A renewed dispute between Baghdad and the Kurdistan Region over salary payments has highlighted longstanding tensions at the heart of Iraq's federal system, with both sides accusing the other of violating legal and financial obligations as political mistrust deepens.
The latest confrontation erupted after First Deputy Speaker of Parliament Adnan Faihan called on the federal government to halt financial transfers to the Kurdistan Regional Government (KRG) until outstanding revenue disputes are settled.
Faihan argued that previous governments had violated budget legislation by continuing to fund salaries in the region despite what he described as Erbil's failure to transfer agreed non-oil revenues to the federal treasury.
"The federal government paid salaries for the region's employees for five months of 2025, while the regional government did not deliver any non-oil revenues," he said, warning that further transfers without a full settlement could expose the government to legal accountability.
His remarks drew an immediate backlash from Kurdish officials and lawmakers, who insisted that salary payments are constitutional rights and should not be used as leverage in political disputes.
Deputy Speaker Farhad Atroshi rejected attempts to link salaries to broader disagreements between Baghdad and Erbil.
"Salaries are a red line and not a tool for offsetting accounts or political pressure," Atroshi said, citing a ruling by Iraq's Federal Supreme Court that separated salary payments from political and financial disputes.
The KRG's Ministry of Finance and Economy also issued a strongly worded response, describing Faihan's proposal as "surprising and astonishing" and arguing that the region had complied with all obligations under Iraq's Financial Administration Law and Federal Budget Law.
The ministry said the region had continued transferring revenues to Baghdad, including 50 billion dinars (about $39 million) in non-oil revenues in May alone. It accused the federal Finance Ministry of deducting 70 billion dinars from salary allocations despite declining regional revenues.
Long-running dispute
The dispute is the latest chapter in a conflict that dates back more than a decade.
In 2014, Baghdad suspended transfers of the Kurdistan Region's share of the federal budget after disagreements over independent Kurdish oil exports. In response, the KRG began exporting crude independently through Turkey in order to fund salaries and public services.
Tensions intensified again in March 2023 after an international arbitration ruling halted Kurdish oil exports through Turkey's Ceyhan terminal, depriving the region of one of its main sources of income.
Since then, Baghdad has increasingly linked salary transfers to the delivery of oil and non-oil revenues, often describing funds sent to the region as temporary advances rather than regular budget allocations.
According to KRG figures, the Kurdistan Region was allocated 58.3 trillion dinars under Iraq's 2023-2025 federal budget framework but received only 24.3 trillion dinars, roughly 41 percent of its entitlement.
Salary shortfalls have continued into 2026. Kurdish authorities reported deductions from both salary and pension funding, while warning that delays were increasing economic hardship across the region.
Political struggle beyond finances
While the immediate dispute centres on budget transfers and revenue-sharing, many analysts view it as part of a wider struggle over the balance of power between Iraq's federal government and the autonomous Kurdistan Region.
Baghdad argues that greater transparency is required regarding oil sales, customs revenues, taxes and payroll figures. Federal officials contend that continuing transfers without stronger oversight would effectively institutionalise parallel financial systems within the Iraqi state.
Erbil, meanwhile, argues that it is being subjected to political pressure and selective treatment not applied to other provinces.
The dispute also intersects with broader political rivalries. Kurdish leaders have long accused influential Shiite parties and Iran-aligned factions of seeking to curb the region's autonomy, while those groups frequently criticise Erbil's close security and political ties with Washington and Western governments.
Since 2003, the Kurdistan Region has maintained extensive self-governing powers, including its own security institutions, administrative structures and economic policies. That autonomy has often clashed with efforts by successive governments in Baghdad to strengthen federal authority.
Fragile compromises
Despite recurring confrontations, neither side appears willing to push the dispute to breaking point.
Federal authorities recognise that a prolonged funding crisis could trigger social unrest in the region and further destabilise Iraq's already fragile political landscape. Kurdish leaders, meanwhile, remain dependent on federal budget transfers following the suspension of oil exports.
Prime Minister Ali al-Zaidi, succeeding Mohammed Shia al-Sudani, recently sought to ease tensions during talks with KRG Prime Minister Masrour Barzani, reportedly instructing the federal Finance Ministry to ensure salary funding is released regularly and without discrimination.
Yet fundamental disagreements remain unresolved, including disputes over oil exports, revenue-sharing, border management and the future distribution of powers within Iraq's federal system.
As a result, the salary dispute increasingly symbolises a broader constitutional struggle over Iraq's future governance model. Without a comprehensive settlement, analysts warn that periodic crises between Baghdad and Erbil are likely to continue, reinforcing uncertainty over the durability of Iraq's federal arrangements and the relationship between the centre and the Kurdistan Region.
Fresh tension as Iraq’s new government faces old Kurdistan salary crisis
Baghdad recognises that excessive escalation against the region carries political and security risks, particularly given Iraq’s fragile internal balances and complex regional environment.
