The relationship between Baghdad and Erbil lately has reached a dead end. The rift between the Kurdistan Regional Government (KRG), the official executive body of the autonomous Kurdistan Region of northern Iraq, and the Federal Government of Iraq (FGI) has, for the past few months, entered a bottleneck driven by political turmoil and rotating governments.
But efforts are being made on both sides to bridge differences. On January 11, a Kurdish delegation headed by Masrour Barzani visited the central government in Baghdad to discuss a number of disputed files. The group included several senior officials: ministers for electricity and finance; chief of the cabinet office; director of the office of the region's prime minister; ministers for planning and oil; economic advisors; general counsel; director of border control; and CEO of State Organization for Marketing of Oil (SOMO Oil).
The Disagreements
A number of critical issues have held sway over Baghdad-Kurdistan relations. Some are old matters, but many have emerged in recent months. Political instability and uncertainty have done further damage to the relationship. Resolving the issues is often postponed as governments come and go, despite their complexity and impact on the Kurdistan region. We may summarise them as follows:
1. Developing Budget law:
Article 121 of the 2005 Iraqi constitution stipulates that each region be allocated a federal budget to cover government costs in proportion to population, resources, and needs.
Kurdistan region is allocated 17% of the annual federal budget, but disputes have arisen ever since. Initially, both sides agreed that the central government would receive 250 thousand barrels for export daily; in December 2014, the KRG delivered the agreed quantity in exchange for 17% of the federal budget, alongside funding the Kurdish Peshmerga forces.
Yet in 2015, the Kurdish region stopped delivering the agreed oil supply and instead has been exporting them directly through Turkey while accusing the central government of failing to deliver on its part of the deal.
Later, in 2017, the KRG ran a referendum for independence and soon after took control of Kirkuk, a key oil city, by force. The central government decreased the region's 2018 budget to 12.6% in retaliation, quoting the region's population data.
The KRG then asserted the 2023 budget allocation isn't enough to cover the region's administrative cost and has asked for an increase ahead of the budget approval at the house of representatives. The KRG wants to avoid repeating the 2021 scenario when it faced a budget deficit and having the FGI pay for Kurdish government workers' wages.
2. Gas and Oil laws:
The dispute between the Kurdish and central governments is centred on oil discovery and export rights. Since 2005, the Iraqi parliament has failed to pass a law that organises exploration and export contracts, which remains a sticking point in Kurdistan-Federal government relations.
The Iraqi constitution stipulates that Iraq's natural resources belong to the Iraqi people. The standing dispute between Kurdistan and the Iraqi federal government worsened when the high court of Iraq ruled in 2022 that the 2007 KRG Oil and Gas Law is unconstitutional and that KRG is required to hand over all production from oil fields to the FGI.
And, while Kurdistan's Judicial Court have rejected the High Court ruling and reinstated the law, the region still needs the central government's political and economic support and thus recognises the need to reconcile its differences with Baghdad as soon as possible to secure the funds it desperately needs. Linked to this file are revenues generated through the Turkey-Iran borders.
3. Disputed territories:
An ongoing issue has been the disagreement about territories covered by article 140 of the constitution. The article stipulates that all territories must be surveyed, and then a referendum to be organised for the Kurdish people no later than December 31, 2007. But this has never been delivered to date. The constitutional article is generic in nature, and so many Kurdish regions remain under dispute, including Tuz Khurmatu, Zammar, and Makhmur, spilling demographic challenges, which the takeover of ISIS in Iraq has exacerbated. The oil-rich region, therefore, has complicated the tense KRG-FGI relations, let alone existing disagreements over oil and gas revenues.
Determining Factors
The current government was only formed when the two main Kurdish parties (Kurdistan Democratic Party and the Patriotic Union of Kurdistan) eventually agreed to join Iraqi cleric Moqtada Al Sadr's "Save the Nation" alliance, which resulted in electing Abdullatif Rashid as president, and Mohammed Shiaa Al-Sudani as prime minister. Soon after, meetings between Kurdistan and Iraqi government officials took place to settle ongoing disputes. Yet, the success of these talks depends on several factors, outlined as follows:
1. Setting the pace:
Baghdad realises that Erbil has fallen to mounting economic and political pressure and is keen to strike a deal soon. Government salary delays, oil companies stopping work, and military interventions by Turkey and Iran, are some of the challenges the region has been facing in recent months.
The recurring official visits indicate the KRG is keen to resolve disputes quickly, especially those related to economic files, as they also influence political files. By contrast, during the lead-up to parliamentary elections, Iraqi officials increased their visits to Erbil in hopes of settling political disputes.
Now that they are part of the Shiite-led government, Kurdish politicians are eager to reap the fruits of their alliance. Through their frequent visits, they hope to get the government to deliver on its promises now that the parliament and house of representatives have signed the initial draft of the deal.
By contrast, Baghdad appears to be in no hurry to resolve these political issues, for regional intervention in Kurdistan has proved to the KRG its need for the federal government, not the other way around. Following an official visit to Tehran, Prime Minister Mohammed Al-Sudani managed to persuade Iran to ease its grip on the region, meaning KGR would benefit from the federal government's support if they were to reach an agreement.
2. Kurdish disagreement:
The region has seen a deep rift between the two biggest parties, the Kurdistan Democratic Party and the Patriotic Union of Kurdistan. Each has accused one another of grave failure over the assassination of Hawkar Jaf, the region's counter-terrorism agency colonel. Also, each party has been pushing their own agenda and attempting to cease control of political decision-making, delaying elections which were set to take place in October 2022.
Because of these disagreements, Kurdish Member of Parliament Kubad Talabani refused to attend regional government sessions. Several other ministers linked to the Patriotic Union of Kurdistan have boycotted cabinet meetings since December 11 2022. And representatives of the National Union Party were notably absent from Iraqi-Kurdish meetings, aiming to derail them until their rivals' demands are met.
3. Growing Shiite disagreements:
Ongoing Kurdish strife has spilt over into disagreements among the Shiite coalition, resulting in further differences on critical files, including the alliance's position on Sadr, Washington, and how to deal with the deteriorating economic situation in Iraq. The government has, therefore, faced mounting popular pressure and frustration. All these issues have led to the government's inability to formalise an agreement that gets the country out of its political stalemate. And if the situation continues, the current government headed by Al-Sudani might be set to delay meeting Kurdish demands, especially as Al-Sudani lacks broader support from his government.
In summary, the KRG is seeking to set in motion at the earliest the agreements signed with Al-Sudani's government. Aiming to get the region out of a crushing economic crisis, the Kurdish government wants to immediately reap the economic benefits of those agreements. However, disagreement among Kurdish factions has damaged the KRG's chances of settling its differences with Baghdad anytime soon. Frequent visits to Iraq might offer the Kurdish government a glimmer of hope for a bigger budget, yet, prospects for a better future remain too far away, perhaps indefinitely.
