Some numbers in Iraqi politics are more than numbers. For the Kurdistan Region, 120 billion dinars represents one of them.
That is the amount Baghdad expects the region to transfer from non-oil or local revenues. In effect, it reflects the unresolved federal bargain over control of the region’s revenues, oil, border crossings and salaries.
The prime minister of the Kurdistan Region now states that the arrangement will no longer work. His argument is simple. When reductions in oil exports, attacks on energy facilities and difficulties with trade reduce revenues, it is not possible to expect a fixed monthly payment to Baghdad. Instead, the region proposes to transfer half of its actual monthly revenues from local sources.
This appears to be a technical matter but is in fact highly political.
For Baghdad, the implications are straightforward. The region receives funds, including payments for public sector salaries. In return, Baghdad requires full disclosure of oil, customs and local revenues. No federal government will support a region about which it has insufficient information. From the viewpoint of Baghdad, it is not possible for the region to request payments for public sector salaries while retaining exclusive control over revenues from oil and border trade.
Iraq’s budget is not a voluntary arrangement, and the federal government has long criticized Erbil for failure to remit revenues from oil and other sources as required by law. It seeks predictability, control and a single national system for collection of revenues. Erbil also warrants scrutiny of its own record of opaque management of oil revenues and of party-dominated institutions that facilitate continuing demands for federal control over oil operations.
But the result is an equally direct response by Erbil: Baghdad cannot impose fixed payments on a region with highly variable income. The resulting disruptions of oil operations have resulted in years of legal conflicts and interruptions of pipeline operations, and recent attacks on oil fields have reduced revenues further. Security for oil operations and infrastructure has become a major component of negotiations for restoration of exports.
Export operations through Turkey’s Ceyhan pipeline were interrupted in 2023 and have remained subject to repeated disputes over restoration of operations. Consequently, the proposed formula for half of actual monthly revenues reflects an effort to substitute a proportional relationship for an obligation of fixed payments. Increases or decreases in revenues earned by Erbil will result in corresponding changes in payments received by Baghdad.
The approach has important financial and political implications. It reflects an assertion that we will provide only actual revenues and not artificial claims of stability for highly variable sources of income. Finally, the expression “local revenues” reflects additional political implications.
Baghdad seeks verification of actual income levels, whereas Erbil demands recognition of its fiscal autonomy.
The people caught in the middle are not ministers or oil executives, but teachers, physicians, police officers, retirees and civil servants who depend on consumer expenditures. The crisis of salaries in the Kurdistan Region has persisted for years with chronic delays, deductions and arrears of payment that have become part of everyday life. For more than a million public employees and their families, this is not a dispute about federal accounting, but about whether wages arrive before rent is due. This contributes to the extreme destructiveness of the Baghdad-Erbil conflict.
Each side can develop a legal or political argument. Baghdad demands that revenues be transferred to central authority. Erbil objects to use of salaries as a means of pressure. Baghdad insists on federal supervision of federal funds.
Erbil objects to punishment of its public employees for intergovernmental disagreements. Both positions have some validity, but the ultimate cost of the conflict is borne by ordinary Kurds. The confrontation over oil is the most visible aspect of the dispute, but conflicts over customs represent a quieter but ultimately a quieter battlefield. Baghdad requires implementation of ASYCUDA, the automated customs system used throughout federal Iraq.
This represents an effort to achieve greater efficiency and transparency of operations, but also provides an additional test of control. Customs represent more than just administrative activity; they reflect issues of revenue, boundaries and degree of control. For Baghdad, use of ASYCUDA provides information on the volume of imports and exports from the Kurdistan Region. For Erbil, however, implementation of automated procedures for customs administration would represent a further mechanism for increased federal control over the generation of revenues from customs operations.
Thus, the controversy over customs is in many ways a miniature version of the conflict over oil. Baghdad demands a system of complete national control, while Erbil is concerned about continuing loss of its separate institutions.
The dispute over 120 billion dinars is not about 120 billion dinars. It reflects continuing uncertainty about whether the Kurdistan Region remains financially independent or becomes increasingly dependent on Baghdad’s monthly approval. These unresolved issues resurface every month as a crisis of payroll payments.
The constitutional status of the Kurdistan Region has been clearly defined in principle since 2005, but major areas of financial interest such as oil revenues, border crossings, federal transfers and security forces remain in dispute. As a result, the region functions as an autonomous entity with its own parliament, security forces, border crossings, external relations and ambitions for energy independence. This has enabled rapid development in periods of weakness for Baghdad and has left unresolved questions about ownership of oil, control of border crossings and responsibility for salaries and revenues.
Consequently, the recent efforts of Barzani to resist fixed payment should be interpreted as more than an expression of dissatisfaction with a fixed level of financial support. Rather, they reflect a warning that the old system of financial relations is breaking down. The region cannot continue to promise financial support that it has already lost.
Baghdad also cannot continue to provide salaries without requiring a much greater degree of transparency concerning financial operations in the region. Finally, neither side can regard these developments as merely administrative. Instead, they represent a continuing risk that salaries will ultimately become the principal weapon of conflict between the federal authorities and the Kurdistan Region.
Failure of negotiations will lead to delays in payments, which will stimulate accusations against Baghdad and ultimately to further loss of confidence in the overall capacity of the Iraqi system.
Any durable compromise would probably require more transparent accounting from Erbil and a less politicised salary mechanism from Baghdad. A percentage-based system, monitored jointly, may be the only practical way forward.
But that would require something often missing in Baghdad-Erbil relations: trust.
Until then, 120 billion dinars will remain more than a number. It will stand for the unresolved question at the heart of post-2003 Iraq: whether meaningful Kurdish autonomy can survive without predictable, locally controlled revenue, and whether Baghdad can accept a federal region it does not fully control.
For ordinary Kurds, the answer arrives not in speeches, budgets or court rulings, but in bank accounts. Either the salary comes, or it does not.