Iraq’s recurring financial dispute with the Kurdistan Region appears to be about far more than revenue calculations or budget-transfer mechanisms, reflecting a deeper political struggle over the nature of relations between Baghdad and Erbil and the limits of authority exercised by each side within Iraq’s federal system.
For years, the issue of salaries for Kurdistan Region employees has been among the most sensitive files in relations between the federal government and Erbil, given its direct impact on the livelihoods of hundreds of thousands of public-sector workers and Kurdish families, and because it has repeatedly been used as a political pressure tool during periods of tension.
Despite changes in Iraq’s political leadership, current indicators suggest Baghdad’s financial approach towards the region has not fundamentally changed. Calls by First Deputy Speaker of Parliament Adnan Faihan to suspend financial transfers to the Kurdistan Regional Government have revived a familiar discourse that links continued funding to the resolution of disputes over oil exports, revenues and border crossings, the same approach seen under previous governments.
Baghdad bases its position on repeated accusations that the Kurdistan authorities have failed to provide full transparency regarding actual revenues, whether from oil, taxes or border crossings, as well as longstanding disputes over the number of public employees, pensioners and salary recipients. Federal authorities argue that continuing transfers without strict oversight entrenches financial and administrative duality within the Iraqi state.
Erbil, however, maintains that Baghdad is applying political rather than legal standards and that the federal government is failing to uphold the principle of partnership equally between the region and other provinces. Kurdish officials point to what they describe as a selective application of the “actual spending” policy, under which the region faces tighter restrictions on funding and deductions than other parts of Iraq.
The dispute carries an additional political dimension because of the influence of Shia parties and factions close to Iran, which have long viewed with suspicion the Kurdistan Region’s degree of political and security autonomy, as well as its close ties with the United States and Western countries.
Since the establishment of Kurdish self-rule after 2003, the Kurdistan Region has remained a special case within Iraq, not only because of its constitutional status but also because it possesses largely autonomous security, administrative and economic institutions. This has created a persistent tension between advocates of a stronger central state in Baghdad and Kurdish leaders seeking to preserve the widest possible degree of autonomy.
The salary issue has increasingly become part of this broader struggle. Any delay in funding places direct economic and social pressure on the regional government and exposes it to growing public dissatisfaction, particularly given the heavy dependence of large segments of the population on public-sector employment.
The continuing crisis also risks undermining political trust between Baghdad and Erbil and complicating negotiations over more contentious issues, including the oil and gas law, revenue-sharing arrangements and the management of border crossings.
At the same time, Baghdad recognises that excessive escalation against the region carries political and security risks, particularly given Iraq’s fragile internal balances and complex regional environment. Consequently, periods of confrontation have often ended in temporary compromises and partial solutions without addressing the root causes of the dispute.
Prime Minister Ali Zaidi’s government appears to be following a similar approach, combining financial pressure on the region with efforts to keep negotiations open. The success of that strategy, however, will depend on whether both sides can move beyond crisis management towards a clearer and more sustainable framework governing financial and constitutional relations between Baghdad and Erbil.
The Kurdistan Regional Government’s Ministry of Finance and Economy responded sharply on Tuesday to Faihan’s call for the suspension of transfers.
In a statement issued by its General Directorate of Accounts, the ministry said calls to suspend or deduct salaries from one group of Iraqi citizens while excluding others were “surprising”, particularly when made by the First Deputy Speaker of Parliament.
The ministry stressed that the Kurdistan Region had fulfilled all financial obligations stipulated under Iraq’s Financial Administration Law and the federal budget law. It said the regional government transferred the federal treasury’s share of revenues throughout 2025 in accordance with existing agreements, but salaries for Kurdistan employees were funded for only ten months despite salaries elsewhere in Iraq continuing to be paid.
The ministry added that Baghdad had agreed during that period to receive 50 percent of non-oil revenues because of declining income levels. It said discussions over implementing the ASYCUDA customs system had reached their final stages, but the necessary federal decision had yet to be issued.
It also criticised the application of the “actual spending” mechanism to the Kurdistan Region, arguing that it resulted in the region not receiving its full share of federal budget allocations, including salary payments, unlike other Iraqi provinces.
According to the ministry, the regional government transferred 50 billion Iraqi dinars (about $39 million) in non-oil revenues to the federal treasury in May, yet the federal Finance Ministry deducted 70 billion dinars from salary funding sent to the region without taking into account declining revenues.
The continued use of employee salaries as a political bargaining tool not only threatens economic stability in Kurdistan, but also reinforces perceptions of an Iraqi state struggling to establish a fair and stable financial and administrative system for all its constituents. The mutual distrust between Baghdad and Erbil reflects a deeper crisis concerning the nature of the Iraqi state itself and the future of its federal system.
#Kurdistan #Iraq #KRG #Baghdad #Erbil #OilPolitics #MiddleEast #AliZaidi #Sudani #Geopolitics #EnergySecurity #KurdishPolicyAnalysis
Comments
Post a Comment