The relationship between Baghdad and Erbil has been strained ever since Iraq managed to eliminate the threat of the Islamic State. Both sides perceive the other’s endeavors with anxiety but are too cautious to entirely shut the door on a future amicable settlement. Today, as both sides struggle to survive the economic impact of COVID having been forced to postpone important projects, a conflict between the two seems increasingly likely. At the same time, finding a mutually agreeable solution to the Iraqi-Kurdish division would massively benefit both parties. For the two sides to come to an agreement, there are multiple hurdles that must be overcome. First and foremost, Iraq desperately needs money as the fiscal breakeven level stipulated in its 2021 federal budget stands at 63 USD per barrel of oil. The Kurdish government, which is even more dependent on crude revenues than the notoriously oil-reliant Iraq, employs roughly half of the entire workforce in the region and has failed to pay out public sector salaries in a timely and adequate fashion. Thus, neither side has the freedom to act magnanimously and let go of funds that the populace might perceive as political misallocation.
