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An American institute dismantles the Chinese puzzle in Iraq: Beijing's investments are supported by factions loyal to Iran

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An American institute dismantles the Chinese puzzle in Iraq: Beijing's investments are supported by factions loyal to Iran

2023-06-08 // 08:24


Shafaq News / The American "Middle East Institute" considered that China's role is growing in the Iraqi energy sector, and that Chinese companies are in a good position to engage in efforts to expand Iraq's capacity, with its active participation in various energy-related projects. For the dominant player in the Iraqi economy, it would be a target that is likely to be difficult to achieve given Iraq's difficult business and controversial politics.


And after confirming the report, which was translated by Shafaq News Agency; He must follow up on whether the roots of China's intervention in Iraq will extend deeper and longer. He noted that if the Iraqi Prime Minister, Muhammad Shia' al-Sudani, is to achieve his declared goals, he must not be satisfied with supporting the coalition supporting his government because of the differences between its parties, and he must also deal with With Muqtada al-Sadr's camp. 


While the American Institute said that the World Bank estimates that oil revenues constitute more than 99% of Iraq's exports, 85% of the government budget, and 42% of GDP, it indicated that the long-term economic prospects for Iraq are facing challenges due to its lack of diversification. Limited investment, a weak private sector, and rampant corruption. However, since the formation of the Sudanese government, Iraq has moved forward with its plans to increase oil production capacity, develop domestic gas supplies, and repair and expand refineries.


The report pointed out that Chinese companies are in a good position to engage in efforts to expand Iraq's energy capacity, adding that oil represents the main pillar of the bilateral relationship between Iraq and China, as China represents about 30% of Iraqi oil exports. China's purchases of oil from Iraq, its third largest supplier, increased by about 50% in 2022 compared to the previous year. 


Despite this, the report said that China's relations with Iraq in the field of energy extend far beyond trade in oil, as Chinese state-owned energy companies have established a strong foothold in the exploration, production and refining market in Iraq, adding that despite the recent downturn in investment Outside of China's Belt and Road Initiative, China's engagement with Iraq in Iraq has continued to grow, mostly in energy and transportation infrastructure.


The report reviewed the major Chinese companies that have been active in Iraq for years, such as the China National Petroleum Corporation (CNPC), the China National Offshore Oil Company (CNOOC), and the China Petrochemical Company, indicating that Chinese companies are working to deepen their participation in exploration, production and refining operations in Iraq, and to strengthen Its shares are as in the fields of Al-Ahdab, Rumaila, Halfaya, West Qurna, Al-Hawiza, Al-Sinbad, and others. 


In addition, the report said that the Chinese presence in the Iraqi energy sector also includes many service companies engaged in exploration and production activities such as drilling, supply, construction of surface facilities, pipelines and field management. He noted that the Chinese company (CPECC) and other Chinese contracting companies maintained positive growth momentum in the past year, as they won 87% of all contracts for oil, gas and energy projects awarded by Iraq, at a value of $3.35 billion. In this context, a Chinese consortium was awarded a contract to develop a refinery in Dhi Qar Governorate and to the state-owned China National Chemical Engineering Corporation (CNCEC) to establish a new integrated refining and petrochemical complex, to be fully funded by the Chinese government, on the Faw Peninsula. 


The Chinese puzzle in Iraq


The report indicated that several factors contributed to the expansion of China's presence in the energy sector in Iraq, adding that Chinese state-owned companies have demonstrated their willingness and ability to take advantage of the reluctance of their Western counterparts to invest in Iraq, and in some cases push to liquidate their assets in Iraq. 


However, the report saw that controversial policies in Iraq are at least partly responsible for the success achieved by Chinese companies and the obstacles they still face in obtaining shares and undertaking energy-related projects, as control of Iraqi energy wealth was the main point of political infighting among the elite. 


The report stated that former Prime Minister Adel Abdul-Mahdi publicly called for Iraq to look east to get rid of Western influence and portrayed China as a champion of "the peoples of the developing world." He added that the "oil-for-reconstruction" agreement that Abdul-Mahdi concluded with China in mid-2019 sparked controversy, with critics and opponents concerned that the terms of the agreement risked mortgaging the country's heritage and exacerbating corruption and waste. 


