China cements influence in Iraq with infrastructure for oil

Chinese President Xi Jinping

Chinese President Xi Jinping. China has gained a major foothold in oil-rich Iraq, shaking up Western domination.

Photo credit: Courtesy | Xinhua

In Iraq’s post-war rebuilding, the Chinese have been telling a different story: That they aren’t a risk, compared to the US.

At a recent press briefing, Wang Wenbin, the Spokesperson of the Chinese Foreign Ministry, wasn’t measured in his attack of the US.

“The biggest risks facing the world today are: the hegemonic act of using military advantage to launch barbaric invasions of vulnerable countries such as Afghanistan, Iraq and Syria,” he said.

China has gained a major foothold in oil-rich Iraq, shaking up Western domination in fields from energy to construction, even as some warn that infrastructure projects could leave Baghdad in debt.

For china, however, the US had bullied others, undermined the principle of market economy and international trade rules “by overstretching the concept of national security and wantonly going after foreign companies, and trying to turn back the wheel of history by hyping up “democracy versus authoritarianism” narratives and dragging the world back to the era of the Cold War.

Peaceful development and a win-win-strategy is what Beijing wants, he said last month.

Iraq, of course is a post-war country. Rebuilding from the US invasion 20 years ago, its nascent governments have been reaching out to partners to help reinstall infrastructure destroyed during the war.

And it has oil, which China needs.  China buys more than 5 million barrels of oil daily from the Middle East countries even though it needs 10 million of that daily. And since Iraq defeated the ISIS group, its role in the Belt and Road Initiative, Beijing’s infrastructure connectivity ambition has risen significantly.

China calls Iraq its third most important energy partner after Russia and Pakistan. It imported 56 tons of oil from Iraq in 2022, paying some $39 billion.

According to the American Enterprise Institute (AEI) China Global Investment Tracker, China’s BRI investment in the Middle East has reached $114 billion and Iraq has gobbled up more than half of the money since 2013 when the BRI was launched.

Today, Chinese companies are in sectors such as oil, agriculture, and housing.

After decades of conflict, Iraq is "badly in need of foreign investment, and specifically investment in energy sector infrastructure", said John Calabrese of the Middle East Institute in Washington.

China, with its soaring energy needs, has stepped in to fill that gap, and is expanding its presence in Iraq under a 2019 "oil for construction" deal.

Beijing has become one of the largest importers of Iraqi crude, and in 2021 accounted for 44 percent of Iraq's oil exports, according to a prime ministerial adviser Muzhar Saleh.

And state firm PetroChina has partnered with France's TotalEnergies and Malaysia's Petronas to exploit the Halfaya oilfield in southern Iraq.

"China is just getting started," ambassador Cui Wei told journalists in a recent videoconference.

But Beijing is interested in more than just Iraq's trade potential, Calabrese said.

Beyond the "obvious commercial incentives" are China's ambitions to "deeply entrench itself in a country and a region that the West, and especially the United States, has dominated," he said.

Iraq is among the many partners in China's vast "Belt and Road" infrastructure initiative, which Western leaders say risks saddling poorer countries with debt.

Baghdad is an "important cooperation partner" in the project, a Chinese foreign ministry spokesman told AFP, adding that Beijing had "actively participated in the reconstruction of Iraq's economy".

Between 2013 and this year, Iraq was "the third most important" Belt and Road Initiative partner "for energy engagement", according to a paper by Christoph Nedopil of the Green Finance and Development Center at Fudan University, Shanghai.

Under the 2019 "oil for construction" deal, building projects in Iraq are funded by the sale of 100,000 barrels per day of Iraqi oil to China.

One aspect of the agreement, inked while former Iraqi premier Adel Abdel Mahdi visited Beijing, was a deal to build Iraqi schools.

Two Chinese partners were tapped to carry out the construction -- PowerChina and Sinotech -- with 8,000 education facilities to eventually be built.

Work has also begun on an airport in the southern city of Nasiriyah, built by the China State Construction Engineering Corp.

Under such projects, Chinese firms must work with local contractors that "provide manpower and raw materials", said Haider Majid, an Iraqi government spokesman.

But Yesar al-Maleki, an analyst for the Middle East Economic Survey, said there was "a big question mark" over how the Iraqi contractors are selected.

"Many of these companies are rumoured to be politically connected, and this is how they got the contracts," he told.

- Additional Reporting by Aggrey Mutambo