BAGHDAD (Reuters) - Iraq’s Kurdistan region received a $420 million budget payment from Baghdad on Thursday, a long-awaited transfer of funds that puts a bilateral oil export agreement back on track.
“It means both sides are committed to adhering to the deal,” Iraqi Finance Minister Hoshiyar Zebari told Reuters, confirming the payment.
Baghdad cut budget payments to the Kurds in January 2014 over the semi-autonomous region’s oil policies.
They were reinstated in December after the Kurds agreed to export an average of 550,000 barrels per day (bpd) from Ceyhan via Iraq’s State Oil Marketing Organisation (SOMO) in 2015.
The agreement was hailed as a breakthrough that would help Iraq increase oil exports at a time when revenues are strained by low global prices and the cost of financing a war against Islamic State insurgents in the north and west.
The Kurds were promised 17 percent from this year’s $105 billion national budget, which averages out to a monthly payment of $1 billion.
But the payment was missed in February, causing tensions to rise amid difficulties for both sides, according to Zebari.
The central government has severe cash flow problems, burdened by low oil prices and the war it is waging against Islamic State militants across northern and western Iraq.
The Kurds have struggled to reach the export target of 550,000 barrels per day from their own fields and from national fields in Kirkuk that they are now responsible for exporting from.
“There are different expectations from both sides,” Zebari told Reuters. He added that the oil exports from the north were now increasing steadily and had reached over 300,000 bpd.
He said both sides would meet their targets for budget payments and oil exports by the end of the year, while figures could vary from month to month. He added Baghdad was expected to make another budget payment to the Kurds at the end of March.
“Both sides are delivering,” he said.
The latest payment was negotiated by Zebari and Deputy Prime Minister Roj Nuri Shaways - both Kurds - and Prime Minister Haider al-Abadi and Oil Minister Adel Abdel Mehdi.
Zebari had told Reuters on Wednesday the payment would be made within days.
Reporting by Ned Parker; Editing by John Stonestreet