* Payment made despite a steep drop in export flows
* KRG needs to service debts to traders, pay state salaries (Adds details, background)
By Dmitry Zhdannikov
LONDON, Nov 9 (Reuters) - Iraq's Kurdistan has made its full monthly payment of around $100 million to oil producers working on its territory, despite a big drop in oil exports amid a political crisis roiling the semi-autonomous region.
A source close to the Kurdistan regional government told Reuters that full monthly payments had been made to companies such as Genel, DNO, Gulf Keystone, Gazprom and Taqa.
The news will be a relief to producers, which have been used to years of non-payments by Kurdistan until the region ramped up exports last year and promised to switch to timely payments on the back of large loans it obtained from oil buyers.
Kurdistan has presold a large part of its future oil output to trading houses such as Vitol, Glencore, Petraco and Trafigura as well as Russian state oil major Rosneft in exchange for $4 billion in loans guaranteed by exports.
The export-backed loans allowed the region to cover some old debts and avoid a budget crisis.
But flows of Kurdish oil towards the Turkish port of Ceyhan have dropped to just around 220,000 barrels per day this month from the usual 600,000 bpd after some major fields have been taken over by Iraqi forces.
The military operation by the central government was launched as a punishment for Kurdistan holding an independence referendum in September and caused a drop in production and a lack of clarity on who owns the barrels.
"Kurdistan is determined to show it is respecting all its obligations despite a very difficult situation," the source told Reuters.
Apart from paying producers, the region also needs to service its debt to trading houses and generate cash for the budget to pay state employees and the Peshmerga military forces amid the ongoing fight with Islamic State. (Reporting by Dmitry Zhdannikov; Editing by Susan Fenton and David Evans)