One of the most interesting issues in the ongoing Kurdistan Regional Government (KRG)-Iraqi central government budget conflict is not merely the disagreement over financial figures, but the competing interpretations of these figures.

Consider the non-oil revenue transfers for early 2025. According to Kurdish MP and Iraqi Parliament Finance Committee member Soran Omar, the KRG transferred 48.7 billion IQD to Baghdad in February, following a 51 billion IQD transfer in January. These amounts fall substantially short of Baghdad’s expectations, highlighting the ongoing dispute over the interpretation of the “50% revenue-sharing” clause in the federal budget law.

The Iraqi Finance Ministry adheres to a strict interpretation of the law, asserting that the KRG must transfer 50% of its gross non-oil revenue—prior to any deductions. Conversely, the KRG argues that the calculation should be based on net revenue, contending that investment costs, salary supplements, and other essential expenditures should be deducted first. Following this methodology, the KRG has effectively transferred only about 9% of its actual non-oil revenues, rather than the 50% Baghdad demands in 2024.

This disagreement is clearly illustrated in the 2024 non-oil revenue calculations. Both the KRG and the Iraqi Finance Ministry acknowledge that the KRG’s total non-oil revenue for 2024 until December was approximately 4.3 trillion IQD, and both confirm that the KRG transferred about 400 billion IQD to Baghdad throughout the year. However, their fundamental dispute over what constitutes the required 50% continues to generate friction between Erbil and Baghdad.

Complicating matters further, Baghdad now insists that the KRG must transfer 100% of its non-oil revenue initially, after which the federal Finance Ministry will return 50%. This stance directly contradicts the KRG’s current practice of remitting only 50% of the net revenue upfront.

With the Iraqi government already raising concerns about the January and February transfers, this ongoing discrepancy is likely to have an impact on public sector salaries for March. However, given the mounting geopolitical pressure on Iraq—amid the Iran-Israel escalation and Trump administration’s pressure on Iraq—there is a possibility that Baghdad may soften its stance on the KRG salary issue, at least for now, to avoid handling multiple crises at once. A KRG official recently suggested that salary disbursements are now largely occurring under U.S. pressure, indicating that external factors may influence how this financial dispute unfolds.

More broadly, this pattern of divergent interpretations extends beyond revenue sharing to numerous other aspects of Erbil-Baghdad relations, reflecting a persistent struggle over fiscal policy implementation.