Iraq worried about China’s control over oil

OPINION:

In 2003, the United States invasion of Iraq liberated the Iraqi people from the tyrannical rule of Saddam Hussein. Nearly two decades later, China has been busy exploiting Iraq’s oil-rich resources by aligning with militia groups to gain a strong foothold in the country’s lucrative oil industry.

So far, China has made three attempts to gain control of Iraq’s petroleum resources, but each attempt was foiled by Iraq’s oil ministry. For instance, Russia’s Lukoil and U.S. oil giant Exxon Mobil wanted to sell their stakes in major fields to Chinese government-backed firms, but intervention from Iraq’s Ministry of Oil prevented it. Even Britain’s BP was contemplating selling a stake to a Chinese company but was dissuaded by Iraqi officials. If China had succeeded, it might well have triggered an “exodus” of international oil giants that would leave Iraq open to a more extensive takeover by Beijing. Iraqi government officials have already expressed deep concern over the fast pace at which China is attempting to virtually take over Iraq. A recent demonstration near the headquarters of a Chinese oil company in Iraq’s southeastern governate of Maysan has once again brought into focus Iraq’s growing concern about China’s expansion into the oil sector.

According to the Italian think tank Geopolitica, China is exploiting the security vacuum in Iraq created after the United States’ withdrawal from the West Asian country, with its companies aligning with militia groups to gain a strong foothold in the Iraqi oil industry. A Financial Times report stated that in 2021 alone, Beijing struck deals worth $10.5 billion in Iraq’s construction sector. Iraq, the third biggest exporter of oil to China, is eager to secure Chinese investments in infrastructural development. That’s because several U.S. and European companies have been reluctant to invest in Iraq due to rampant corruption and militias (reportedly loyal to Iran) targeting U.S. coalition forces and Western interests.

Unlike others, Beijing has been finding ways to work within this system and deal with deep structural corruption and the domination of Iraq’s public space by militias. In fact, Iran is the de facto arbiter of power in Iraq, via its client military and political organizations. Although China prefers to collaborate with strong and centralized state authorities, it has found ways of dealing with an unstable Iraq. According to a recent report from Shanghai’s Fudan University, in 2021, Beijing secured new construction deals in Iraq worth $10.5 billion — constituting almost one-sixth of China’s Belt and Road Initiative investments that year.

For China, Iraq has emerged as the number one trading partner in the region and the third largest oil supplier, right after Saudi Arabia and Russia. Its energy reserves and strategic location — near the Persian Gulf and Strait of Hormuz — prove critical to the BRI. With the U.S. withdrawal from the region, Beijing was poised to expand its influence; improving economic relations with Baghdad will likely translate into political influence over a period of time.

Experts say that China’s role in the reconstruction of Iraq and growing China-Iran relations are accelerating Beijing’s presence in Iraq at the expense of the United States. The U.S., Iran, and Turkey, all actively and deeply connected to Iraq, are closely watching China’s moves.

China-Iraq energy cooperation has been the cornerstone of the two countries’ bilateral ties since 1981. At this juncture, it is estimated that Iraq will need a massive $88 billion for its post-Daesh reconstruction needs, which will provide an ample opportunity for Beijing to increase its visibility through investment and construction. While bilateral trade topped $30 billion in 2018, relations were enhanced under former Iraqi Prime Minister Adel Abdul Mahdi, who described the ties as poised for a “quantum leap” during Beijing’s 2019 visit. In the first half of 2021, trade volume between the two countries exceeded $16 billion.

Shrewd China has always used “soft power” strategies to take over countries in need of money. In the case of Iraq too, Beijing has done the same, in sharp contrast to the United States’ hard power initiatives. “Soft power” strategies include economic investments and non-intervention politics. Beijing has recently been getting benefits from post-conflict opportunities with mediation efforts and commercial commitment as opposed to military involvement and discourse elsewhere. It has also used its U.N. veto right many times, acting with Russia and against the Western bloc on the Syrian conflict. It is more active in major regional files like Afghanistan. China also wants to prevent the U.S. from using political and military power in Iraq, as and when needed.

China has a vested interest in the oil and energy sectors. Beijing has been building power plants, factories, water treatment facilities, as well as badly needed schools across the country, according to the Los Angeles Times. Dozens of contracts signed in recent years ensure China’s growing footprint, even as major Western companies, including the U.S., plot their exit. While Iraqi officials concede that they desire a greater U.S. presence, they find appeal in China’s offer of development without conditions for democracy or reform and its deft diplomacy. As a result, Chinese companies are dominating Iraq’s key economic sector, oil, and Beijing consumes 40% of the country’s crude exports. From a narrow focus on hydrocarbons, Chinese investments have grown manyfold. Chinese companies are operating in numerous key sectors — including finance, transport, construction, and communications — as noted by the Los Angeles Times.

In the oil sector too, Chinese companies are dominating oil contracts — from operating fields to providing downstream services, and they continue to win more. Recently, Iraq finalized terms with China’s Sinopec to develop the Mansuriya gas field, which could produce up to 300 million standard cubic feet per day.

Although Baghdad has expressed deep concern over China’s control over Iraqi resources, it is worrisome that Iraq could become a puppet in the hands of China in the foreseeable future. The only way to counter these efforts, it seems clear, is for the U.S. to raise its diplomatic and economic game.

This means, first and foremost, that the U.S. should frame America’s strategic competition with China in Iraq as an ideological contest between democracy and autocracy. The U.S. should make concerted diplomatic and economic efforts to strengthen Iraq’s democracy, which would enhance its independence and the Iraqi people’s sovereignty. For example, through initiatives like the Partnership for Global Infrastructure and Investment — which President Biden along with other G7 leaders unveiled in late June and which will mobilize $600 billion of investments by 2027 to deliver “transparent” and “game-changing” infrastructure projects in developing countries — the U.S. must present itself to Iraq as a more reliable, supportive, and like-minded partner.

• Jianli Yang is founder and president of Citizen Power Initiatives for China and the author of For Us, the Living: A Journey to Shine the Light on Truth.