China has become the winner of the oil industry development in Iraq after Saddam Hussein was overthrown. Chinese companies now take almost half of the Iraq oil production with ambitions for a bigger share, notes the New York Times. China already imports about 1.5 million barrels of oil a day from Iraq and made a bid for commercial rights owned by U.S. group Exxon Mobil for one of the largest oil fields in Iraq.
“The Chinese are the biggest beneficiary of this post-Saddam oil boom in Iraq.” They need energy, and they want to get into the market,” said Denise Natali, a Middle East expert from the National Defense University in Washington.
Before the 2003 military intervention of the allied forces, Iraqi oil industry was in trouble, being largely isolated from the global market because of sanctions against the Saddam Hussein regime. Removal of the embargo opened its domestic market to foreign investors.
Chinese state-owned companies have noted the opportunity and invested over $2 billion a year in Iraq, have transferred hundreds of workers to the Arab state and have shown willingness to play by the rules imposed by the new Iraqi government and accept lower profits to ensure access to important contracts.
“We lost out. The Chinese had nothing to do with the war, but from an economic standpoint they are benefiting from it, and our Fifth Fleet and air forces are helping to assure their supply,” said Michael Makovsky, a former Defense Department official in the Bush administration.
Recently, China has built in Iraq, near the border with Iran, its own airport to transport workers to the oil exploitation fields in the south. Chinese plan to inaugurate direct flights from Beijing and Shanghai to Baghdad.
In Basra hotels Chinese businessmen come to Iraq and impress local partners speaking Arabic with Iraqi accent. More importantly, however, the Chinese do not complain. Unlike executives from Exxon Mobil, the Chinese accept without a problem stringent conditions imposed by the Iraqi government in oil exploitation contracts with minimal profits.
China is more interested in access to resources, in order to ensure energy security and economic development than in making a profit. This is because Chinese companies do not have to answer to shareholders for profits and dividends, exclusively serving the foreign policy interests of Beijing.
“We don’t have any problems with them. They are very cooperative. There’s a big difference, the Chinese companies are state companies, while Exxon or BP or Shell are different,” said Abdul Mahdi al-Meedi, an official at the Iraqi Oil Ministry.
However, American experts in the field of energy consider that China’s significant presence in Iraq’s oil industry is not a problem for U.S. interests. The increase of Iraq’s oil production, even though it is generated by Chinese workers helped keep oil prices under control in the context of Western sanctions imposed on Iran, another major manufacturer.
Also, the boom in shale oil extraction in the U.S. in recent years has significantly reduced dependence on Middle East resources, as the United States can afford now to give up some of its access to Iraqi reserves.
Moreover, China’s significant presence in Iraq could help stabilize the government in the context of the Syrian conflict, which is also feel by other Arab states. The Iraqi government needs foreign investment, and oil is the main political and economic resource for the country’s future.
Iraqi government finances its defense and social programs with revenues from the oil industry which, on the other hand, needs a $30 billion a year investment in order to keep its capacity at an optimal level.
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