As long as oil prices remained over $100 a barrel, the Kurdistan Regional Government (KRG) in northern Iraq could afford to spend lavishly. From 2005 until 2013, the economy boomed, growing 12% in 2012, and the KRG operating budget increased from $9.7 billion in 2009 to a little more than $13 billion in 2013. This boom allowed the KRG to expand programs and to employ 1.4 million civil service employees, in a region with a 5.2 million population. Meanwhile, Kurdistan built a pipeline so that it could sale crude oil directly through Turkey instead of going through the Iraqi central government, and in response, Baghdad cut the region’s funding.

Then oil prices collapsed, and the KRG’s income deteriorated. The government’s expenses then increased as the Syrian civil war and conflict with Islamic State (ISIS) led to 1.8 million refugees and internally displaced persons escaping to the region, including Assyrian Christians who fled Mosul as ISIS took the city. The Kurdish Peshmerga forces have fought bravely while fighting ISIS, and they have recaptured 8,000 square miles. Yet this latest war has caused greater financial stress on Kurdistan. In spite of austerity measures and reforms the KRG began in February, the region is now on the verge of bankruptcy according to KRG ministers.

The KRG’s Interior Minister Karim Sinjari and Deputy Prime Minister Qubad Talabani both spoke about Kurdistan’s fiscal crisis at the Foundation for Defense of Democracies’ (FDD) Washington Forum last Wednesday. They both described how many government employees, including soldiers and teachers, have not been paid for months, which poses significant risks.

According to Sinjari, some Peshmerga fighters under KRG’s control have deserted due to the lack of pay. He insisted, though, that these desertions have been rare thus far. When pressed for an exact number, he suggested (or perhaps guessed) that around 1% of the soldiers or fewer have deserted. They usually did so after visiting home for either a religious holiday or otherwise and then simply did not return to their units. The Interior Minister explained these Peshmerga soldiers faced difficulties trying to provide housing and other necessities for their families, so they decided to desert and find other ways to make a living. Though there have been few desertions, Sinjari warned that there may be more if Kurdistan cannot pay its fighters.

Whereas last year Kurdistan needed weapons because ISIS had better equipment and capabilities, Talabani emphasized that today the region needs “direct budgetary support”. Specifically, his government would need $100 million per month to meet payroll obligations. Because Kurdistan is not a sovereign country, it cannot access bailout funds or the same kinds of debt that a regular government would. Along with their continued conflict with Baghdad over finances and other issues, Talabani was concerned over the KRG’s ability to fight ISIS.

Those concerned about Christians who remain in Iraq, including those Assyrians in places like Kurdish Erbil, should also be concerned about the KRG’s continued ability to pay soldiers and thus defend its territory. Certainly, the United States has provided military support to prevent ISIS from taking new territory, both with air strikes and more recently with Marines providing artillery fire. Yet if a significant number of Peshmerga soldiers desert, ISIS may be able to gain ground and again threaten the religious monitories and others seeking refuge in the region.

At the very least, an attack on ISIS-controlled Mosul remains unlikely if soldiers go unpaid. Both Sinjari and Talabani insisted there were currently no detailed plans to retake Iraq’s second largest city, and they would not attack without a coordinated effort with Baghdad and others. As Chris Seiple made clear during a recent Providence event, retaking Mosul is a primary goal for many Assyrians.

Of course, Sinjari and Talabani have their own agenda while visiting DC and asking for budgetary support, and talk about Peshmerga desertions and $100 million per month may be more about bargaining positions and leverage than facts on the ground. Perhaps the KRG could do more to cut non-military spending. However, the KRG could also ask other parties for the cash. Iran, for instance, may have an interest in bankrolling Kurdistan. When asked specifically about Iran’s relationship with Kurdistan, Sinjari was quite sheepish, and some Americans may be displeased with this expanding influence.

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Mark Melton is the Deputy Editor for Providence. He earned his Master’s degree in International Relations from the University of St. Andrews and has a specialization in civil conflict and European politics.

Photo Credit: Peshmerga fighter. Via Kurdishstruggle on Flickr.