In this interview with Rudaw, Iraq’s Finance Minister Hosyar Zebari says that the country has a difficult year ahead due to serious financial shortfalls. Zebari says that apart from blocking Kurdistan Region’s budget, billions of dollars have also gone missing during Nouri al-Maliki’s term as prime minister. However, said the minister, a new draft budget agreed on by Baghdad and Erbil has been prepared for the new year and that Erbil will receive its monthly budget without delay.

Rudaw: How is the financial situation of Iraq?

Hoshyar Zebari: The financial state of Iraq is very bad, and we have to admit this reality. When I got my post as Iraq’s finance minister, I was actually shocked to see a rich country in this condition. I was shocked.

Rudaw: Why were you shocked?

Hoshyar Zebari: Because of the lack of money, there was no money. Iraq is a rich country and has reserve money in the central bank and it is not bankrupt. In 2014 there was no budget law, and money was spent without a law. The new Iraqi government had decided to prepare the budget for 2015 before the end of the year. It is really shameful to run a country without a legal budget.

When I got my post as Iraq’s finance minister, I was actually shocked to see a rich country in this condition.

Rudaw: What was the main cause that emptied the Iraqi treasury, who was responsible?

Hoshyar Zebari: The main cause was the previous Iraqi government as it spent Iraq’s money unlawfully. We have decided to release an announcement to explain how the budget of 2014 was spent, spent by whom, and on what. It is the first time since 2003 that the Iraqi draft budget gets prepared this quickly. It has also been amended four times and includes the agreed upon 17% of the Peshmerga share. I want to confirm to the people of Kurdistan that this budget proposal has been agreed on by Erbil and Baghdad and if one party violated the agreement, the other party has the right to reject it as well.

Rudaw: As minister of finance, will you withhold Kurdistan Region’s budget if the Iraqi government violated the agreement?

Hoshyar Zebari: Even the Iraqi government is obliged to abide by this agreement. If Baghdad decided to violate the agreement and refused to release the budget of the Kurdistan Region or the salary of its employees, then the Kurdistan Region will stop pumping oil from its oil fields and the ones in Kirkuk. But the political atmosphere between Erbil and Baghdad is positive at the moment.

Rudaw: The Iraqi PM, Haidar al-Abadi, said that $45 billion is missing from the 2014 budget and the Iraqi parliament says that they will conduct an investigation.

Hoshyar Zebari: That is true. There are demands to carry out an investigation. But such matters will not get disclosed that easily. We have to prepare the financial report and make the final calculations first, but people have the right to know how that money was spent.

Rudaw: On which sector was the largest amount of money spent?

Hoshyar Zebari: Mostly on defense and security sectors, on defense contracts, refugees, voluntary Shiites militias, fuel, and other sectors.

Rudaw: There was also corruption, which has been mentioned by you and the Americans as well.

Hoshyar Zebari: Yes, there is corruption and I was the first person who said that reform must be made in military and security institutions.

Yes, there is corruption and I was the first person who said that reform must be made in military and security institutions.

Rudaw: You mentioned that corrupt government officials have registered many ghost employees for their salaries. Do you have any data on that?

Hoshyar Zebari: Yes, there are a great number of them in the Iraqi army and the ministry of interior. They also exist in the ministry of Peshmerga. The ministry of defense has started carrying out some procedures to eliminate this kind of corruption. It has been decided to make everyone receive his own salary in person instead of lists.

Rudaw: In next year’s budget, 24 trillion Iraqi Dinars (ID) has been allocated for the Ministry of Defense. Will part of that money go to the volunteer Shiite militias?

Hoshyar Zebari: The volunteer Shiite Militia has its own committee and it belongs to the Council of Ministers. The Shiite volunteers, which was formed after Ayatollah Sistani called for Jihad, have not been given adequate weapons and salaries. Some of them are in good conditions but they are not very organized. This problem exists in the Iraqi army and the Peshmerga forces as well. As the Ministry of Finance, we are obliged to carry out any decision that has been made by the council of ministers. Whenever the Iraqi parliament approves the budget share of the Peshmerga, the ministry of finance shall release it.

