Baghdad may waive oil shortfall blocking June budget transfers to Erbil: KRG source

ERBIL, Kurdistan Region - Baghdad may overlook the volume of oil currently being delivered by the Kurdistan Region despite it falling short of the agreed-upon quota, potentially paving the way for the disbursement of June salaries, a source from the Kurdistan Regional Government (KRG) told Rudaw on Wednesday.

“Sending June salaries is tied to oil delivery, but it's possible Baghdad may overlook the amount of oil being delivered, given that current production does not reach 280,000 barrels and it's decided to reach that level gradually,” the source said, on the condition of anonymity.

Under a July 17 agreement approved by Iraq’s Council of Ministers, the KRG is required to deliver 280,000 barrels of oil per day, with 50,000 barrels allocated for domestic use. In return, Baghdad is to send monthly salary payments.

More than 1.2 million civil servants in the Kurdistan Region remain unpaid for June.

Aziz Ahmad, deputy chief of staff to KRG Prime Minister Masrour Barzani, said earlier this month that nearly 200,000 barrels of oil production had been lost due to the “spate of drone attacks.”

A Baghdad technical team is expected to visit oil fields in the Kurdistan Region to assess current production levels and inspect damage from the strikes. A KRG source told Rudaw the delegation had already visited some fields and will now inspect the remaining ones.

Rudaw has recorded dozens of drone and rocket attacks on the Kurdistan Region in recent weeks, many of which targeted oil infrastructure. While no group has claimed responsibility, the KRG interior ministry has accused the Popular Mobilization Forces (PMF or Hashd al-Shaabi) of involvement - a charge Baghdad has rejected as “unacceptable.”

Despite these challenges, a source from the oil companies operating in the Kurdistan Region told Rudaw on Tuesday that they received a proposal detailing how to produce the 50,000 barrels for domestic use and how their financial entitlements will be paid. According to the deal, companies are to be paid $16 per barrel.

However, Rudaw has learned that firms raised objections over the fixed rate. They want their payments after the initial two-month period to reflect their contractual shares and be linked to market prices, rather than a flat rate.

Beyond oil, non-oil revenue also remains a sticking point. Baghdad has demanded 120 billion dinars in non-oil revenue for both May and June. While that amount has been delivered for May, a KRG source said June’s contribution “will be provided somehow,” but added that the Region “cannot deliver that amount of revenue for July.”

According to Rudaw’s information, a joint committee from both governments’ finance ministries and financial oversight bodies is now tasked with assessing and determining the Region’s actual monthly non-oil revenues. The outcome could change future targets.

Baghdad’s expectations are based on a March 12 report to the prime minister’s office that estimated the Kurdistan Region’s 2024 non-oil revenues at 4.702 trillion dinars, or about 391.8 billion dinars per month. But a KRG finance ministry source told Rudaw the figure is misleading.

“The problem is that the calculated revenue amount has not all been returned to the government in cash. Part of that revenue, such as electricity money, has not been paid by citizens, so it's difficult to deliver the same estimated amount of money,” the source said.

Tensions between Erbil and Baghdad escalated in late May when the federal finance ministry halted budget transfers, accusing the KRG of exceeding its 12.67 percent share and failing to meet oil commitments.

The standoff began to ease earlier this month after Baghdad sent 975 billion dinars (around $737 million) to cover May salaries. But the deal’s implementation has faced delays over unresolved technical and financial details.

Hastyar Qadir contributed to this report.