The political and economic landscape in Iraq is currently embroiled in significant controversy regarding the calculation of the oil production cost in the regional budget, set at $16 per barrel. Many stakeholders view this projection as inflated, mirroring concerns from the central and southern governorates, which could potentially delay the approval of the overall budget.
Amid these discussions, Allawi Al-Benadawi, a deputy representing the coordination framework, emphasized today the ongoing dialogues among political factions aimed at facilitating the amendment of the budget law.
The proposed modification of Article 12, which pertains to the price calculation of oil from the region, has become a central point of contention. The price is considered adjustable, increasing or decreasing based on market conditions, forming the crux of the disagreement.
The Finance Committee is optimistic about securing a vote on this amendment, contingent upon a resolution with the Minister of Finance. The political disagreements surrounding the compensation mechanism that the government is expected to implement in this amendment have added layers of complexity to the process.
Al-Benadawi stated, “Political blocs and parties are actively engaged in consultations to pass the budget law amendment without hindrance, coinciding with the upcoming sessions of the House of Representatives in a few days.”
He further noted that revising the budget law would address several outstanding issues between Baghdad and Erbil regarding the financial and oil sectors. Furthermore, it would expedite the preparation of budget tables for 2025, as the government is awaiting this amendment to proceed with sending finalized tables.
The proposed amendments to the current federal budget have generated considerable confusion within political circles. Some deputies close to the government have escalated their demands, while government officials have reiterated that the responsibility for modifying budget items lies with Parliament.
The friction between Baghdad and Erbil intensified when a new proposal emerged, diverging from the agreement sanctioned by the Parliamentary Finance Committee and the two governments, particularly regarding Article 12, which deals with the resumption of oil exports from the Kurdistan region.
Bishua Hawrami, a spokesperson for the Kurdistan Regional Government, asserted on January 23 that the latest amendments to the budget proposal were made without proper consultation with the Kurdistan Regional Government, announcing their outright rejection of these changes and calling for the approval of the draft law by the Federal Council of Ministers.
In response, the federal government spokesperson, Naim Al-Awadi, refuted claims made by Hawrami regarding obstruction of the amendment related to oil export procedures, urging the Kurdistan Regional Government to comply with the federal budget law provisions, which mandate the delivery of financial revenues, both oil and non-oil, to the federal government as stipulated in the law and a federal court ruling.
The House of Representatives session in January experienced disruptions when a quorum was lost due to deputies exiting the hall amidst votes on budget law provisions.
The oil revenue dynamics between the federal government and the Kurdistan region remain one of the most intricate issues, intertwining legal and political dimensions. Despite efforts from both government and parliament to resolve challenges through legal amendments and oversight mechanisms, adherence to agreements by the Kurdistan region is critical for ensuring the rights of employees and stabilizing relations between both entities.
Recent weeks have seen heightened tensions and a “data war” between the Kurdistan region and the Federal Ministry of Finance over discrepancies in salary allocations. Salaries for December 2024 remain unpaid for employees in the Kurdistan region. Meanwhile, the Federal Ministry of Finance maintains that all allocated funds for salaries were dispatched, while the Kurdistan region contends that the funds received from Baghdad fell short by approximately 800 billion dinars, inhibiting salary disbursements for the last month of 2024.
On January 15, the United States urged the Iraqi parliament to expedite the passage of the federal budget. U.S. State Department spokesperson Matthew Miller stated that efforts have been made in collaboration with both the Iraqi federal government and the Kurdistan Regional Government to establish a lasting budgetary agreement that facilitates sustained oil production in the Kurdistan region. He noted the need for rapid adoption of the budget amendment as a pressing priority.
Remarkably, the budget for the current year remains unimplemented, raising alarms among experts over diminishing confidence in the government’s financial management capabilities and its implications for economic stability and investment prospects.
For nearly a decade, political factions in Baghdad and Erbil have struggled to resolve persistent issues, often termed “outstanding files,” which encompass budget allocations, the region’s financial share, salary disbursements for public employees in the Kurdistan region, the status of disputed territories, and the arming of the Peshmerga.