Iraqi budget cut raises tensions with Kurdish region

The new Iraqi national budget sparked angry words from the prime minister of the autonomous Kurdish region on Sunday, as a row over allocations placed further strain on Baghdad's already fragile relationship with Erbil.

The $88.5 billion budget – the first since Iraq declared victory over ISIL – was passed by parliament on Saturday evening despite a boycott by Kurdish MPs angry at the diminished share for Iraqi Kurdistan.

“This was not the Iraq we wanted after 2003,” said Kurdish Prime Minister Nechirvan Barzani.

“Stability in Iraq cannot be obtained by ignoring the rights of one component in the country, be it the people of the Kurdistan region, or any other."

The Iraqi parliament did not specify what percentage of the budget should be allocated to the Kurds, stipulating only that the region will receive funds proportional to its share of the population – as in accordance with article 9 of the Iraqi constitution.

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The Kurdistan Regional Government (KRG) has traditionally received 17 per cent of the national budget since the fall of former dictator Saddam Hussein – though it stopped receiving funds in 2014 over a dispute with Baghdad over oil revenue.

But a previous draft of the 2018 budget set the portion allocated to the Kurdistan Regional Government at 12.67 per cent. Baghdad says this figure reflects the Kurdish region's share of the Iraqi population – something that is disputed by the KRG.

Kurdish MPs have now warned they could boycott the upcoming general elections in May.

“The Kurdish blocs [in parliament] will decide to either challenge the 2018 budget before the Federal Court or to withdraw from the political process in parliament, including the elections,” said Mohsen Saadoun, an Iraqi MP from the Kurdistan Alliance coalition.

The budget is based on projected oil exports of 3.8 million barrels per day (bpd) – including 250,000 bpd produced in the autonomous Kurdish region – at a price of $46 per barrel, a parliamentary statement said.

The text of the budget states that the KRG must export 250,000 bpd this year and hand over the money it earns from the sales to the federal authorities.

"If Kurdistan does not hand over the funds, the finance ministry will take it from its part of the budget," the text said.

The spokesman for the speaker of the parliament told The National that the passing of the budget was a significant accomplishment amid the challenges the country has encountered.

“The members of parliament voted [in the] public’s interest and for the country," Abdel Al Malik Husseini said. "The budget addressed Kurdish concerns and the government approved the payments of Kurdish civil servants and Peshmerga's (Kurdish militia fighters) salaries as well as welfare entitlements.”

“Iraq is now at a vital stage – reconstruction and rebuilding. Peaceful coexistence is part of the reconstruction efforts that is needed from all parts of the government,” Mr Husseini added.

Parliament was meant to pass the budget before the start of the 2018 financial year in January but all three main blocs, Shiite Arabs, Sunni Arabs and Kurds, had serious issues with the government’s proposed draft.

Baghdad stopped sending funds to Erbil in 2014 when the KRG began selling oil independently.

The deteriorating relationship between the central government and Kurdish region then took a turn for the worse in September last year when the KRG held an independence referendum that overwhelmingly backed secession from the rest of Iraq.

The vote was deemed illegal and unconstitutional by the central government, which responded by launching a military operation to recapture Kurdish-held areas contested by both Baghdad and Erbil, including the city of Kirkuk and surrounding oilfields. This resulted in the Kurdish region once again finding itself financially dependent on Baghdad.