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Dec 2, 2014 5:21 AM

Iraqi and Kurdish governments agree to oil deal

The Associated Press

BAGHDAD (AP) The Iraqi federal government and the Kurdish regional government in northern Iraq have reached an agreement Thursday over longstanding oil and budget disputes that for months have created a rift.

The agreement stipulates that the semi-autonomous Kurdish government will send a total of 550,000 barrels of oil per day to the Iraqi oil ministry, half of which will come from disputed Kirkuk oil fields, according to Iraqi Finance Minister Hoshyar Zebari. In exchange, the Kurds will receive their 17-percent share of the national budget allocated to their region, plus installments of as much as $1 billion to boost the capabilities of Kurdish peshmerga fighters battling the Islamic State militant group.

"This deal is a win-win deal for both sides," Zebari, a Kurd, told The Associated Press. "The (Kurdish government) needed more stability in its relations with Baghdad and the Iraqi (central) government is going through very serious financial difficulties because of the drop in oil prices, and because of...spending that has been taking place, so really we are struggling to increase oil production."

Earlier this year, Baghdad cut the 17 percent of the state budget that is supposed to go to the Kurdish region which in 2013 totaled about $12 billion, according to Zebari. The central government withheld the funds after the Kurds began transporting oil from fields inside the autonomous zone to Turkey against Baghdad's wishes. The Kurdish government says it needs that money to meet its growing security demands, particularly amid the current fight against the Islamic State group, and to pay public-sector employees and fund much-needed infrastructure development.

Since Prime Minister Haider al-Abadi came to power in September, the Kurds have pushed for a quick resolution, saying they will give him three months to resolve the outstanding dispute or they would boycott his government.

Last month, the government in Irbil, the capital of the Kurdish region, agreed preliminarily to sell 150,000 barrels of oil per day to the federal government in return for a one-time payment of $500 million, in a sign that tensions between the two sides were thawing.


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