Iraq's semi-autonomous Kurdistan Regional Government said on Friday it was opposed to changes in the draft federal budget that it claims infringe on the rights of the Kurdish people.
The KRG's opposition poses a challenge to Iraqi Prime Minister Mohammed Shia Al Sudani as he attempts to adopt a three-year budget, a flagship policy of his government that came to power late last year, backed by a coalition of Shiite, Sunni and Kurdish parties.
The KRG said it would not abide by any other decision outside the agreement signed with Mr Al Sudani's government, which appeared to be a reference to a deal between the two governments setting a framework for the resumption of oil flows from the northern Iraqi region via Turkey.
Before Mr Al Sudani formed his government, he struck a deal with the powerful Kurdish Democratic Party, which dominates the administration in Erbil, the capital of the semi-autonomous region in northern Iraq.
The agreement included ending a long-running dispute over budget transfers to Erbil and oil revenue sharing between the national government and the Kurdish region, three Kurdish officials said.
Under the Iraqi constitution, the Kurdish region is entitled to a portion of the national budget. But the arrangement collapsed in 2014 when the Kurds began selling crude independently from the Kurdish region.
In 2017, Iraqi forces retook disputed territories including the oil-producing city of Kirkuk. Baghdad resumed some budget payments, but they have been sporadic.
The KRG called the changes in the draft budget, introduced by members of the parliament's finance committee, unconstitutional and “inconsistent with the agreement signed between the regional government and the federal government”.
In March, Mr Al Sudani's cabinet approved the 2023 draft budget of 197.828 trillion Iraqi dinars ($135.6 billion) that would be referred to parliament for approval.