Iraq cannot finance its projected 2014 budget deficit unless the northern Kurdistan region pays its oil export revenue  into the national treasury – or loses its share of state spending, a senior lawmaker said. Haider Al Abadi, head of parliament’s treasury committee, told Reuters the budget, swollen by extra expenditure, would “collapse” if the state kept paying the autonomous region its 17 per cent share even as the Kurds with hold oil export proceeds.
Baghdad’s chronic quarrel with Kurdistan over how to manage and share Iraq’s energy resources intensified this month when the Kurdish Regional Government (KRG) said oil had begun flowing to Turkey  for export via a pipeline outside federal control.
Last week Iraq’s oil minister threatened legal action and drastic trade reprisals against Turkey and any foreign companies  involved in what he called the “smuggling” of Iraqi oil . Kurdistan’s Prime Minister Nechirvan Barzani arrived in the Iraqi capital to pursue talks on an issue that has bedevilled relations between Iraq’s Arabs and minority Kurds.
“We go to Baghdad with the intention of closing gaps,” KRG spokesman Safeen Dizayee said before the talks, which he said would focus on increasing Kurdistan’s oil output and a mechanism for marketing its exports. Abadi said the draft budget projected a deficit of about 21 trillion Iraqi dinars ($18 billion), assuming the Kurds paid the treasury the revenue from budgeted oil exports of 400,000 barrels per day – a target industry sources say far exceeds Kurdistan’s current export capacity.