‘Oil-for-Salaries' Deal Ends Dispute Between Baghdad and Erbil
The deal, announced following an emergency cabinet meeting in Baghdad, covers oil production handover, non-oil revenue sharing, and the resumption of salary payments to KRG employees beginning with May 2025.
According to a government statement, the agreement was based on a recommendation by a ministerial committee and aligned with Kurdistan's regional cabinet decision No. 285, issued on July 16.
KRG Prime Minister Masrour Barzani confirmed the breakthrough, stating that the federal government had approved a 'mutual understanding regarding salaries and the region's financial entitlements.'
Under the terms of the deal, the KRG will hand over all crude oil production - currently 280,000 barrels per day (bpd) - to Iraq's State Oil Marketing Organization (SOMO), with the exception of 50,000 bpd reserved for domestic consumption. This marks the first such commitment in more than two years, during which oil exports were suspended amid ongoing disputes and recent drone strikes targeting northern oilfields operated mostly by US firms.
In return, the federal Ministry of Finance will pay $16 per barrel, in cash or in kind, to cover production costs. Revenues from locally consumed oil derivatives will go to the federal treasury after deducting production and transport expenses.
On non-oil revenues, the KRG will transfer an initial 120 billion Iraqi dinars (approx. $92 million) to the federal finance ministry, representing an estimate of Baghdad's share for May. A joint audit team from both governments will verify and finalize the figures within two weeks.
To resolve long-standing disputes over public salaries, a new joint committee will oversee the localization of KRG employee payrolls, in line with a ruling from the Federal Supreme Court. The committee is expected to complete its work within three months.
As part of the agreement's first phase, the federal government will begin disbursing May salaries following confirmation from SOMO that the agreed oil volumes have been received.
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