KRG Signs $110B Gas Deals with US Firms; Baghdad Freezes May Federal Budget Transfer

KRG Prime Minister Masrour Barzani signed natural gas development contracts with US energy firms HKN Energy and WesternZagros on May 19, valued at an estimated $110 billion over the lifetime of two major Kurdistan gas fields. Baghdad's federal Oil Ministry immediately declared the deals 'null and void,' citing the 2022 Federal Supreme Court ruling that all oil and gas contracts must be approved by the federal government. In direct retaliation, the federal finance ministry suspended disbursement of the KRG's share of Iraq's May federal budget — approximately $1.2 billion — triggering a salary crisis for an estimated 1.2 million Kurdish civil servants, pensioners, and welfare recipients ahead of the Eid al-Adha holiday. KRG PM Barzani accused Baghdad of using budget transfers as a political weapon and announced the KRG would pursue the contracts through international arbitration if necessary. The dispute threatened to derail the new Zaidi government's early relationship with Kurdistan, as both the KDP and PUK had supported his partial cabinet vote on May 14. The KRG has historically relied on independent oil and gas contracts to fund its autonomous budget, a practice Baghdad has repeatedly contested as unconstitutional under Article 111 of the Iraqi constitution.