When Iraq’s new prime minister ordered oil companies in the Kurdistan Region back to work this summer, the decision was framed as an economic emergency measure. For hundreds of thousands of Kurdish families, however, the real question was simpler: will it bring their salaries home on time?
On June 3, Prime Minister Ali al-Zaidi met a Kurdistan Regional Government (KRG) delegation in Baghdad to discuss oil exports and ordered companies to restart operations the following day. Al-Zaidi, a businessman, had been sworn in only the month before. The stakes were high. Several energy firms had stopped oil and gas production in the region after repeated drone attacks on oil fields and energy infrastructure, part of the fallout from the US-Israeli war on Iran that broke out in late February.
The companies wanted more than a directive. KRG officials said foreign operators had asked for formal security guarantees from Baghdad, and al-Zaidi personally pledged protection for operators and energy infrastructure. In return, the Kurdish delegation committed to raising exports through the Ceyhan pipeline to maximum capacity.
Baghdad’s urgency had a clear source. Oil funds about 90 percent of Iraq’s government income, and revenue fell by more than 70 percent, from $6.8 billion to $1.96 billion, after exports through the Strait of Hormuz were suspended. Suddenly, the northern pipeline through Kurdistan to Turkey was a strategic asset for the whole country, not just a point of dispute.
A Pipeline Tied to Paychecks
The pipeline has a troubled history. Kurdish exports through Turkey’s Ceyhan port stopped in March 2023, after a Paris-based arbitration court ruled that Ankara had breached a 1973 pipeline agreement by letting Erbil sell oil independently. Flows only resumed on September 27, 2025, after two and a half years of disagreement over how export revenue should be shared.
The 2025 deal changed who controls Kurdish oil. Iraq’s State Oil Marketing Organization (SOMO) now receives all oil produced in the region, except what is needed for domestic use. The KRG committed to delivering at least 230,000 barrels per day and may keep 50,000 barrels per day for local consumption.
In exchange, Baghdad is supposed to fund Kurdistan’s share of the federal budget, most importantly public salaries. Earlier arrangements made this link explicit. A July 2025 agreement released May salaries in return for the KRG’s pledge to export 230,000 barrels daily through SOMO, transfer 120 billion dinars a month in non-oil revenue, and speed up moving public employees’ payroll into the federal banking system.
In other words, every barrel that leaves Kurdistan is tied to a teacher’s or nurse’s paycheck. When the oil stops, whether because of court rulings, political disputes or drones, salaries are the first thing at risk.
The regional war sharpened this dependency. Even before the June directive, Erbil had tried to position itself as a partner. In March, the KRG agreed to export oil from the Kirkuk fields alongside its own crude through the Kurdistan-Ceyhan pipeline, citing the need to protect salaries, livelihoods and public services.
But the pressure extends beyond Kurdistan. In August, a senior Iraqi Finance Ministry official warned that salaries could not be paid on time if export disruptions continued, with officials considering paying every 45 days instead of monthly. The central bank’s foreign reserves also fell by 6.3 percent since the end of last year, reaching $91 billion at the end of May.
The Trust Deficit
Behind the numbers lies a deeper problem: neither side fully trusts the other’s accounting.
Erbil’s grievance is well documented. The KRG says its constitutional entitlement between 2023 and 2025 totaled 58.3 trillion dinars, about $44.4 billion, while it actually received no more than 24.3 trillion dinars, or 41 percent. The regional government also says it transferred the federal treasury’s share of revenues throughout 2025, yet Kurdistan’s employees were funded for only ten months while salaries elsewhere in Iraq kept flowing.
The political temperature has not cooled under the new government. In June, the first deputy speaker of Iraq’s parliament called for suspending financial transfers to the KRG, reviving the familiar approach of linking funding to disputes over oil, revenue and border crossings.
For ordinary Kurds, this cycle is exhausting. Salary delays have become a routine part of life, shaping everything from household debts to shop sales in Erbil’s bazaars. Each new agreement brings hope, and each new dispute reopens old wounds.
The June directive shows that war can force cooperation when both sides are losing money. The harder test is whether that cooperation survives once the crisis fades. Oil can flow through a pipeline in a matter of days. Rebuilding public trust, that promised money will actually arrive, is likely to take much longer.
By Jawad Qadir