A key meeting today in Baghdad may lead to a preliminary agreement that would resume the Kurdistan Regional Government’s (KRG) salary payments, which have been suspended for two months. The Iraqi government’s Ministerial Council for Economic Affairs is expected to finalize discussions on the terms of the deal, setting the stage for approval at the Council of Ministers.

Context: The Iraqi government has withheld salaries for KRG employees for the past two months, officially citing the Region’s failure to comply with the federal budget law. However, the move was widely interpreted as retaliation for the KRG’s multi-billion-dollar energy deals signed in Washington—reportedly worth over $100 billion—without Baghdad’s approval. At the same time, Erbil-Baghdad negotiations over the resumption of KRG oil exports had stalled, primarily due to unresolved disputes over several key issues, including the mechanism for paying oil companies operating in the Region.

Details: At the heart of the negotiations is a proposal under which Baghdad would resume funding salaries and operational expenses for the Kurdistan Region in exchange for oil and revenue commitments. Baghdad is requesting the delivery of 280,000 barrels per day (bpd) of oil through the state oil marketer SOMO, along with 150 billion Iraqi dinars in monthly domestic revenue. Crucially, this figure represents 50% of the Region’s total non-oil revenues—not just half of customs revenues, as the KRG has been providing to date.

In return, the KRG is seeking full coverage for employee salaries, operational costs, employment programs, and investment expenditures. It is also asking for a $16 reimbursement per barrel to cover oil production expenses and approval to retain 125,000 barrels of oil per day for domestic use within the Region.

The meeting is chaired by Iraqi Deputy Prime Minister and Foreign Minister Fuad Hussein, a senior KDP figure, and includes the ministers of finance, planning, and oil. If the Ministerial Council approves the deal, it will be presented to the full Cabinet for ratification.

The Region has made several demands of its own:

• Full payment of public employee salaries
• Inclusion of operational, employment, and investment costs
• Exclusion of salaries from federal expenditure calculations
• Repayment of oil company debts
• Continued provision of 280,000 barrels to SOMO and 115,000 barrels for local use
• $16 per barrel to be reimbursed for production costs

Oil companies operating in the Region have also outlined their conditions:

• Protection of existing contract terms
• Repayment of over $1 billion in arrears
• Clarification on the long-term future of their projects

Preliminary financial estimates suggest that exporting 280,000 barrels per day through SOMO at a global average price of $65 per barrel would generate approximately $18.2 million per day—or around $546 million per month. With $16 per barrel allocated for production costs, the total monthly expense would reach $134 million, leaving Baghdad with a net revenue of roughly $412 million. By contrast, if the same volume were sold domestically at the KRG’s average rate of $33 per barrel, monthly revenues would total just $277 million. This represents a shortfall of $269 million compared to federal sales—without even accounting for additional deductions such as company shares, transportation, and other operational costs.

However, since key demands by international oil companies remain unresolved—particularly the repayment of arrears and clarity on the mechanism for disbursing the $16 production cost per barrel—it remains uncertain how substantial of a breakthrough the current agreement truly represents.

If today’s meeting results in consensus, Baghdad is expected to immediately release May salaries as a goodwill gesture, with June payments following once the deal is formalized. However, the underlying disputes—contract sovereignty, political leverage, and revenue control—are far from resolved. This is a tactical de-escalation, not a strategic settlement.