Analysis: As cash flows from Baghdad, political risks deepen for Kurdistan and its oil sector

Iraq's Kurdistan region has entered a new era of financial integration and political dependence on Baghdad, as federal money is now flowing to Erbil at levels not seen for the past decade.

Federal budget transfers have averaged $618 million per month this year through August, according to an Iraq Oil Report analysis of government data, keeping the Kurdistan Regional Government (KRG) solvent by funding a large majority of its expenditures.

Yet this new status quo is hardly stable. Transfers have arrived on an unpredictable schedule, through ad hoc actions influenced by shifting political dynamics and competing pressures on Iraqi Prime Minister Mohammed Shia al-Sudani that are likely to intensify as national elections approach.

The new paradigm has also left Kurdistan’s international oil companies in limbo, cut off from pipeline exports to international markets, forced to sell crude at a deep discount into the domestic market, and exposed to heightened levels of political risk from Baghdad.