Revenue Sharing Procedures in Iraq

The 2007 draft hydrocarbon law states that Iraq’s hydrocarbon wealth belongs to all of its citizens, but does not contain specific guidelines for how oil and gas revenues should be distributed.

Concerns over the equitable distribution of Iraq's oil revenues are one of the central issues in the ongoing dispute between the Kurdistan Regional Government (KRG) and the federal government in Baghdad. Other regions, such as Anbar in Iraq's northwest and the oil-rich Basra region in the south, have also demanded more control over their natural resources. A primary focus of the revenue sharing debate in Iraq is the issue of whether or not governorates should retain the right to make decisions over revenues from oil and gas produced in their territory.

The mechanisms through which Iraq's oil revenues are collected and distributed remain contested. Chief economist at the IEA Faith Birol warned in 2012 that unless "consensus" was reached on revenue-sharing legislation, Iraq's oil output growth could be significantly slowed, but noted that there had been 'encouraging signs' of cooperation between the central government and the KRG on this front.

2007 draft revenue sharing law
The KRG and the federal government in Baghdad agreed on a draft revenue sharing law for Iraq in June 2007. According to the draft law, the federal government is empowered to collect all of Iraq's oil and gas revenue, with a priority to allocate the funds to support national priorities such as defense and foreign affairs. The remainder would then be distributed to governorates automatically, on a monthly basis, based on agreed population-density-based percentages until a census can be completed. Of this remainder, the KRG would receive a 17% share.

Treatment in national budget
The Iraqi government presented its draft for the annual 2012 budget law in December 2011; the total budget was 117 trillion Iraqi dinars (ID), or approximately US $100 billion, a 21% increase over Iraq's 2011 budget. According to Reidar Visser of the Iraq and Gulf Analysis blog the 2012 draft budget is favorable to the interests of the KRG. The budget projects Kurdistan's oil exports to amount to 175,000 barrels per day (bpd) in 2012, roughly 6.7% of the anticipated total Iraqi daily exports of 2.6 million barrels. But the budget allocates 17% of the expenditure budget to the KRG. Under the 2012 draft budget, other oil-producing governorates receive one US dollar per exported barrel. This is expected to make up about 1.7 trillion ID in total, or less than a tenth of what the KRG alone receives.

However ahead of the release of the 2013 budget, Iraq Oil Report reported that allies of Prime Minister al-Maliki were lobbying to reduce the KRG's budget allocation, with many supporting a reduction from 17 to 12 percent, considering that current arrangements are too generous to the semi-autonomous region. A member of parliament from the Iraqiya list reminded that Erbil and Sulimaniyah are more developed than the rest of Iraq, claiming that the budget allocation is unjust.

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