BAGHDAD — Iraq’s Kurdish region has begun to sell oil independently of the central government, a move that is exacerbating divisions in the country as it struggles to turn back Islamic State militants.
The Kurdish region last month stopped transferring oil to the state as it had promised to do under a landmark deal in 2014. Kurdish officials argued that payments from Baghdad had not been sufficient. Instead, the region exported more than 600,000 barrels a day itself, Kurdish and Iraqi officials said, a step that Baghdad considers illegal.
The dispute threatens to widen differences in a country already effectively split into three parts: the Kurdish north, areas in southern and central Iraq controlled by the Shiite-led government, and territory in the north and west seized by the Islamic State.
The collapse of the oil deal also risks ruining one of the key achievements of Prime Minister Haider al-Abadi, who was credited with improving relations with the Kurds after years of acrimony.
“It’s a crisis,” said Arez Abdullah, a Kurd who heads the Iraqi parliament’s oil committee. “In reality, neither side is committed, and they are exchanging accusations.”
Kurdish officials say they have been forced to move toward economic independence rather than rely on authorities in Baghdad to pay the salaries of the Kurdish region’s government workers and fighters. Those fighters have been going without pay, hurting morale at a time when they have been protecting hundreds of miles of an informal border against Islamic State militants.
“It’s very important to resolve this because of the security situation,” said Ibrahim Mohammad Bahr al-Ulloum, a former oil minister and a member of parliament’s oil committee. “We have to have a good relationship with the Kurds.”
The federal government had intended to open a joint command center with the Kurds in northern Iraq to coordinate an offensive to take back the city of Mosul, which was seized by the Islamic State last summer. Those plans are on hold, in part because of a new focus on Anbar province. But the worsening relations between Baghdad and the Kurds do not help the situation, officials said.
Abadi was widely praised when he brokered the oil deal in December. Relations between the Kurds and Baghdad had frayed under the previous prime minister, Nouri al-Maliki, and the central government had frozen budget payments to the Kurdish north.
The oil deal stipulates that the Kurdish regional government must transfer 550,000 barrels of oil a day to the state oil company, in exchange for 17 percent of the national budget. That includes 300,000 barrels a day from oil fields in Kirkuk, which authorities in Baghdad say belong to the Iraqi government. The Baghdad government has been unable to export that petroleum because of the security situation in the region.
The Kurdish region says its initial transfers to the state oil company were lower than required in the deal for technical reasons, and Baghdad reciprocated with 30 to 40 percent of the agreed payments. But when the Kurds resolved those problems and transferred an average of more than 500,000 barrels a day in April, payments from the central government did not increase, Kurdish officials complain.
“The amount of oil transferred was promising, but the money paid didn’t reflect that,” Abdullah said. “That is why the problem emerged.”
As trust broke down, Kurdish authorities transferred just under 150,000 barrels a day to Iraq’s state oil company in June, according to their monthly report on exports. Last month, the transfers stopped completely, officials said.
Meanwhile, the Kurdish region’s direct exports via its pipeline into Turkey have averaged more than 600,000 barrels a day, officials say. That brings the Kurdish region closer to the $1 billion a month it says it needs to cover its expenses.
However, the Kurdish exports include oil from disputed fields in Kirkuk. The administration of the oil-rich province has long been a source of contention between Baghdad and Irbil.
Kurdish forces took control of the city of Kirkuk last summer, stepping into the vacuum left as Iraq’s army collapsed in the face of the Islamic State assault.
The Kurdistan Regional Government, or KRG, said that it was obligated to increase oil sales independently of Baghdad in June due to the “significant debt” it had accumulated when the Baghdad government froze budget payments last year. The Kurdish region had already been straining from the cost of fighting the war and the expense of hosting an estimated 1.7 million foreign refugees and Iraqis displaced from other areas of the country.
“Our message to Baghdad is clear; our preference is a deal,” said Safeen Diyazee, a spokesman for the Kurdistan region’s government. “But we cannot wait for bankruptcy.”
In Baghdad, officials say the deal collapsed because of the low amounts of oil transferred by the Kurdish government. The central government is suffering from its own economic crisis caused by the drop in global oil prices. Oil revenue makes up more than 90 percent of Iraq’s budget.
“It’s not clear why the KRG stopped delivering oil,” Ulloum said.
There are differing opinions on whether the oil agreement can be resurrected.
The deal has been vehemently opposed by some factions in Baghdad, including groups in Abadi’s own party, Dawa, who argued that it gave up too much to the Kurds.
“I can honestly declare the signing of the death certificate of the oil deal,” said Mowaffak al-Rubaie, an Iraqi politician in Abadi’s ruling bloc. “It’s collapsed.”
Others hope that it can be revived but say that little progress has been made.
“We are ready for negotiations,” Diyazee said. “The arrangement is fine, but it’s not being honored properly.”
If the Kurdish region continues to sell oil independently, it faces a potential backlash from Baghdad, which raised legal objections when a similar move was attempted last year.
The wrangling highlights the problems facing Abadi as he attempts to hold together a government that includes representation from Sunni and Kurdish minorities.
“The goverment of Abadi wants to reach a solution,” Abdullah said. “But there are many, many problems to be solved.” One of those is Abadi’s limited influence, he said. Despite leaving office, former prime minister Maliki, one of the oil deal’s fiercest critics, remains head of Abadi’s Dawa party.
In Baghdad, Shiite politicians such as Rubaie are increasingly skeptical that the Kurdish region has a future in Iraq.
“They are going their own way but sucking whatever they can from Baghdad,” Rubaie said. “They are shackling us, and the whole country is paralyzed.”
He said the Kurdish region’s current semiautonomous status is untenable. “You can’t make a woman half pregnant,” he said.