The Iraqi Parliament Finally Passes the 2011 Budget
Posted by Reidar Visser on Sunday, 20 February 2011 19:52
After a marathon session in the Iraqi parliament, Iraqi politicians today passed the budget for 2011.
The key figures are as follows: Income, 80.9 trillion Iraqi dinars (ID); expenditure, 96.6 trillion ID (of which 30 trillion ID is investment); deficit 15.7 trillion ID. The budget is based on an expected daily oil export of 2,2 million barrels and an oil price of USD 76.5 per barrel.
The big money in this budget goes to the central government in Baghdad and the Kurdish Regional Government, underlining the asymmetrical nature of Iraq’s federalism despite constitutional provisions that arguably could have given the unfederated governorates more rights and money. The biggest single ministry spending post is defence and security with 14 trillion; unless it is a typo education will get 9 trillion which seems generous compared with the military spending. It is interesting that the petrodollar scheme that was introduced in 2010 and gave a dollar for each barrel of exported oil to the producing governorates is perpetuated (to total some 1.6 trillion ID), and will also include petrodollars that accrued in 2010 but have yet to be spent. There had been some discussion that the scheme would be made universal to all of Iraq at the expense of the producing governorates, but instead the two ideas appear to have been merged into one as the ministry of finance is given the task of allocating additional petrodollars based on national production to all governorates based on population (i.e. a lot less per governorate than the producing governorates get under the original scheme). Kurdistan is excepted from the petrodollar arrangement until it has sent in an audited account of its oil-industry activities for 2010–2011.
Other than that, the Maliki government has gone some way towards compromise with the Kurds on oil export. Whether it has gone all the way, as Maliki appeared to promise in an early-February interview when he said that the KRG oil contracts had been fully approved, simply remains unclear in the current budget. Maliki recently backtracked in a televised press conference and put the taped video on his website, thereby seemingly reverting to the previous agreement between the oil ministry in Baghdad and the Kurdish authorities of paying costs but not profits for the foreign companies. As expected, the key numbers pertaining to this issue are not included in the budget law as such, and even in the annexes – not yet published by parliament – they are unlikely to specify the exact payment that will be given to the foreign companies. But it is interesting that in a leaked version of these numbers that has failed to receive much attention, from the Sumaria news agency on 9 February, a heading of around 2.05 trillion ID was set aside as “contribution to the costs of exporting oil including entitlements under the contracts signed with foreign companies in Arbil”.
المساهمة في كلفة انتاج النفط الخام المصدر بضمنها مستحقات عقود شركات النفط الأجنبية في إقليم اربيل
It is noteworthy that this heading, without the Kurdistan portion, has featured in Iraqi budgets going back at least to 2008, and has increased annually – apparently from 800 billion ID in 2008 via 1.3 trillion ID last year. Thus the increase from last year may well reflect some natural growth in the cost of oil production in other parts of Iraq on top of payment for the Kurdish exports. At any rate, total Iraqi exports are estimated at 800 million barrels for 2011, meaning this allocation of money, the equivalent of USD 1.7 billion, should add up to around 2 dollars per barrel on average, though with Maliki having recently acknowledged a greater per-barrel cost for Kurdistan than the rest of Iraq, and with that leaked budget draft certainly making reference to “contracts”. Additionally, there was also a significant heading of 3.2 trillion ID for unspecified “investment projects of the foreign oil companies”. Again, these numbers relate to a leaked version of the full budget from 10 days ago; today some confusion has been thrown into the mix by a Reuters report to the effect that the budget supposedly includes “$2.05 billion to pay oil firms investment costs” which sounds very similar to the 2.05 trillion ID reported on 9 February except that they applied to Iraq’s total exports. It is impossible to verify this before the annexes to the budget are published; in 2010 some annexes weren’t published at all. (Update: Figures more or less similar to those reported by Sumaria on 9 February have now been confirmed by sources that have seen the final annexes. The “investment projects” are thought to relate to contracts signed by Baghdad for the south and hence the share of the firms operating in Kurdistan is presumably to be taken from the USD 1.7 billion heading for general export costs.)
At any rate, money has definitely been set aside for exports for Kurdistan to resume, and the Kurds skilfully managed to avoid controversy over the issue in parliament by seeking assurances from the finance minister from Iraqiyya instead of attempting to spell the issue out in the budget law itself. Some commentators have hinted that there may be transparency issues here, but DNO regularly reports its profits so some numbers should emerge eventually. It is of course remarkable that a party like Iraqiyya should go as far as this in underwriting a Galbraithian economic model for Iraq, but it can be explained in terms of realpolitik with reference to the party’s ongoing campaign to seek Kurdish support for the establishment of the strategic policy council that at least its leader, Ayad Allawi, remains focused on.
The bigger challenge for the Kurds these days seems to come from the people in their own streets. That applies to other parts of Iraq too: Tension is simmering in Kut and Ramadi as well. In other words, the test for all of Iraq’s leaders going forward, regardless of whether they are Shiites, Sunnis or Kurds, is whether they can do more than divvying up the spoils between themselves and actually deliver the services and jobs that the Iraqi people are asking for. The budget is only a first step.
Note: The exchange rate for the Iraqi Dinar (ID) has been calculated at 1,200 ID to the US dollar. “Billions” and “trillions” are given in accordance with Anglo-American usage in which a billion is the same as a “milliard” in many European languages and Arabic and a trillion is 1,000 “milliards”.
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