International oil firms have warned Iraq that projects to increase its crude output will be delayed if the government insists on drastic spending cuts this year, Reuters reported.

Oil companies helping Iraq develop its massive oil fields effectively perform a role similar to oil service firms in that they have to clear spending with the government each year. They are then repaid with crude oil produced from existing fields, Al-Arabiya English reported. However, the country has been struggling to find enough oil to repay the companies for their investment after the oil prices have collapsed to $40 a barrel.

With its finances stretched, Iraq has asked foreign oil companies to rein in their budgets for developing the country’s oil resources for a second year in a row, but the two sides have failed so far to agree on spending levels. “There has been no agreement so far with the foreign companies on the proposed budgets, and that is causing delays in all key oil field projects,” said a Iraqi official, adding that the talks were continuing. He said that some companies, have complained that the proposed budgets even may prevent them from continuing operations in Iraq.

By his side, the government has also argued that prices for goods and services have fallen steeply during the market downturn so oil companies should be getting less.