Editorial Analysis by Nicola Sole
Iraqi Prime Minister Mohammed Shia al-Sudani is facing a new crisis in his efforts to reform the economy and compile a state budget. The Kurdish Democratic Party (KDP), which helped al-Sudani form his government, could withdraw its support if the prime minister does not fulfil his promise to address longstanding disputes between Erbil and Baghdad. If the KDP withdraws its support, al-Sudani will struggle to pass bills in parliament and enact reforms, putting his government in a precarious position.
The KDP dominates the administration in Erbil, the capital of the semi-autonomous region in northern Iraq. Before al-Sudani formed his government, he struck a deal with the KDP, which included ending a long-running dispute over budget transfers to Erbil and oil revenue sharing between the national government and Kurdistan. The Iraqi constitution entitles the Kurdish region to a portion of the national budget, but the arrangement collapsed in 2014 when the Kurds began selling crude oil independently from Kurdistan. In 2017, Iraqi forces retook disputed territories, including the oil city of Kirkuk, and Baghdad resumed some budget payments, but they have been sporadic.
Al-Sudani came to power after more than a year of political deadlock, as infighting among Shi’ite and Kurdish groups prevented the formation of a government, hampering efforts to rebuild a country on its knees after decades of conflict. The paralysis left Iraq without a budget for 2022, holding up spending on much-needed infrastructure projects and economic reform and depriving Kurdish authorities of revenues needed to pay international oil firms and the salaries of thousands of local workers.
In January, the Iraqi Federal Supreme Court ruled that orders from the Baghdad government to transfer money to the Kurdistan Regional Government (KRG) to pay salaries in 2021 and 2022 were illegal because they broke Iraq’s budget law. Massoud Barzani, president of the ruling KDP, said the court has taken a “hostile position” against the region. According to an adviser, who spoke on condition of anonymity, al-Sudani has tasked the cabinet’s legal team with finding a solution to allow salary transfers without breaching the court verdict.
Some political actors in al-Sudani’s camp in Baghdad see escalation with the Kurds by using such court rulings as a necessary political tactic to put him in a stronger negotiating position. However, the KRG’s Jotiar Adil was still hopeful that a compromise could be reached, as the KRG delegation was in Baghdad on Monday to discuss the budget and hydrocarbon laws. He said the KRG had a serious and real intention to reach an agreement with Baghdad, and they felt the same seriousness from al-Sudani to solve those obstacles.
This new crisis with the KDP comes at a critical time for Iraq, which has been suffering from economic instability, poverty, and unemployment since the 2003 U.S.-led invasion. Al-Sudani has pledged to reform the economy, fight corruption, improve public services, and combat poverty and unemployment. However, he cannot achieve these goals without the support of the KDP, which has 31 seats in parliament.
Al-Sudani is facing a critical new crisis in his efforts to reform the Iraqi economy and compile a state budget. Without the support of the KDP, which helped him form his government, he will struggle to pass bills in parliament and enact reforms, putting his government in a precarious position. The KDP has made it clear that they will stop supporting al-Sudani if he does not keep his promises. Therefore, he must work closely with the KDP and find a solution to the budget and hydrocarbon laws to avoid this crisis and help Iraq recover from decades of conflict.
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