FILE PHOTO: Workers check the valves at the Taq Taq oil field in Arbil, in Iraq's Kurdistan region, August 16, 2014.   Picture…
FILE - Workers check the valves at the Taq Taq oil field in Irbil, in Iraq's Kurdistan region.

A sharp decline in oil prices has been followed by signs of a brewing conflict in Iraq, threatening to undermine efforts against the remnants of the Islamic State terror group in the conflict-ridden country.

Tensions between the Iraqi government and the autonomous Kurdistan Regional Government (KRG) in the north over oil have escalated in recent days, prompting officials to call on the international community for mediation as a landmark revenue-sharing deal between the two sides is collapsing.

Kurdish officials say the central government in Baghdad has refused to send salaries of public workers in the Kurdish region, including Kurdish peshmerga fighters, who have played a major role in the war against IS.

“The KRG budget and salaries must not be politicized,” Nechirvan Barzani, president of the autonomous Iraqi Kurdish region, said during a meeting Tuesday with Jeanine Hennis-Plasschaert, the U.N. secretary-general’s special representative for Iraq.

FILE - Members of the Kurdish peshmerga special forces demonstrate their skills during their graduation ceremony at a military camp in Soran district, in Irbil province, Iraq, Feb. 12, 2020.

“The [KRG] president asked the U.N. special representative to mediate in resolving the ongoing dispute,” according to a statement from the KRG.

Revenue-sharing deal

A deal that guarantees a monthly payment of nearly $400 million from the country’s oil revenue to the KRG was reached nearly a year ago. It had allowed the two sides to move beyond an acrimonious relationship caused by a Kurdish independence referendum in 2017 and instead focus on coordinated efforts to fight IS jihadists.

That arrangement appears all but dead now as Iraqi officials accuse the KRG of not complying with the agreement, which requires the Kurdish region to send 250,000 barrels of oil per day to the federal government.

Earlier in April, a letter was sent from the Iraqi Council of Ministers to the Finance Ministry, ordering it to stop sending payments to the region. The Iraqi minister of finance, Fuad Hussein, is an ethnic Kurd.

“Your ministry is obligated to stop the release of funds,” the letter said, according to the Iraq Oil Report website.

Following that, more than a dozen lawmakers sued Hussein, claiming he had violated the Budget Law by sending payments to the KRG despite its failure to transfer the oil to Baghdad.

"If the legal system proceeds, the minister of finance could be convicted,” said Yousif Kilabi, a member of the Integrity Committee in the Iraqi parliament.

“The minister of finance, according to the legal details that we have, acts against the law and has violated it, an offense that amounts to criminality,” he told VOA.

Kurdish officials, however, say the Iraqi government and its allies in the parliament are politicizing the budget issue.  

“The consensus in Iraq is so fragile that any crisis or problem can impact it,” Jotiar Adil, a KRG spokesman, told VOA in a phone interview.

“When this consensus is undermined, I believe stability and the future of Iraq will be undermined. It would be dangerous,” he added.

Political vacuum

For months, Iraq has been facing a political impasse in which local powers have not been able to form a new government.

This political vacuum, in combination with the oil crisis and the budget dispute, could affect efforts to battle the remaining IS militants.

FILE - Iraqi Security Forces members stand guard in front of the U.S. Embassy in Baghdad, Iraq, Jan. 1, 2020.

“That will mean that funding for the peshmerga and Iraqi Security Forces could possibly be reduced from its already low levels,” said Seth Frantzman, a Middle East expert and author of the book After ISIS: America, Iran and the Struggle for the Middle East.

“It adds to Iraq’s difficulties, including the Iran-U.S. tensions which compound the problem of concentrating on defeating ISIS fully,” he told VOA, using another acronym for IS.

Bilal Wahab, an Iraq expert at the Washington Institute for Near East Policy, echoes similar views.

"ISIS has been apt at exploiting any security vacuum to cause damage,” he told VOA, adding that “a KRG-Baghdad escalation does no service to the task of maintaining pressure on ISIS, especially in the disputed territories.”

Disputed territories

Though it has lost nearly all territory it once held in Iraq, IS maintains an underground presence in Iraq, particularly in territories considered as “disputed areas” between the Iraqi government and the Kurdish region. In recent weeks, IS militants have increased their attacks on Iraq and Kurdish troops, and civilians in those areas.

This financial crisis “will be an opportunity for ISIS to resurge,” said Murad Ismael, director of  Yazda, an advocacy group for the Yazidi minority, whose members were subjected to persecution and sex slavery during a major IS onslaught in 2014.

“ISIS is taking opportunity whenever they can. With the coronavirus, the economic situation in Iraq, and if you have some political vacuum going on, I am sure ISIS will capitalize on it,” he told VOA.