Iraq's Oil Minister, Adel Abdul-Mehdi (L) meets with Iraq's Kurdistan Prime Minister Nechirvan Barzani in Arbil, north of Baghdad, November 13, 2014 (Photo: Reuters)
A preliminary deal between Baghdad and Iraq's Kurdish region on long-running financial disputes has reduced a threat to national unity, the oil minister said Friday.
Baghdad has long opposed the three-province autonomous region's independent export of oil, while Kurdish leaders have criticised Baghdad for withholding budget payments.
In a first move to end the disputes, the two sides agreed for Baghdad to pay $500 million to Kurdistan in exchange for the transfer of 150,000 barrels of oil per day to the federal government.
The crisis between the two sides "created a rift that threatens not only economic, security and political interests, but also threatens national unity," Oil Minister Adel Abdul Mahdi said in a statement.
The dispute was harming both sides, with Iraq losing oil revenue and the Kurdish region not receiving federal budget payments, Abdul Mahdi said.
The agreement, while not final, "opens the way" to permanent solutions, he added.
UN Iraq envoy Nickolay Mladenov hailed the deal as "a very important first step."
"This agreement will allow public sector employees in the governorates of Arbil, Dohuk and Sulaimaniyah to begin receiving their salaries. It will also allow the Kurdistan Regional Government to resume its contribution to the federal budget at a time of national crisis," he said in a statement.
The deal was reached at a meeting in the Kurdish capital Arbil between Abdul Mahdi, Kurdish regional premier Nechirvan Barzani and his deputy, Qubad Talabani, the Kurdish government statement said.
"Nechirvan Barzani will then head a delegation due to arrive in Baghdad in the coming days to reach a comprehensive, fair and constitutional solution to all outstanding differences between the federal government and the KRG," it added.
The initial deal is one of the most significant achievements of the new Iraqi government of Prime Minister Haidar al-Abadi, and marks an important improvement in ties between Baghdad and Arbil, which reached new lows under the previous premier.
The budget dispute has lasted almost a year and had led to a sharp deterioration of relations between the federal government and the Kurdish region.
A resolution of the budget feud is seen as an essential step in improving cooperation at a time when both are battling the Islamic State jihadist group, which has overrun large parts of Iraq since June.