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Budget Amendment Proposals Spark Disagreements Between Iraqi Government, Parliament
1/27/2025
Proposals to amend the budget law have sparked disagreements between the Finance Committee in the Iraqi parliament and the government, delaying the vote on the amendment related to the financial dues of the Kurdistan Region’s oil companies.
The Finance Committee proposed to restrict the difference from the revenues of the Kurdistan Region’s oil exports, after compensating the Kurdistan Regional Government from the sovereign expenses for production and transportation costs, as revenue for the state treasury, linking this process to the settlement of financial dues accumulated over 18 years between Erbil and Baghdad.
The government submitted its written comments on the amendments of the Finance Committee, stressing that these amendments conflict with the mechanism of SOMO’s work, and that all oil revenues must be transferred to the state treasury before disbursing financial dues. If no agreement is reached on these amendments to the budget law, the text will be reworded to include the delivery of all oil and gas to the Kurdistan Region.
The controversy over the vote on three draft laws related to the Kurds, Shiites and Sunnis, during the Iraqi parliament session held on January 21, 2025, caused the first paragraph of the session’s agenda, which was related to amending the general budget law, to be bypassed.
The amendment addresses Article 12 on the production, transportation and delivery of the Kurdistan Region’s oil, setting the cost of production and transportation per barrel at $16 temporarily, until an estimated price is determined by an international consultant, with the Kurdistan Region committing to delivering 400,000 barrels of oil per day.
Dara Sikani, a member of the Legal Committee in the Iraqi Council of Representatives, explained to Rudaw Media Network that “the vote on this amendment has not yet taken place, as the government has submitted a new version of the amendment to the parliament for a vote, and we, as Kurdish representatives, did not agree to this version.”
The new version was submitted in writing by the head of the Coordination Board between the provinces and the government’s representative, Ahmed Al-Fatlawi, to the presidency of the Iraqi parliament, and the letter included notes on the changes proposed by the Finance Committee to the draft amendment law.
"Settling financial dues for 18 years"
According to the proposal of the Finance Committee in the Iraqi Parliament, a copy of which was obtained by the Rudaw Media Network and added to the draft amendment, "the difference between production and transportation costs and the selling price is recorded as revenue for the state's public treasury", taking into account paragraph (a) of Article 12 of the General Budget Law.
This condition was not present in the wording of the draft budget amendment law sent by the Iraqi Council of Ministers to the parliament.
Paragraph (a) of Article 12 of the Iraqi General Budget Law refers to the importance of settling financial dues for the period from 2004 to 2022 between the Kurdistan Region and the federal government. This settlement is made after the dues are audited by the Federal Board of Financial Supervision in coordination with the Board of Financial Supervision in the Kurdistan Region, based on the rights and obligations stipulated in the budget laws for those years.
The government: Either an agreement or handing over all oil and gas revenues
According to the official letter obtained by the Rudaw Media Network, the government made comments on the proposed amendments submitted by the Finance Committee in the draft law.
The letter stated: "The government does not support the proposed amendment because it reduces the revenues of the public treasury compared to the government text, and contradicts what is being implemented in the rest of the regions of Iraq according to the current Financial Management Law, and is not consistent with the mechanisms of selling oil by SOMO, which receives the sales revenues in full as documentary credits and deposits them in the oil and gas revenues account of the Ministry of Finance."
The Iraqi Ministry of Oil works on service contracts to invest in the oil and gas sector, whereby sums of money are paid to companies instead of allocating shares to them, while the Kurdistan Region relies on contracts to participate in the revenues of the sold oil.
The government explained that its amendment stipulates exporting oil through SOMO according to the prices and mechanisms applied in all regions of Iraq, with all oil revenues being delivered to the public treasury as final revenues without any deductions. Compensation for oil production costs is done separately from revenues, according to a mechanism determined between the federal Ministries of Finance and the Kurdistan Regional Government.
Another note from the government indicated that the amendment of the Finance Committee does not include "delivering the full revenues, but rather deducting the production costs from them before delivering them," and considered that this mechanism "is not consistent with the contexts of SOMO's work."
The government's letter stated that the proposed amendment to the Finance Committee "does not guarantee the receipt of revenues without additional deductions, or according to estimates of production costs not agreed upon with the federal government," and that "the proposed addition violates the text of Article (13/First/A) and restricts Article (12/Second/A) of the current budget law, which are important articles that the federal government insists on keeping as they are."
Paragraph (A) of the first item of Article 13 of the budget law also states that all revenues from the sale of oil delivered from the Kurdistan Region are deposited in a bank account affiliated with the federal Ministry of Finance, opened by the Central Bank. Paragraph (A) of the first item of Article 12 deals with the delivery of 400,000 barrels of oil per day from the Kurdistan Region to SOMO, to be sold by the company.
At the end of its letter, the government confirmed its rejection of the proposed amendment to the Finance Committee, explaining that it reduces the share of the general treasury and has a negative impact on the revenues of the federal government, in addition to its contradiction "with the contexts applied in the rest of the regions of Iraq and the mechanisms of SOMO."
The amendment to the General Budget Law has passed the first and second reading stages, and all that remains is a vote on it.
The government preferred, if Parliament fails to pass the amendment, to formulate it in a way that guarantees the payment of “revenues from the sale of oil, its derivatives and gas, locally and abroad, as final revenue to the public treasury without any deductions, and in accordance with the procedures adopted in the rest of the regions of Iraq and the amended Financial Management Law of 2019.”
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