The government of Iraq and the semi-autonomous region of Kurdistan have reached a deal to ease tensions over Kurdish oil exports and civil service payments from Baghdad, Iraq's finance minister told Reuters.
Hoshiyar Zebari said the central government had agreed for the time being to resume payments from the federal budget for Kurdish civil servants' salaries.
Zebari, who is a Kurd, described the step as a "major breakthrough" that would reduce friction between the KRG and Baghdad. He said the payments would cover October and then November.
The deal was reached after talks between Iraqi Oil Minister Adel Abdel Mehdi and Kurdish Prime Minister Nechirvan Barzani in the Kurdistan region on Thursday.
Baghdad stopped paying for KRG civil servant salaries in protest against the Kurds' exporting oil to Turkey independently.
Under the agreement, Iraqi Kurdistan will give 150,000 barrels per day of oil exports - equal to around half its overall shipments - to the federal budget.
In Arbil, the Kurdistan Regional Government (KRG) confirmed the agreement.
"What they have agreed is that Baghdad will release some funds - $500 million - and the KRG will give 150,000 barrels per day of oil to Baghdad," KRG spokesman Safeen Dizayee told Reuters .
EXPORTS STILL UNDER CONTROL OF KURDS
He said a KRG delegation headed by the prime minister would travel to Baghdad soon to hammer out a more comprehensive deal and the regional government would not hand over control of exports to Baghdad.
A similar agreement was proposed in April but never advanced to a deal.
In July, then Iraqi foreign minister Zebari said the Kurdish political bloc withdrew from the national government in protest against Prime Minister Nuri al-Maliki's accusation that Kurds were harbouring Islamist insurgents in their capital.
The Kurds later rejoined the administration. But tensions persisted.
Maliki, one of the most divisive figures to emerge from the U.S. occupation of Iraq, was later replaced by Haider al-Abadi.
He is seen as a moderate Shi'ite capable of cooperating with Sunni Muslims, Kurds and other sects.
Iraqi leaders are under pressure to bury differences in order to counter Islamic State militants who have seized chunks of the country in the north and west.
There are about 5 million Kurds in majority Arab Iraq, which has a population of more than 30 million. Most live in the north, where they run their own affairs, but remain reliant on Baghdad for a share of the national budget.