Government Spokes: Iraqi Cabinet Decision Marks Turning Point in Baghdad-Erbil Financial Relations

INA

Iraqi Government Spokesperson Basim al-Awadi.

Iraqi Government Spokesperson Basim al-Awadi announced on Monday, 21 July 2025, that the recent Cabinet decision concerning the Kurdistan Regional Government's (KRG) revenues represents a fundamental transformation in the relationship between the Iraqi federal government and the KRG.

Speaking to the Iraq's state media (INA), Awadi described the decision as “a major and exceptional event” that shifts the financial relationship away from informal political understandings toward a framework grounded in constitutional and legal obligations. 

“This marks the end of a phase where financial arrangements were dictated by political consensus,” he said, “and the beginning of a new era where the constitution and the federal budget law take precedence.”

Awadi emphasised that the decision is anchored in the Federal Budget Law for the years 2023–2025 (Law No. 13 of 2023), but is now being implemented in a way that upholds legal authority over political negotiation. 

He said: "Under the agreement, the KRG is required to deliver 230,000 barrels of oil per day to the State Oil Marketing Organization (SOMO), with 50,000 barrels allocated for local consumption in the region. SOMO will handle the export of the oil and deposit the revenues into the federal treasury."

"This measure aligns with a recent Federal Court ruling on the localisation (Nationalisation or Tawtin) of KRG public sector salaries and ensures that these salaries will be paid directly from the federal budget," Awadi noted.

He added that the decision also addresses non-oil revenues, including taxes and customs collected at border crossings, which are to be treated as sovereign income and included in the public treasury. 

“This decision represents the first step toward a comprehensive and lasting settlement of financial and administrative issues not only with the KRG, but also with other governorates,” he stated, highlighting the importance of constitutional compliance and the rule of law.

In the event that oil exports through the Turkish port of Ceyhan remain blocked, Awadi explained that the decision includes alternative mechanisms allowing the allocated quantities to be transferred to SOMO, which will seek to export them via other routes. 

He concluded by calling the move a “foundational step” that will enhance federal stability, reduce political tension, and promote equitable wealth distribution in accordance with a national constitutional vision.

Public employees in the Kurdistan Region have now gone without salaries for over 70 days despite a recent agreement reached between the Erbil and Baghdad governments over salary payments by Baghdad. The fate of their May and June payments remains uncertain, deepening concerns over the welfare of thousands of civil servants in the Region.

Baghdad insists that before sending salaries, the KRG must begin exporting oil via the state's oil marketing company SOMO and handing over domestic revenues, with transferring an initial payment of 120 billion Iraqi dinars from non-oil revenues for May salaries.

The salary crisis in the Kurdistan Region is part of a decade-long standoff rooted in disputes over oil revenue sharing, budget allocations, and constitutional interpretations. While the Kurdistan Region’s share of the federal budget is legally set at 12.67%, repeated disagreements and legal rulings have complicated the transfer of funds.

The situation worsened after the Iraqi federal government suspended the disbursement of the KRG's share of the national budget in May, asserting that the Region’s full share of the national budget for 2023, 2024, and 2025—approved by Parliament—had already been disbursed. 



PUKMEDIA