By PAUL MCLEARY | Foreign Policy

A $22 million U.S. Defense Department fund that has helped pay the salaries of Kurdish Peshmerga fighters in northern Iraq is due to run dry in September, worsening a financial crunch as the government in Irbil struggles with billions of dollars in debt.

The timing couldn’t be worse, as the one-year program runs out at the same time the Kurdistan Regional Government (KRG) plans to hold a referendum on formally leaving Iraq, a vote the United States and other players in the region vehemently oppose.

The government in Irbil is also waiting to hear about the status of a nearly $300 million aid package the Pentagon pledged in April, which would provide equipment for two full Peshmerga infantry brigades and two artillery battalions. Kurdish officials told Foreign Policy they’re unsure when the equipment will begin to arrive. The package includes 4,400 M16 rifles, dozens of .50-caliber machine guns, more than 100 Humvees and armored vehicles, and 36 105 mm howitzers, along with other equipment and spare parts.

The State Department was unable to immediately respond to provide an update on the status of the deal by press time. But most contracts for U.S. military equipment take months to work their way through Congress and the U.S. defense industry, creating a gap between the State Department’s approval, and delivery.

But Kurdish officials are concerned about how Baghdad has treated other promised arms shipments.

“The U.S. has accepted that Baghdad has delayed the approval of equipment,” Bayan Sami Abdul Rahman, the KRG’s representative to the United States, told FP. “Baghdad would deliberately lose that piece of paper, or it would get hung up in the bureaucracy. Even today, there is equipment that Canada wanted to send many months ago, and now it hasn’t reached us. The question is why?”

Kurdish government officials have long complained that the military aid promised by Washington and other Western governments is being held up by Baghdad, which has relied on the Peshmerga’s help to defeat ISIS but is wary of allowing the Kurds to grow too powerful.

Since 2015, the United States has provided more than $1.4 billion in aid for the Kurdish Peshmerga while training more than 22,000 Kurdish fighters and supplying them with weapons, armored vehicles, artillery systems, ammunition, and medical supplies.

One U.S. military official told FP that the end of the one-year, deal to pay stipends to Peshmerga troops involved in the fight to retake Mosul and the timing of the referendum are coincidental. The United States is not pulling aid to signal its displeasure with the government in Irbil, the official said.

The battle in northern Iraq is still very much on with ISIS, and the Peshmerga remain a critical part of that fight. Kurdish forces are currently deployed north of the city of Tal Afar to block ISIS fighters attempting to flee as government forces push them out and to clean up pockets of support for the group.

After a sharp, eight-day fight, Baghdad said on Monday that Tal Afar had been effectively cleared of ISIS fighters, but Defense Department spokesman Col. Robert Manning said pockets of resistance continued to fight it out inside the city.

While the Americans want Kurdish leaders to push back the vote until after the fight in northern Iraq is over, authorities in Irbil don’t see the value in postponing the referendum.

“When we ask [Washington] when there is a good time, there isn’t an answer,” Abdul Rahman said.

“The Peshmerga are committed to continue to fight against ISIS,” she added, referring to the ISIS. “We are not planning a war of independence – we are planning a dialogue.”

In addition to training and supplying the Peshmerga, the U.S.-led coalition fighting the ISIS in Iraq also maintains a key operations center in Irbil and uses the city’s airport as a major hub for special operations raids in Iraq and Syria and for ferrying in supplies and troops.

U.S. forces have taken over the old terminal at the airport, and American troops and contractors have set up living quarters and other facilities at the site, where U.S. military helicopters and other aircraft bring troops and supplies in and out.

A team of military officers from the United States, U.K., and Germany is also currently conducting a review of the 200,000-strong Peshmerga at Irbil’s request. The team expects to present a plan sometime this year for reforming and reorganizing the Kurdish group to transform it from a militia force into a professional military.

While the Defense Department says military aid is not being tied to the referendum, Pentagon officials continue to beat a path to the door of KRG President Masoud Barzani. Just this month, U.S. Central Command head Gen. Joseph Votel and Defense Secretary Jim Mattis separately sat down with Barzani to urge a postponement, and this past week Turkish and European Union officials also met with the Kurdish leader.

But Barzani has declined all entreaties. According to a statement from his office, he reassured Votel that the Peshmerga will continue to fight ISIS and that “the referendum issue will not have any negative effects on the ongoing war.”

American officials have not indicated that the funding for the Peshmerga would be in danger after the referendum, but U.S. military officials were reluctant to comment, citing the fact that the aid is part of supplemental funding bills, which ebb and flow with the situation on the ground. They also say the referendum itself won’t split Kurdistan from Iraq and want to watch the process develop.

Abdul Rahman said no matter what the outcome of the vote and the political fallout that follows, “the Peshmerga will continue to fight ISIS and hope [the Pentagon] continues to support the Peshmerga in terms of training and equipping.”