Iraq/Kurdistan: Iraqi Kurdistan on the Brink of Collapse as Oil Prices Crash

May 3, 2020 | Viktor Katona, OilPrice.com
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Attentive Oilprice readers must have read at least a dozen articles describing how hard Iraq has been hit by the drop in oil prices. Iraq’s political travails are by no means over, Baghdad is now the tactical battlefield to have Mustafa al-Kadhimi, the head of the country’s National intelligence service, elected as the new prime minister after the previous two candidates failed to garner sufficient approval in the Parliament. Fighting coronavirus and low oil prices at the same time, the management of Iraq’s slew of problems has befallen to Oil Minister Thamir Ghadhban who has become the de facto head of government after nominal Prime Minister Adil Abdul-Mahdi went into self-imposed absence.  Against this background, the federal Iraqi government has stopped all payments towards the Kurdistani Regional Government (KRG) last week. To put these numbers in context, the KRG needs around 900 million every month to ensure essential government functioning, of this, some 380 million came from the federal government in Baghdad which has pledged to take regional government officials and Peshmerga on its payroll. Even before COVID-19 struck the world and before oil prices plummeted by 60% compared to February 2020, Erbil had persistent issues with paying the salaries of people on its payroll – for instance, the money that public sector workers received this April were in fact arrears for December 2019.