Wednesday, February 17, 2016

Are Abadi and the KRG serious about a new oil deal?

So the Baghdad and Erbil governments are now negotiating, very publicly, a new arrangement to settle, at least temporarily, their differences over KRG oil exports and budget.

PM Abadi made an offer, which the KRG says it accepts. But does this mean a deal is happening? It's not that simple.

Abadi's proposal was this: "I have a suggestion: Give us the oil and we will give every Kurdish employee a salary like we do for every Iraqi employee."


The KRG interpreted the proposal as: "sending the entire salaries of the Kurdistan Region’s 1.4 million employees which amount to 890 billion IQD."

The problem is, 890 billion IQD is about $800 million, but the 600,000 bpd the KRG would hand over to State Oil Marketing Organization (SOMO) are worth about $450 million (assuming $25/bbl). 

Is Baghdad ready to cover the difference of $350 million? Most certainly not.

The way I see it, Abadi's "like we do for every Iraqi employee," was meant to include implied austerity measures that are bound to increase as Iraq's budget deficit grows bigger and bigger.


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