In the past 100 days, effectively an entire season, the Kurdistan Regional Government (KRG) has managed to distribute only one salary payment. As the summer season comes to an end, employees in the Kurdistan Region have gone through nearly three months with just a single salary.

Context: Since May, only one round of salaries has been distributed. Specifically, the May salary was released on July 25, 2025. This means that throughout the summer of 2025, the KRG has paid employees only once, and that payment was for the spring month of May. No salaries have been issued for the summer months of June, July, or August.

Analysis: The KRG’s financial position has been marked by dwindling revenue streams and a worsening dependency on federal transfers. Domestic non-oil revenue has generated an estimated 320 billion dinars per month. US coalition forces’ funding for the Peshmerga stands at just 20 billion dinars, which is set to end by October, and oil exports, the government’s traditional backbone, remain at zero.

Following its meeting today, the Iraqi Council of Ministers announced that it was prepared to send June salaries to the KRG’s public employees, though subject to the KRG meeting the conditions set in their recent agreement. These include the transfer of the KRG’s agreed-upon share of non-oil revenues, at 120 billion dinars; the resolution of ongoing disputes over these revenues by the KRG delegation in Baghdad within 72 hours; and the commitment from foreign oil companies to abide by federal terms and accept the 16 dollars per barrel production cost mandated in the amended budget law.

The KRG, however, has signaled its reluctance to comply without guarantees. In its last cabinet meeting, the KRG decided that it would only transfer the 120 billion dinars in non-oil revenues if Baghdad first committed to releasing the June salary.

At the center of the impasse are the international oil companies operating in Kurdistan, which have raised new demands in their dealings with Baghdad. Beyond the 16 dollars per barrel production cost, companies are seeking reimbursement for transport expenses, as crude must be hauled by tanker over distances of 200 to 300 kilometers from the fields to the pipeline. They also insist that Baghdad formally recognize the contracts they signed with the KRG, though the contracts themselves remain undisclosed. In addition, they are demanding payment guarantees not only for future exports but also for past arrears, which include nearly 1 billion dollars owed by the KRG. Furthermore, the companies want revenues and expense reimbursements transferred directly to their accounts abroad, reportedly through Citi Bank’s Dubai branch, and are pressing Baghdad to sign a written agreement ensuring these conditions.

Together, these disputes underscore the fragility of the Region’s fiscal position. With salaries already months behind, the political tug-of-war between Erbil and Baghdad, complicated further by international oil company demands, suggests that the crisis may deepen before any resolution is reached.