ERBIL, Kurdistan Region - Iraq’s Council of Ministers on Thursday approved a new financial agreement with the Kurdistan Regional Government (KRG), paving the way for the resumption of salary payments to the Region’s public employees and the restart of the Kurdish oil exports.
“The federal government at the Council of Ministers meeting today decided to release May salaries [of KRG’s civil servants],” Iraqi Justice Minister Khalid Shwani, a Kurd, told Rudaw, adding that subsequent months’ salaries will be released after “they are audited by special commissions.”
An informed source in Baghdad told Rudaw, on condition of anonymity, that May salaries are expected to be disbursed on Sunday - over two months after transfers were halted due to a budget dispute between Baghdad and Erbil.
Shwani said the agreement is set to remain in effect through the end of the year and represents “a long-lasting framework” for financial cooperation between the federal and regional governments until a new budget law is passed in 2026.
According to the agreement, a copy of which has been seen by Rudaw, the KRG is obligated to export all of the oil produced from its fields - estimated at 230,000 barrels per day - through Iraq’s State Oil Marketing Organization (SOMO). The KRG will retain 50,000 barrels per day for local consumption, covering production costs, while the federal Ministry of Oil may provide refined oil products equivalent to 15,000 barrels per day if needed.
The KRG is also obligated to hand over 120 billion Iraqi dinars (nearly $92 million) in non-oil revenues monthly for May. In return, the federal ministry of finance will pay the KRG $16 per barrel as production fee, in accordance with the amended federal budget law. International oil companies operating in the Kurdish region will receive some of the fee.
A working group from both the federal and regional Boards of Supreme Audit will review and classify oil revenues and determine Baghdad’s share within two weeks.
The Iraqi ministry of finance is expected to “immediately begin disbursing” salaries for May, according to the text of the agreement.
“We welcome this step and expect the Federal Government to send the salaries and financial entitlements of the Kurdistan Region,” said Kurdistan Region Prime Minister Masrour Barzani in a statement.
“I have great appreciation for the patience and endurance of the people of Kurdistan,” he said, adding that “I hope that salaries and financial entitlements, which are the legitimate right of the people of Kurdistan, will no longer be mixed with any problems or disputes, and that we resolve our issues within the constitutional framework and with respect for agreements.”
Minister Shwani said the deal also accounts for emergency situations that may prevent the KRG from fulfilling its commitments.
Tensions between Baghdad and Erbil escalated in late May when the federal finance ministry suspended transfers, accusing the KRG of exceeding its 12.67 percent share of the federal budget and failing to deliver the agreed oil volumes to SOMO. The freeze affected more than 1.2 million public sector employees in the Kurdistan Region.
“This agreement required political backing… There were a lot of political efforts,” the justice minister told Rudaw.
The deal was finalized shortly after Prime Minister Mohammed Shia’ al-Sudani and President Abdul Latif Rashid met in Baghdad and expressed their support.
In a statement, Sudani’s office said the two leaders discussed “the need to resolve the outstanding issues between the federal government and the Kurdistan Regional Government in accordance with the constitutional and legal frameworks in force - particularly concerning the transfer of oil and non-oil revenues to the federal government and the issue of salaries for employees of the Kurdistan Region.” Rashid’s office released a similar statement.
The KRG announced on Wednesday that it "approved a new understanding" regarding the disbursement of salaries and financial entitlements.
The following is the English translation of the Erbil-Baghdad agreement as published by Sudani's office:
First: Oil Delivery
1. The Kurdistan Regional Government shall immediately begin delivering all oil produced from fields in the Kurdistan Region to the State Oil Marketing Organization (SOMO) for export. The Federal Ministry of Finance shall pay an advance to the Kurdistan Region of 16 USD (in kind or in cash) for each barrel received, in accordance with the amended Budget Law. The minimum daily delivery shall not fall below 230,000 barrels and shall include any increase in production as verified by the Joint Measurement and Calibration Committee. If exports stop for any reason, the entire quantity (currently 230,000 barrels/day) shall be delivered to the Federal Ministry of Oil.
(Clarification: Total current production, according to the Kurdistan Region’s reports, is 280,000 barrels/day, of which 50,000 barrels/day are used for domestic consumption in the Kurdistan Region. The remaining 230,000 barrels/day—plus any future increases—are to be delivered to SOMO for export.)
2. A daily quantity of 50,000 barrels will be allocated for local consumption in the Kurdistan Region. The Kurdistan Regional Government must cover the costs of production and transportation for this quantity. Revenues from the sale of petroleum products will be transferred to the Federal Treasury after deducting the aforementioned costs. If needed, the Federal Ministry of Oil may supply the Kurdistan Region of Iraq with petroleum products equivalent to no more than the output from refining 15,000 barrels of crude oil daily. A joint committee from the Federal Ministry of Oil and the Kurdistan Region’s Ministry of Natural Resources will assess the actual needs and submit a report within two weeks to the Federal Council of Ministers for decision.
Second: Non-Oil Revenues
1. The Kurdistan Regional Government shall transfer an initial estimated payment of 120 billion dinars for the federal treasury’s share of non-oil revenues for May to the Federal Ministry of Finance. The final settlement will be made after auditing, as described below.
2. A task force comprising the Federal Ministry of Finance and the Federal Board of Supreme Audit, in coordination with the Kurdistan Region’s Ministry of Finance and Board of Audit, will classify and audit non-oil revenues and determine the federal share starting from May 2025. This will be based on average revenue values stated in the joint audit reports since the current federal budget law came into effect. The team shall submit its report to the Federal Council of Ministers within two weeks.
3. A joint committee between the Federal Government and the Regional Government shall finalize the salary domiciliation process in the Kurdistan Region in line with the Federal Court’s ruling. The process must be completed within three months, and funding at the end of the period shall be limited to processed salaries only.
4. A team from the Federal Ministry of Finance and the Federal Board of Audit, in coordination with their counterparts in the Kurdistan Region, shall determine the extent of excess expenditures in the Kurdistan Region and propose solutions in accordance with the Federal Budget Law for 2023–2025. The report must be submitted to the Federal Council of Ministers within two weeks.
5. The Ministry of Finance shall begin disbursing salaries for the Kurdistan Region’s employees for the month of May, contingent on SOMO’s confirmation of receipt of the full 230,000 barrels/day at the port of Ceyhan, as per the law.
6. All deadlines outlined in this decision shall commence from the date of its approval by the Council of Ministers.
Updated at 6:28 pm
