Iraq, Kurdish region implement deal on oil exports, salaries

The government of Iraq and the semi-autonomous Kurdistan region have begun implementing a deal under which Baghdad resumes funding Kurdish civil servant salaries in return for a share of Kurdish oil exports, Iraq's finance minister said on Wednesday.

The accord aims to reduce friction between Baghdad and Kurdish authorities as they face a common threat from Islamic State insurgents who have seized large parts of the north and west of the country.

Under the agreement reached last week, Kurdish authorities committed to pump 150,000 barrels per day of oil - around half their overall shipments - to Iraqi government export tanks in the Turkish port of Ceyhan.

Baghdad agreed to pay $500 million towards Kurdish salaries.

Finance Minister Hoshiyar Zebari said that the Kurdish Regional Government began pumping oil to State Oil Marketing Organisation (SOMO) tanks at Ceyhan on Tuesday and the $500 million was transferred on Wednesday.

"This payment will be followed by other payments," Zebari, who is a Kurd, told a news conference in Baghdad.

Baghdad cut the Kurds' share of the budget to punish them for exporting oil without its consent. The region was plunged into financial crisis, but has continued pumping oil through its independent pipeline to Turkey, and exports recently increased to around 300,000 bpd.

Iraqi leaders are under pressure to bury differences in order to counter Islamic State militants who control substantial parts of Iraq and neighboring Syria.

In July, then-foreign minister Zebari said the Kurdish political bloc withdrew from the national government in protest against then-prime minister Nuri al-Maliki's accusation that Kurds were harboring Islamist insurgents in their capital.

The Kurds later rejoined the administration. But tensions persist even after Maliki's replacement by Prime Minister Haider al-Abadi, also a Shi'ite Muslim but seen as more moderate and capable of cooperating with Sunni Muslims and Kurds.

There are about 5 million Kurds in majority Arab Iraq, which has a population of more than 30 million. Most live in the north, where they run their own affairs, but remain reliant on Baghdad for a share of the national budget.