We have achieved three major successes in regards to the budget. First, we have determined the budget of Kurdistan Region. Second, we have removed all the retaliatory laws that existed in the budget against Kurdistan Region. Third, we have reached reasonable terms with Baghdad. Iraq will be giving money to the Peshmerga forces for the first time. In the previous years money was allocated in the Iraqi budgets for the Peshmerga forces, but it was never implemented. In the 2015 budget 1.2 trillion ID will be sent to the Peshmerga.

Rudaw: What happened to the share of Kurdistan Region in the 2014 budget, which Baghdad has not paid yet?

I believe 2015 will be financially a difficult year, especially in the first six months.

Hoshyar Zebari: This budget faced big problems. The Iraqi government paid Kurdistan only the months of January and February in 2014, the rest was stopped by Nouri al-Maliki. Baghdad has no constitutional right to stop the budget of the Kurdistan Region. There is currently an agreement between Erbil and Baghdad. Baghdad has sent one $1 billion to the Kurdistan Region during two months, and in return the Kurdistan Region sent 150,000 barrels of oil to the Iraqi government.

Rudaw: How will Iraq solve its financial crisis?

Hoshyar Zebari: I believe 2015 will be financially a difficult year, especially in the first six months. I also believe the price of oil will reach around $80 per barrel and not its previous levels of $100 or $110. Iraq has calculated its budget based on $60 per barrel as the price of its oil sales. In the 2015 budget we have also thought about imposing taxes to increase the revenues. People must get used to taxes. The Iraqi PM supports the taxation proposal completely. Taxes will be imposed on vehicles, lands, and tourism as well. Those who travel more will pay more taxes.

Rudaw: According to Erbil-Baghdad agreement, the Kurdistan Region will export 550,000 barrels of oil but has Erbil the capacity to produce more than 400,000 barrels?

Hoshyar Zebari: To be honest, some statements made in London about this issue, were not received warmly by Baghdad, because there is an agreement that demands exporting 250,000 barrels from the Kurdistan Region and 300,000 barrels from Kirkuk through the Kurdistan Region’s pipelines. All the parties must adhere to the agreements if we want to solve the problems.

Rudaw: What happens if Erbil decides to export more oil outside the agreement with Baghdad?

Now it is possible to solve the issue of the oil and gas law

Hoshyar Zebari: Trust will be lost and the agreement ended. All steps must be taken transparently in this regard. For example, the Kurdistan Region needed weapons and ammunitions. The President of the Kurdistan Region told us to tell Baghdad about our needs. We did and the Iraqi PM immediately agreed to send weapons to the Kurdistan Region.

Rudaw: But the Kurdish prime minister says that there is no obstacle before Kurdistan Region selling its own oil?

Hoshyar Zebari: I was present in the agreement between Baghdad and Erbil. If we want this agreement to succeed, then both sides must abide by it.

Rudaw: The Kurdistan Region is currently taking loans from outside Iraq. Will Baghdad accept this?

Hoshyar Zebari: The Kurdistan Region has consulted legal experts and it seems to be legally viable, otherwise it will cause problems. Erbil must also consult the Iraqi ministry of finance regarding this issue.

Rudaw: You were a minister in Maliki’s cabinet, and now you are a minister in Abadi’s cabinet. Who is easier to work with?

Hoshyar Zebari: I can work with everyone. But the atmosphere of work decides the quality of work. For the record, I admit that I had issues with Maliki because he was interfering, but I would not allow him. Maliki tried to create problems through a third party but also failed. Now the atmosphere is good and the obstacles have been removed. Now it is possible to solve the issue of the oil and gas law, which has been the source of problems between Erbil and Baghdad.

Rudaw