Iraqi Kurds accept Baghdad's deal to pay salaries

Iraq's autonomous Kurdish region said on Wednesday that it would halt independent oil sales if Baghdad pays its employees, but cast doubt on the federal government's ability to implement the proposal.

Iraqi Prime Minister Haider al-Abadi said earlier this week that he would pay the salaries of the cash-strapped northern region's employees if it halted the oil sales, which Baghdad considers illegal.

The Kurdistan government said it "accepted your excellency's proposal of the Iraqi federal government (paying) all the salaries of the employees of the Kurdistan region, who number 400,000 people."

Their salaries amount to 890 billion Iraqi dinars a month, it said in an online statement, or more than $747mn at the 1,190 dinars per dollar exchange rate used by Iraqi banks.

In exchange, the region would "hand over all of its oil production to the federal government of Iraq, as is clearly stated in your excellency's proposal," it said.

In saying they accept the offer, the Kurds put Abadi in the position of either finding a way to follow through or risk being blamed for the failure of the proposal.

The Kurdish authorities appeared sceptical about the chances of a working agreement actually materialising, listing various occasions on which they say Baghdad has failed to honour its financial commitments, and questioning the state of federal finances.

The region said that Baghdad was not even making enough from oil export revenues - which have been slashed by plunging crude prices - to cover the cost of its own employees' salaries, though Baghdad has said they will continue to be paid.

Iraqi Kurdistan has been independently exporting and selling crude from northern territory it controls via Turkey since a deal with Baghdad on oil and revenue-sharing collapsed last year.

Last year, a report by Reuters revealed that Kurdistan is exporting over 500,000 barrels per day to as many as 10 countries.

"We would accept a real budget that Baghdad can commit to without conditions, but we don't want to be part of a theoretical budget which isn't worth the paper it is written on," said Ashti Hawrami, the minister for natural resources, at the time.

The region said on Tuesday that it had made over $3.94 billion from independent sales from 24 June to 31 December, compared with $1.98 billion it received from the federal government over the first half of the year.

Kurdistan is facing a financial crisis despite the substantial oil revenues, and has announced that its employees will not be paid their full salaries until further notice and that months of wage arrears will be considered loans to the government.

The Kurdish austerity measures have sparked widespread anger among regional government employees, some of whom have protested or gone on strike.

Massoud Barzani, the region's de facto president, has said that the "time has come for a referendum on independence", but Kurdistan's financial woes effectively rule out a viable state for now.