Source: Associated Press
Author: Sinan Salaheddin

BAGHDAD (AP) — Iraq’s self-ruled Kurdish region has halted oil exports over a payment row with the central government in Baghdad, the latest dispute in a long-troubled relationship between the two administrations.

Furious over the move, Baghdad on Monday accused the Kurdistan Regional Government in northern Iraq of withholding billions of dollars in oil payments from state coffers and smuggling crude oil and petroleum products out of the country for sale abroad.

The Kurds have unilaterally struck scores of deals with oil companies in recent years, even though Baghdad says they have no right to do so. The two sides struck a tentative deal in 2011 by which the Kurds send the oil to Baghdad, which sells it, and each side then takes 50 percent of the revenues.

The Kurds announced late Sunday that they have halted oil exports from their region because of a payment dispute with Baghdad.

The region’s Ministry of Natural Resources said in a statement that Baghdad failed to send any money since May, even though the region had been exporting 50,000 barrels per day. The statement said only two payments of $514 million have been made, and that the last took place in May 2011.

“After consultation with the producing companies, the ministry has reluctantly decided to halt exports until further notice,” the ministry said. “There have been no payments for 10 months, nor any indication from federal authorities that payments are forthcoming.”

It added that oil exports will be resumed once the payment issue is resolved, and that the production in the interim will be diverted to the local market for processing and refining to generate an alternate source of cash flow for the producing companies.

On Monday, Iraq’s deputy prime minister, Hussain al-Shahristani, said the Kurds’ decision to halt oil exports will affect the 2012 national budget. He also accused Kurdish authorities of smuggling huge amounts of oil to neighboring countries, mainly Iran, or selling it on the local market.

The Kurds, he charged, were withholding about $5.65 billion in revenues generated from unreported oil sales since 2010.

“Where the money went, I don’t know,” he said.