Iraq granted them autonomy in 2005 but the central government has opposed secession

Kurds are the biggest minority in Iraq, comprising 20 percent of the population

An Iraqi court's decision ruling against secession following a Kurdish bid for independence was "highly politicised" and part of a wider set of "vengeful" policies imposed by Baghdad, officials in Iraq's semi-autonomous Kurdish region told Al Jazeera.

Iraq's Supreme Federal Court said on Monday that the constitution did not allow for the secession of any part of the country, stressing the preservation of unity and territorial integrity.

"We have not committed any illegal steps," Mohammed Ali, the spokesman for the Kurdistan Democratic Party (KDP), told Al Jazeera. "We believe that this has been politicised."

The court is responsible for settling all disputes between Baghdad's central government and regional provinces. Its rulings cannot be contested.

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"In fact, all the reactions in the post-referendum period have been highly politicised, and it is very unfortunate to see an entity such as the constitutional court is taking sides," said Ali.

The court decision came after Masoud Barzani, the former president of the Kurdish Regional Government (KRG), decided not to extend his presidential term past November 1, and quit his position after being in office for 12 years, though his tenure had officially ended in August 2015.

The 71-year-old's powers have now been distributed among the KRG, headed by Prime Minister Nechirvan Barzani - Masoud's nephew - the parliament, and the judiciary council. The office of the presidency has since been abolished.

Masoud Barzani's departure came just over a month after the secession referendum he spearheaded. The vote, which was held on September 25, saw 93 percent cast ballots for independence, despite lacking regional and international support.

The vote heightened tensions with Baghdad, which had declared the move as illegal. Days of fighting between Iraqi government and Kurdish Peshmerga forces followed.

"It is against the constitution for the Iraqi army to use arms against its own people, which also exactly what happened, unfortunately," said Ali.

The Iraqi army, backed by Shia-dominated paramilitaries, captured oil-rich Kirkuk province on October 21 after a rapid advance in the wake of the referendum. Since 2014, Peshmerga forces had controlled key oil reserves in the city, after they pushed out fighters from the ISIL (Islamic State of Iraq and the Levant, also known as ISIS) group.

The operation saw Baghdad retake five oil fields from the Kurdish forces, which heavily affected the KRG's finances as it had depended on revenues from the city's oil exports.

"Economically speaking, the Kurdistan region is going through a very hard time, and if Baghdad continues these policies of revenge we will face serious problems," Ali added.

'Constitutional violation'

Earlier, the KRG deemed drafting Iraq's 2018 monetary budget without Kurdish participation as a constitutional violation and appealed to the federal government.

The draft includes reducing the Kurdish region's share of the federal budget from 17 percent to 12 percent.

"The drafting of the budget has been done with a mentality of revenge ... even the budget has been politicised," Ali said, as he decried the central government's sanctions, including an international air embargo on the Kurdish region.

Several parties in the KRG had opposed the referendum, fearing a backlash.

Sadie Pier, a senior KRG official and member of the Patriotic Union of Kurdistan party (PUK), told Al Jazeera that with Masoud's resignation, "several issues have been solved".

"Masoud's presidential term was problematic internally, and with that resolved, I would say the region has one main problem at the moment," said Pier.

"The only problem persisting is the one between the KRG and the central government in Baghdad."

Last month, the KRG offered to freeze the results of the referendum in order to resume negotiations with Baghdad - but Iraqi Prime Minister Haider al-Abadi rejected the proposal and insisted on an "annulment".

"For every action, there is a reaction, and I believe this applies to all parties involved," said Pier.

"They cannot reach a decision on whether the referendum was constitutional or not - without even consulting us," he said of the court decision. "Given that Iraq is a signatory to several international agreements, the right to self-determination should be granted to us - meaning the constitutional results are surely reflective of the Kurds' wishes."

'Weaker bargaining position'

While the KRG faces political and economic instability, analysts say that it is now in a much weaker bargaining position since the referendum.

And with the new structure implemented in the semi-autonomous region, the leadership vacuum casts doubt over the possibility of carrying out negotiations with Baghdad.

"I would question the court's independence; I don't think it's independent," Chatham House fellow Renad Mansour told Al Jazeera. "It's hard to view these as legal matters because it's all politics, so even something like the court is politicised.

"At the moment they need to find proper leadership to negotiate on their behalf ... I think Nechirvan Barzani is coming out to be the lead negotiator."

The sectarian nature of Iraq has at times allowed for the political emergence of non-state actors, such as the Popular Mobilization Forces – dubbed the country's second and stronger army.

"It's also important to note that institutions don't mean power in Iraq - just because you don't have an institutional role, doesn't mean that you're not powerful," Mansour said, adding that this model exists both in the Kurdish region and in Baghdad.

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"You can stop being prime minister for example, but still be very powerful," he said. "So I don't think it's a complete loss of power, and I think he [Masoud] will still remain an influence."

Similarly, Ranj Alaaldin, a visiting fellow at the Brookings Institute in Qatar's capital, Doha, said that since the court has not ruled on the referendum itself, it provided "Erbil and Baghdad with a face-saving ruling and that opens up the space for dialogue".

"After that [budget] was cut by Baghdad and oil prices declined, austerity measures helped the region withstand the fallout as did control over Kirkuk's oilfields.

"In the short and medium term, Kurdistan's economy will be heavily, if not wholly dependent on its share of the national budget," Alaaldin explained.

A way in which the Kurds can reclaim their full share of the national budget is to maintain a "unified front in Baghdad", says Alaaldin.

Nechirvan [Barzani] adopted a much-needed conciliatory approach to politics and governance that will be critical to remedying the political tumult Ranj Alaaldin, Brookings Institute fellow

Despite the KRG's "crises of internal sovereignty", Nechirvan Barzani appears to be the leading figure in the negotiation process with Baghdad.

"Nechirvan adopted a much-needed conciliatory approach to politics and governance that will be critical to remedying the political tumult," said Alaaldin.

Whether Erbil and Baghdad succeed in taking the necessary steps towards reconciliation, negotiations will likely involve the United States and other actors.

"The reason we're calling for international support for these talks to happen is because there is no way for both of us to continue like this – we are still a part of Iraq, with all of this punishment and treachery… this will not lead Iraq to a peaceful solution," said Ali, the KDP spokesman.

Meanwhile, he added, the Kurdish regional parliament may examine a proposal to amend the Kurdish presidency law, which discusses the possibility of introducing a semi-presidential system to the northern region.

Either way, Chatham House fellow Mansour noted that ongoing sanctions from Baghdad might lead to negative consequences for both sides.

"It's very dangerous if Abadi is unable to control how much punishment is given to the Kurdistan region," he said. "He cannot go too far."