China,  Iraq

China makes a bid for favor in Baghdad

Cross-posted from Aymenn Jawad al-Tamimi at The Daily Star of Lebanon

The withdrawal deadline for U.S. forces in Iraq is drawing nearer and officials in the Obama administration are pressuring Iraqi politicians to make a decision on whether to extend the American military presence. Much debate has arisen around which foreign powers will wield most influence in the country, especially once all American troops are withdrawn. Indeed, some American publicists worry that Iraqi Prime Minister Nouri al-Maliki will turn Iraq into an Iranian satellite state.

However, one nation in particular, China, is rapidly developing ties with Iraq and looks set to be a major contender with the United States and Iran for influence in Baghdad. The most recent indication of this has been the signing of several Memorandums of Understanding, or MOUs, between China and Iraq. So far, the MOUs have involved broad economic and technical cooperation and the training of Iraqi cadres in China, to be followed by an MOU on electricity.

Cooperation in the field of electricity is noteworthy in light of the fact that since the Coalition Provisional Authority lifted import tariffs in late 2003, Iraq has a seen a flood of cheap imports of consumer goods from China. As a result, real demand for electricity has soared even as overall output has increased. The result has been a reduced average daily availability of electrical power since 2003 in cities like Baghdad.

More generally, there are two principle reasons, namely oil and reconstruction, to suggest that Chinese influence in Iraq will continue to grow to the detriment of other foreign countries.

Let’s start with oil. Iraq’s oil industry is still state-run, and in signing deals with foreign corporations to develop oil fields, Baghdad has successfully imposed high taxes and low fees per barrel, so that profits have been tipped overwhelmingly in the government’s favor. For corporations seeking to import Iraqi petroleum, Chinese firms have arguably fared the best in securing oil deals from Iraq’s government.

In fact, the first agreement signed with a foreign corporation after the war in 2003 came in August 2008, with the China National Petroleum Corporation, or CNPC, to develop the 1 billion-barrel Ahdab oil field in Wasit in southern Iraq. Similarly, in the first bidding round in June 2009, CNPC was able to acquire a joint venture deal with British Petroleum (BP) for the massive 17.8 billion-barrel South Rumaila oil field near Basra. In securing the bid, the companies hoped to achieve an eventual production goal of 2.85 million barrels per day.

Over the next two decades, it is expected that the greatest growth in demand for oil will come from China, with global consumption predicted to reach 105 million barrels per day by 2030. Thus, as Iraq’s daily output continues to grow, expect further cooperation between the two nations in the development of Iraqi oil reserves. It is conceivable that CNPC and other Chinese energy companies will take over most of the joint ventures as Western oil companies increasingly look beyond the Middle East for oil supplies.

Then there is reconstruction: During a visit to Shanghai, Maliki affirmed that Iraq was willing to invite more Chinese companies to aid in the country’s reconstruction programs. Pointing to what he saw as China’s advanced experience in technology and infrastructure building, the prime minister expressed his hope that a greater number of Chinese firms would participate in the construction of harbors, airports and railways, and other projects in Iraq.

Maliki’s desire is partly rooted in Iraqi politicians’ appreciation of the fact that China has forgiven all Iraqi debt and assisted in the removal of Iraq from the authority of Article 7 of the United Nations Charter, which had imposed economic sanctions against Baghdad.

Another thing is worth bearing in mind. The Iraqi government is reluctant to work with the United States and other Western nations on reconstruction because of the general failure of U.S. reconstruction efforts in Iraq since 2003, as assessed by the U.S. Special Inspector General for Iraq Reconstruction. Besides a lack of planning, poor coordination of rebuilding projects, and a problem of insurgent attacks, the United States often failed to take into account local Iraqi needs.

For example, in Hilla, a town 60 miles south of Baghdad, a huge $4 million maternity hospital built by the Americans is largely unable to function because the Iraqi staff cannot operate most of the equipment. Hence, it is not surprising that Iraq is now tempted to turn elsewhere for help in reconstruction efforts.

And so it is that at a cost of over $1 trillion and the lives of more than 4,500 troops, the United States may be on the verge of handing China – America’s main economic rival and long-term threat to its global dominance – the gift of a firm foothold in the Middle East. And this took place without the Chinese having ever supported the Iraq war in any way. Such are the ironies of modern geopolitics.