MEED conference told central government owes the KRG $7bn

Overdue budgetary payments to the Kurdistan Regional Government (KRG) from Iraq’s central government are now worth $7bn, the KRG minister and head of the KRG media and information department Safeen Dizayee told the MEED Kurdistan Projects conference in Erbil this afternoon.

“That card that we feared has been used,” Dizayee said about the overdue payments. “This is illegal by the constitution and the budget law of 2013.”

Dizayee said that an agreement between the KRG and the Iraqi government calls for the KRG to receive 17 per cent of Iraq’s oil export earnings. The 2013 budget law called for the KRG to receive a total of $12.5bn for the year.

Dizayee said the budgetary transfers cover project and development spending, operational expenses and salaries. He said that, so far this year, the KRG has only received payments equivalent to two months of government salaries.

Dizayee said that due to rising Iraqi oil income the estimate is that the KRG should receive $17bn-18bn in 2014. He said that total oil production from the KRG is projected to rise to 400,000 b/d by the end of the year. At that point, the KRG would be financially self-sufficient, Dizayee said.

Dizayee said that the KRG has been dealing with the financial shortfall by increasing local income, including from taxation, borrowing from financial institutions and advanced payments from oil and other companies with concessions in the KRG region.

“We would like to reach a settlement with Baghdad (about the budget),” Dizayee told the conference. “In order to contribute to Iraq’s budget, the KRG has been more than ready to export its oil production. In due course, this amount will be increased and this can contribute to Iraq’s budget.”

Dizayee said that Baghdad has persistently blocked attempts by the KRG to produce and export oil and gas. He said, initially, the central government questioned whether reserves in the KRG region were as high as estimated. This objection was countered by successful exploration with proved reserves of more than 100bn barrels.

“Baghdad then said, OK you have the oil but you don’t have the infrastructure nor the expertise, so you can’t bring in foreign investors,” Dizayee said. Initially, small companies signed oil and gas deals with the KRG but eventually large oil corporations reached development agreements.

“So we proved there was oil, we attracted large companies and they invested,” Dizayee said. “And then the pipeline came and production started. It was at this point that Baghdad said let us negotiate.”

Dizayee said the central issue now about who is responsible for marketing and exporting oil produced in Iraqi Kurdistan and the collection and distribution of the revenue it generates. “This is where we have the dispute,” Dizayee said.

The pumping of 100,000 b/d of crude oil produced in fields in Iraqi Kurdistan via a pipeline to Ceyhan in Turkey started on 23 May. The first tanker carrying Kurdish oil left Ceyhan at the end of May.

In a question-and-answer session at the MEED Kurdistan Projects conference in Erbil this morning, minister and head of the department of foreign relations in the KRG Falah Mustafa Bakir failed to confirm the location of the tanker, which is carrying 1m barrels of oil. Bakir said he expected another tanker of Kurdish oil would be dispatched soon.

Dizayee said that the KRG had become increasingly disappointed with the performance of the government of Iraqi Prime Minister Nouri al-Maliki since the start of his second term in office. “There was no vision and no serious co-operation or an attempt to form a more inclusive government. There are more unilateral decisions and authoritativeness,” Dizayee said. “Never in Iraq’s history has a government had so much income. Yet we see a lack of electricity, public services and water sanitation in almost all provinces of Iraq with the exception of the Kurdistan region. The lack of security is an issue and it is also hurting us. We are being burdened by the flow of people leaving non-Kurdistan Iraq in the past seven years.”

“And now, in the last few days, we have witnessed problems in Mosul and Anbar and we are seeing a new flow of people (into the Kurdistan region),” Dizayee said. “We are catering for them but it hurts us to see them as IDPs (internally-displaced persons).” “This widens the sectarian strife and external intervention especially from terrorist elements playing into this sad and bloody game,” Dizayee said.

MEED’s Kurdistan Projects 2014 Conference was organised in collaboration with the Kurdistan Regional Government, the KDBC and the UKTI. Taqa is strategic event partner. Conference sponsors are Drake & Scull, Falcon Group and Hill International. Jotun is exhibitor and Parson is networking event sponsor.