Last year, when the Kurds sold oil independently of the central government, the federal government froze all payments to the Kurdish autonomous government. The Baghdad government also took legal action resulting in a tanker anchored off Galveston, Texas for months waiting to unload only to leave after a court found in favour of the Baghdad government’s claim to the oil.
The Baghdad government has been very slow and stingy in disbursement of funds from exported oil to the Kurdistan government. With lower oil prices both governments are strapped for cash. The Kurds insist they must export their own oil because of the huge costs of fighting the Islamic State and the lack of funds coming from Baghdad. Jordan Perry, lead Iraq consultant with Verisk Maplecroft a UK-based risk consultancy firm said: “It’s quite a provocative step. Baghdad will not look kindly on that, and it’s entirely possible that it could return to the kind of legal challenges that we have seen in the past year.”
In the December deal, the central government agreed the Kurds could ship up to 550,000 barrels a day through a pipeline that connects the autonomous region with the Turkish port of Ceyhan. The Kurds expected this to yield them about $1 billion (US) a month. However, with the price of oil continuing to fall, payments have never been more than $450 million a month. While the Kurds recognize that Baghdad has its own financial problems they complain that the central government has not been transparent and open about the basis for its disbursements. The Kurds have become more and more irritated and frustrated with Baghdad. Falah Bakir, the Kurdistan Autonomous Region’s(KRG) minister of foreign relations said: “If Baghdad has problems, then it has to be transparent and open with the KRG. What hurts the region is if Baghdad unilaterally decides to cut [payments] without any consultation.”
The dispute with the central government will encourage those within Kurdistan who want to create an independent state in areas that Kurds control in the north. Kurdistan is now exporting about 600,000 barrels of oil a day itself. This amount was confirmed Turkish Minister of Natrual Resources, Taner Yildiz,in a recent interview. Yildiz predicted that exports would soon reach one million barrels per day. One of the achievements of Iraqi Prime Minister Haider al-Abadi had been to improve relations with the Kurds after years of acrimony by reaching the oil deal. Now with the collapse of the deal the two governments are again in conflict.
