Home inContext Baghdad, Kurds Agree On Deal Over Oil Revenues

Baghdad, Kurds Agree On Deal Over Oil Revenues

Michael Johnson

Iraq’s central government and representatives from the Kurdistan Regional Government (KRG) reached a preliminary agreement regarding the distribution of oil revenues on Tuesday. The deal resolves months of political infighting as both the Shiite dominated government in Baghdad and Kurdish peshmerga continue to fight the Islamic State (IS).

Under the agreement, the KRG will allow the central oil ministry to pump 300,000 barrels of oil per day (bpd) through pipelines in northern Iraq and into Turkey. Erbil can also sell an additional 250,000 bpd directly to Turkey, bypassing the central government. In return, Baghdad will release 17% of the national budget to the KRG after it had been suspended earlier this year. Additionally, Baghdad plans to transfer up to $1 billion to Kurdish fighters, helping them buy new equipment and pay militia salaries.

Iraqi security forces guard an oil facility. (Photo: al-Jazeera)

Iraqi Finance Minister Hoshiyar Zebari called the deal a “win-win for both sides”. Similarly, U.S. State Department Special Envoy Brett McGurk described the agreement as an “important breakthrough.” But, according to analysts, other disputes regarding the division of oil revenue have not yet been resolved. Baghdad still claims control over Kirkuk’s oil fields that Kurdish fighters captured in July and oil ministry officials do not recognize extraction contracts created by the KRG.

While Tuesday’s announcement may represent a small step towards wider Shiite-Kurdish political reconciliation, IS and other Sunni extremists continue to pose a significant threat to Iraq’s oil infrastructure. Over the past couple weeks, government fighters have made slow progress pushing IS out of Baiji, a city located near Iraq’s largest oil refinery. Occupied by extremists since June, officials estimate that damage to the facility caused by fighting could take a year to repair.