailed as a breakthrough that would help Iraq increase exports at a time when revenues are strained by low global crude prices and the cost of financing a war against extremist insurgents holding parts of the country’s north and west. Zebari said it also remained a cornerstone of bilateral relations. “It’s a comprehensive deal that means a great deal for everybody. Both sides are committed to it and that is encouraging.” The minister said he understood the impatience of the Kurdish Regional Government “because they haven’t received their payment for some time.” While mutual mistrust and unrealistic expectations remained a problem, Baghdad would “transfer another payment to the KRG very soon, within days,” he added. The dispute exemplifies differences between the two sides over who should control the country’s oil resources and revenues. Kurdish authorities in Erbil have threatened to sue buyers and ramp up independent oil exports, and say they have already been forced to sell some oil independently because Baghdad has not paid them and the region needs to meet a bloated public sector payroll as well as repaying creditors.Zebari acknowledged that if there is “no serious progress the deal will not hold,” but said both sides are committed to avoiding that.