Iraq, Kurdistan strike oil-for-salaries deal after years of deadlock

The Iraqi federal government and the Kurdistan Regional Government (KRG) have reached a major agreement aimed at ending a prolonged impasse over oil revenue sharing and civil servant salaries.

Announced on July 18 following an emergency cabinet meeting in Baghdad, the agreement lays out a roadmap for cooperation on oil production, non-oil revenues, and salary payments—issues that have strained relations between Baghdad and Erbil for years, Caliber.Az reports per Arabic newspaper.

According to a federal government statement, the deal stems from recommendations made by a ministerial committee and is in accordance with Kurdistan’s regional cabinet decision No. 285, issued earlier this week.

KRG Prime Minister Masrour Barzani welcomed the development, confirming that a mutual understanding had been reached regarding both salaries and broader financial entitlements for the region.

Under the terms of the deal, the KRG will transfer its full crude oil output—around 280,000 barrels per day (bpd)—to Iraq’s State Oil Marketing Organisation (SOMO), except for 50,000 bpd reserved for local consumption.

This represents the most significant cooperation on oil production in over two years, following a period marked by halted exports and drone attacks on northern oilfields operated primarily by U.S. firms.

In exchange, Baghdad’s Ministry of Finance will pay $16 per barrel—either in cash or in kind—to cover production costs. Revenue from refined oil products consumed locally will be directed to the federal treasury after accounting for transport and operational expenses.

On the non-oil revenue side, the KRG has committed to transferring an initial 120 billion Iraqi dinars (approximately $92 million) to the federal finance ministry, representing Baghdad’s projected share for May. A joint audit team will review and finalise the figures within the next two weeks.

The two sides have also agreed to form a joint committee to oversee the process of localising KRG employee payrolls—a long-standing demand of the Federal Supreme Court. The committee is expected to complete its work within three months.

As part of the initial implementation phase, the federal government will begin releasing May salaries once SOMO confirms the receipt of the agreed oil volumes.

By Aghakazim Guliyev