Hussein al-Shahristani's remarks came amid a long-running row between the central government and Kurdish authorities in Arbil over oil contracts with foreign energy firms, with the dispute having worsened after US energy giant ExxonMobil signed a contract with Kurdistan against Baghdad's wishes.

Kurdistan has threatened to cut off its oil exports, accusing the federal government of withholding up to $1.5 billion in payments to firms working in the region.

"I would advise them, before they make any threat, to consider how much oil (revenue) they are getting from other parts of the country, which is much more than the oil that is being produced there," he said in an interview in English with AFP in his office in Baghdad's heavily fortified Green Zone.

Shahristani, a former oil minister, noted that Kurdistan was allocated 17 percent of Iraq's federal budget, but said it provided a smaller proportion of Iraqi oil exports.

He said the region was also not living up to its promises on crude output.

"This is in breach of their commitment in the 2012 budget: the Kurdish region is required to hand over 175,000 barrels per day (bpd). Otherwise... they will bear the consequences if that level is not met, and there should be a financial compensation to the ministry of finance," he said.

"They need to put their act together and hand all the oil that's being produced in the region to the ministry of oil immediately if they would like to see the budget allocation in the 2012 budget... implemented."

Baghdad and Arbil have squabbled over payments, revenue-sharing and the central government's refusal to recognise deals Kurdish officials have signed with foreign energy firms.

Kurdish authorities said on Monday they had reduced oil exports to 50,000 bpd, and threatened to cut them off entirely if the central government did not transfer nearly $1.5 billion it claimed was owed to firms working in the region.

Kurdistan said in May 2011 that Iraq had paid oil contractors in the autonomous region as part of an "interim agreement on revenue allocation."

National Finance Minister Rafa al-Essawi told AFP on Tuesday that the central government was "not afraid of exports from the Kurdistan region being stopped."

The region has signed around 40 contracts with international companies on a production-sharing basis without seeking the express approval of the central government's oil ministry, which regards Kurdistan's deals as illegal.

The federal oil ministry, meanwhile, has awarded energy contracts to international companies on the basis of a per-barrel service fee. It has also refused to sign deals with any firm that has agreed to a contract with Kurdistan.

Shahristani warned French energy giant Total, which has said it is in talks over deals with the Kurdish government, that any such agreements would be illegal.

"If they sign a contract to develop a field in Iraq, in any part of the country, without the approval of the Iraqi government, they will be considered in breach of the Iraqi laws, and they will be treated accordingly," he said.

Total is part of a consortium along with China's CNPC and Malaysia's Petronas to ramp up output at the Halfaya field in southern Maysan province, having been awarded the contract in December 2009.

Baghdad has yet to approve an oil and gas law that would regulate the sector, with proposals languishing for several years.