Iraq’s federal government has offered to pay the salaries of employees working in the public sector in Iraqi Kurdistan if the autonomous region agrees to stop independent oil exports.

“Give us the oil and I will give every employee in Kurdistan (their) salary,” Prime Minister Haider al-Abadi said in an interview with the state television channel Iraqiya on 15 February.

Iraq’s Kurdistan region is currently embroiled in a financial crisis driven by spending on the ongoing war with Islamic State of Iraq and Syria (Isis) and persistently low oil prices, which have reduced government revenues.

Global oil prices have declined by two thirds since June 2014 – with West Texas Intermediate crude slumping below $30 a barrel in January 2016.

Amid the crisis Iraqi Kurdistan’s regional government has announced that public sector employees will be paid partial salaries until further notice and that the months of unpaid wages will be considered loans to the government.

Currently the regional government pays salaries or welfare payments to 1.34 million people, almost a quarter of the region’s population.

Those receiving payments include:

• 683,000 public employees,
• 25,000 government contractors,
• 222,000 pensioners and
• 412,000 people who are on social benefits programmes.

In late 2014 Baghdad and Erbil forged an agreement to share oil revenues, but over 2015 this deal collapsed.