By the Blouin News Politics staff

As ISIS threat grows, Baghdad makes deal with Iraq’s Kurds

by in Middle East.

People hold the Iraqi Kurdish Regional Government (KRG) and Kurdistan Democratic Party's flags at the Ibrahim Khalil Border Crossing to welcome Peshmerga forces, sent by KRG to fight against Islamic State of Iraq and Levant (ISIL) alongside other armed groups in Syria's Ayn al-Arab (Kobani), on October 28, 2014 in Duhok, Iraq.

People hold Kurdish flags on October 28, 2014 in Duhok, Iraq. Anadolu Agency/Getty Images

Iraqi authorities implemented a groundbreaking deal with the country’s semi-autonomous Kurdish Regional Government (KRG) on Wednesday, and transferred $500 million to the regional government to fund civil servant salaries. The aim: calm longstanding tensions with the KRG amid the growing strength of the jihadist terrorist group ISIS.

At the heart of the tension is oil – namely the KRG’s claim to oil reserves in northern Iraq that total nearly 44 billion barrels, and could bring in a cool $120 billion in revenue. After a decade of battling Baghdad over such claims, authorities in Erbil (the capital of the KRG) moved ahead this May with the launch of an independent oil pipeline that runs through Turkey, and plan to build a second pipeline. They also signed key contracts with international gas giants like ExxonMobil and Total. The result was economic prosperity as the rest of Iraq’s economy stagnated, and growing autonomy.

[Read more: Iraqi Kurdistan oils the path towards independence.]

During the same period, Iraq’s central authorities did little to pull Kurdish separatists back into the fold. Then-Prime Minister Nuri al-Maliki retaliated against the construction of the independent pipeline by withholding payments of oil revenues due Erbil (Baghdad is obligated to give the Kurdish region 17% of its total oil income) in a move heavily criticized by the KRG.  Now, both sides are making overtures, however slight. On Tuesday, the KRG began moving oil reserves to federal depots in a Turkish port as part of its pledge to hand over 150,000 barrels of oil per day to Baghdad. The thaw is motivated by the rise of a common enemy. While the KRG has proven better prepared than the beleaguered Iraqi army, thanks to its battle-hardened Peshmerga militia, it too is struggling to contain the ISIS onslaught (not to mention the influx of both Kurdish and Iraqi refugees).

So what next? The deal could mark a lasting boost to Iraqi-Kurdish relations, which hit an all-time low under al-Maliki. Though, Erbil’s territorial claims to parts of northern Iraq are not likely to dissipate so quickly – especially amidst a climate of strengthened pan-Kurdish solidarity. This past year has seen Iraq’s Kurds emerge as the most autonomous mini-statelet in the surrounding region (semi-autonomous Kurdish communities also exist in Syria, Turkey and Iran.) But while Erbil may appear to have the upper hand – notably because Baghdad is struggling to simultaneously bolster its international standing, quell political infighting, and fight off ISIS militants, the KRG is nonetheless reliant on funding from Iraq’s central government. (When al-Maliki pulled the plug on oil revenue payments, the KRG’s economy froze.)

With tensions cooling between Baghdad and Erbil, the two players may be paving the way for a badly-needed cohesive front against ISIS in the months ahead. For now, the deal remains one of necessity.