On the other hand, the report said that Mustafa Al-Kazemi, the "consensual candidate" who succeeded Abdul-Mahdi, sought to diversify the energy sector partners in Iraq, adding that during Al-Kazemi's tenure between (May 2020 - October 2022), Iraq rejected several times proposals New Chinese investment amid concerns of Oil Ministry officials that Beijing's tightening control over the oil industry could lead to an acceleration of the migration of Western companies. The report pointed specifically to the joint venture with "Lukoil" to develop the West Qurna-2 field, and the attempt to acquire ExxonMobil's share in the West Qurna-1 field. Also, Iraqi officials persuaded the "British Petroleum" company not to sell its share in the Rumaila oil field to the Chinese National Petroleum Corporation.


The report indicated that these dynamics, although evident in all parts of Iraq, appear more clearly in the south, where the contrast between the country's wealth and the destitution of its population is stark and where local political and non-state actors compete for economic resources in service of the network of patronage and regional players. He pointed out that the dispute over the Al-Faw Grand Port project is an example of this, as while the militias allied with Iran, such as Kata’ib Hezbollah and Asaib Ahl al-Haq, called on Chinese companies to win the project, the coalition led by Muqtada al-Sadr al-Din favored the Korean “Daewoo” engineering and construction company. He pointed out that when Daewoo won the contract, pro-Iranian parties and militias mobilized protest demonstrations in Basra and Baghdad.


The report added that there are supporters of China in Iraq, including the "Silk Road" coalition in Parliament, in addition to the popular campaign called the People's Movement for the Silk Road, which supports more strong economic relations with China in exchange for Western, Korean and Saudi investments. He added that Chinese economic activities in Iraq are protected by militias allied with Iran. 


In addition, the report indicated that Al-Sudani, after assuming office, set an ambitious agenda to face the many challenges he inherited, including the need to improve health services and educational facilities, increase electricity production, and enhance job opportunities, in addition to developing policies related to the oil industry, adding that the government Al Sudani got off to a fast start, signing six out of 11 oil and gas sector deals in February, and three other promising developments followed. First, the federal government and the Kurdistan Regional Government reached an agreement on oil export and revenue management through the Kirkuk-Ceyhan pipeline, and second, Iraq concluded a deal with the French company "Total Energy" to move forward with the long-delayed multi-billion dollar integrated gas development project. And thirdly, the Qatar Energy Company and the Saudi company ACWA Power were invited. 


And after the report said; "Iraq is in a good position to benefit from the melting of regional geopolitical tensions resulting from the rapprochement between Saudi Arabia and Iran that Baghdad helped facilitate," he said. 




The report stated that after more than 6 months of his term, the Sudanese government proceeded with its efforts to address economic problems, with energy security at the heart of the agenda, adding that Al-Sudani encouraged the participation of foreign companies in the oil and gas industry. With the activation of the oil-for-reconstruction agreement, Chinese companies deeply involved in the energy sector in Iraq have emerged as a strong competitor. 


The report added that the principles guiding the Sudanese administration and the restrictions it faces in engaging Chinese and other trading partners were determined by the parties that support his presidency, and they reflect the controversial policies and contradictory compromises that brought him to power, a situation that continues. 


The report indicated that there is fierce competition between the elite under the surface, adding that the great coalition of the forces of the coordination framework and the Kurdish and Sunni parties that together formed the Sudanese government suffer from fragility, adding that the Shiite parties and factions in the coalition are themselves torn apart by rivalries and tensions. 


Therefore, the report says that al-Sudani, "in order to rule in line with his declared goals and priorities for the state, must not only maintain the support of this divided coalition, but must deal with al-Sadr's camp, which despite its withdrawal from the political process can mobilize thousands of demonstrators against the government." 


The report concluded by saying that under these circumstances, it remains to be seen whether the Sudanese administration will perform better than its predecessors, or whether it will be fully able to benefit from oil revenues to improve the welfare of Iraqis instead of enriching the ruling elite, observing whether the roots and branches of interference China in Iraq will extend deeper and longer.تقارير-وتحليلات/معهد-مريكي-يفكك-اللغز-الصيني-في-العراق-استثمارات-بكين-مدعومة-من-الفصا-ل-الموالية-ل-يران

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