KRG tested by refugees, Baghdad budget squeeze and petrol shortage

The Kurdistan Regional Government (KRG), which is growing in status amid speculation that independence could result from the latest violent events in the rest of Iraq, is being tested by unprecedented economic challenges.

At least 600,000 Syrian refugees and internally-displaced (IDPs) from the rest of Iraq are now living in areas under KRG control. The UN World Food Programme said on 25 June that it has launched an emergency operation to feed more than half a million people in Northern Iraq. Some estimate up to 1m refugees are now living KRG areas.

Before the new wave of displacements, starting with the violence in Mosul, WFP had already been assisting 240,000 people displaced by conflict in Iraq’s al-Anbar Governorate, as well as more than 180,000 refugees from the conflict in Syria who sought refuge in Iraq.

The KRG said this week that it’s implementing a fuel management programme to contain soaring prices caused by increased demand following the expansion of areas under KRG control to encompass Mosul and Sinjan earlier this month and black-market sales of subsidised gasoline produced in refineries in Iraqi Kurdistan to neighbouring Iraqi provinces. These are suffering severe shortages following the elimination of production at the 300,000 b/d Baiji refinery which ISIL rebels said they have captured on 24 June.

The government is continuing to struggle with funding shortages due to the refusal of central government to transfer the full amounts due under an agreement with the KRG. This calls for 17 per cent of Iraq’s oil export revenues to be transfered to the KRG. The KRG said at the MEED Kurdistan Projects Conference earlier this month that Baghdad owed it $7bn by the end of May.

For more about the economic implications of the Iraq crisis see: