Erbil, Kurdistan Region – Iraq’s oil ministry on Thursday held the Kurdistan Regional Government (KRG) responsible for what it said were “oil smuggling operations” from the Kurdistan Region, demanding the immediate handover of regional oil production. A day prior, the KRG accused the federal government of imposing a “siege” on the Region by blocking funds to Erbil and withholding salaries for over a million civil servants.
The Iraqi oil ministry said in a statement that it “is monitoring information indicating the continuation of oil smuggling operations from the Kurdistan Region outside Iraq” and “holds the KRG fully [legally] responsible for this, while reserving its right to continue taking all legal actions in this regard.”
It further urged the KRG to “adhere to the constitution, the Federal [Supreme] Court decisions, and applicable laws, including the General Budget Law,” which “obliges the KRG to hand over oil produced from fields within its territory to the federal oil ministry for export, thereby contributing its revenues to the public treasury.”
Tensions between Baghdad and Erbil flared last week after the Iraqi finance ministry suspended all budget transfers to the KRG. Iraqi Oil Minister Taif Sami claimed the decision stemmed from Erbil’s exceeding its 12.67 percent budget allocation for 2025 by 13.547 trillion Iraqi dinars (approximately $10.34 billion).
Sami further noted that the Region’s oil and non-oil revenues from 2023 until April of this year amounted to 19.9 trillion dinars ($15.19 billion); however, it only transferred 598.5 billion dinars ($456.87 million) to the federal government.
She claimed that, under rulings from the Federal Supreme Court, further payments to the KRG under such circumstances are legally prohibited.
The minister added that the KRG “must not renege on its commitments” as its “continued failure to hand over oil causes major financial losses to Iraq,” including “forcing the federal oil ministry to reduce production from other oil fields” to “comply with Iraq's OPEC quota.”
Importantly, the strongly-worded statement by the federal oil ministry came a day after the KRG Council of Ministers slammed the federal oil ministry’s suspension of funds as “unconstitutional and illegal,” and as constituting “collective punishment” of all the Region’s citizens.
Kurdistan Region Prime Minister Masrour Barzani said the KRG fulfilled its obligations and “transparently presented all financial data and information to the joint team of both the federal and regional financial oversight bureaus,” according to the statement.
PM Barzani added that a joint agreement was signed at the beginning of the 2025 fiscal year between the federal and regional finance ministries to provide all monthly salaries based on a federal court ruling that prevents disputes between the two governments from affecting budget implementation.
“Under no pretext or excuse should the Region’s employees’ salaries be halted for the next eight months, especially with only a few days remaining until the holy Eid al-Adha [on June 6],” the KRG stated, slamming Baghdad’s “political decision” as one that “is imposing a blockade on the region.”
During the meeting, the KRG Council of Ministers also decided to call for help from the international community to resolve the salary crisis.
Abdullah Haji Mahmood, the Kurdistan Region’s Martyrs and Anfal Affairs Minister, told Rudaw’s Sangar Abdalrahman on Wednesday that “only two days are left [before Eid al-Adha holidays]. I do not think [that salaries will be disbursed],” adding that they will pursue diplomatic and legal approaches to resolve the issue.
On Tuesday, Iraqi parliament second deputy speaker Shakhawan Abdullah, a Kurdistan Democratic Party (KDP) member, said in a Facebook post that he and other senior party officials met with Prime Minister Mohammed Shia’ al-Sudani on Sunday to deliver a message from KDP leader Masoud Barzani, stating that “under no pretext should people's salaries be suspended.”
Abdullah said Sudani responded that if the Supreme Federal Court issues a decision or administrative order in response to a complaint, he would disburse the salaries.
Of note, Iraq’s Federal Supreme Court on Sunday said it had received a complaint from the Region's civil servants seeking an injunction to guarantee continued payments. However, a senior Iraqi government source told Rudaw on Monday that a ruling is unlikely before the Eid holiday.
Importantly, in protest of Baghdad’s decision, KDP ministers in the Iraqi government, including the high-profile Foreign Minister Fuad Hussein, boycotted Tuesday’s Federal Council of Ministers meeting, according to Abdullah.
