Iraq Budget 2010-Pass Tomorrow?2010 budget boosts oil-producing provinces
By Alice Fordham of IraqOil Report
Published February 10, 2010
BAGHDAD - Iraq's 2010budget is set to be passed by the PresidentialCouncil tomorrow, thefinal step before a bill becomes a law, bringingwith it radical bonusesfor oil-producing regions, significantconcessions to the Kurdistanregion and rewards for Shia pilgrim areas.
The bill, whichamounts to more than $72.4 billion, sets out new rulesoutlining howprovinces will receive money according to hydrocarbonproduction levels.
Thebudget stipulates that provinces will receive $1 for each barrelofcrude oil or 150 cubic meters of natural gas produced intheirprovince, and a further $1 for each barrel of oil refined.
Thisrepresents a bonanza for some areas, particularly Basra, whichholds themajority of Iraq's oil, and has many functioning refineries.Theprovincial council in Basra has announced already that it isdrawing up aplan of how to spend the money.
There will also be financialbenefits to economically productiveregions which attract tourists andpilgrims to Iraq. For each visitorto a holy site, such as Najaf orKerbala, the governorate will be paid$20. Iraq analyst Reidar Visserdescribed this clause as an attempt tomitigate negative reactions fromShia governorates to the "Basradollar".
Ongoing disputes overoil exports from Kurdistan were reflected in aclause which states thatthe Council of Ministers would decide how muchdamage would be caused tothe government in the event of any areahalting crude oil export orextraction. A financial penalty would thenbe decided on accordingly.
TheKurdistan Regional Government (KRG) halted oil exports, after a rowoverits independently-declared oil deals and the responsibility forpayingits foreign investors, in October last year. In the absence ofanyresolution on the long-delayed hydrocarbons law, which wouldregulatesuch payments, this rule will discourage the KRG from suchactions in thefuture.
The 17 percent share of the budget to the Kurdishregion remainsconstant, and federal spending, on things like nationwidedevelopmentplans, are not deducted from that 17 percent.
Theannual allocation of 17 percent of the budget given to provincesandregions has been a compromise between the kurds, who claim they aredueas much as 23 percent of the budget, and critics who say thepopulationof the Kurdish region entitles it to as little as 12percent. Amid highlycontentious disputes over demography and landclaims in the north ofIraq, a census has long been delayed, andpopulation details remain opento debate.
The budget anticipates average oil exports for thisyear at 2.15million barrels per day and the expected average oil priceat $62.50per barrel, but this leaves the budget with a $19.6 billiondeficit.After oil prices fell dramatically in 2009, the deficitincreased andthe budget had to be readjusted repeatedly.
Thebudget legislation had been drafted last year, and sent to theCouncil ofMinisters for approval, but political debate over variousclauses haddelayed the approval process. It was approved by theparliament onJanuary 26, and although there were rumors thatvice-president AdelAbdulmehdi planned to veto some parts of it, hisoffice denied theseclaims. The budget looks set to be passed Wednesdayas planned