Mutual benefits of growing Sino-Iraqi relations are clear
https://arab.news/2x7ug
Iraq has emerged as a significant partner for China as the latter actively expands its economic and diplomatic presence in the Gulf.
In particular, Beijing has shown interest in investing in the Gulf state’s oil and gas sector, which continues to be a lifeline for the Iraqi economy.
In the past month, Chinese companies have been successful with five bids for the exploration and development of oil and gas fields across Iraq, including the Eastern Baghdad field, the Middle Euphrates field, Al-Faw field, the Qurnain field, the Zurbatiya field and the Mansuriya gas field.
The bidding process was part of a round of hydrocarbon exploration licensing agreements, as these fields hold significant potential for boosting Iraqi gas production for domestic use. For instance, the Mansuriya gas field is forecast to produce about 100 million cubic feet of gas within 18 months and triple that amount within five years.
This is important because Iraq has typically depended on Iran to meet its domestic gas requirements; the former reportedly imported 9 billion cubic meters of natural gas from the latter during 2023. Close to 40 percent of Iraq’s electricity generation is dependent on Iran. This is not without its problems. Iraq has consistently faced difficulties in paying Iran for gas as a result of ongoing American sanctions on trade with Tehran. In July 2023, Iraq owed more than $11 billion to Iran, which led to a decision to start exporting crude oil to the country in exchange for gas to circumvent the trade embargo.
But Iraqi oil exports come with complications as well. Weakening infrastructure, a limited water supply, OPEC+ cuts on oil production and ownership disputes with the Kurdish authorities are just a few of the factors that place restrictions on Iraq’s export capacity. Therefore, the dynamics of trade with Iran, combined with Iraqi Prime Minister Mohammed Shia Al-Sudani’s efforts to develop a more balanced foreign policy and foster diverse international partnerships, have created space for new international partnerships in the energy sector.
China has embraced this opportunity, given the economic and strategic benefits of partnering with Iraq.
Iraq’s postwar reconstruction efforts serve as the primary axis around which the relationship revolves.
Zaid M. Belbagi
Economic cooperation in particular has developed over the past decade, following the signing of a bilateral strategic partnership agreement in 2015 that deepened cooperation in the energy, communications and infrastructure sectors. The value of trade between the two countries now stands at more than $50 billion, with more than $2 billion in direct investments by Chinese companies in Iraq. Moreover, Chinese companies manage more than half of Iraq’s crude oil production. As one of the highest oil consumers globally, China is keen to maintain positive trade relations with Iraq, particularly given the country’s openness to international private players in its oil industry.
The economic codependence between the two countries is therefore of note, with Iraq’s postwar reconstruction efforts serving as the primary axis around which the relationship revolves. Active efforts made by Iraq since 2018 to stabilize its socioeconomic conditions have provided the opportunity for China to invest in the country’s rebuilding.
At the same time, Chinese interest in Iraq is also motivated by strategic geopolitical incentives. Iraq is a key part of the Chinese Belt and Road Initiative, an ambitious infrastructure-development project that seeks to connect countries in Asia, the Middle East and beyond through infrastructure, digital and energy projects. Iraq is crucial to this initiative given its strategic location in the region, its access to the Arabian Gulf and its abundant hydrocarbon resources.
Iraq is also working on the Iraq Development Road, also known as the Iraqi Silk Road, as part of the wider Belt and Road Initiative. Last month, Iraq, Turkiye, Qatar and the UAE signed a cooperation agreement for this project, which aims to connect Asia with Europe through a network of railways, roads, ports and cities and could serve as an alternative trade route to the Suez Canal. All four countries have some degree of trade cooperation with China.
China’s keen interest in trade with Iraq is complemented by the latter’s growing receptiveness to international partnerships. Having faced decades of postwar political and economic turmoil, as well as restrictions on its banking system and international trade, Iraq has reacted positively to Chinese support in building robust domestic energy infrastructure and generating employment opportunities at a time when its unemployment rate is at an alarming 15 percent.
The interest of Iraqi elites in Chinese partnerships is driven by perceptions of the efficiency, speed, quality and technological advancement within the Chinese model. As with China’s other Middle Eastern partners, Iraq has benefited from Chinese policies of political noninterference and openness to knowledge transfer to develop domestic capabilities.
China’s latest investments in building Iraqi domestic natural gas capabilities therefore bode well for Iraq, as they will reduce its dependence on imports, create jobs for the youth of the country and generate the socioeconomic stability that raises international investor confidence.
- Zaid M. Belbagi is a political commentator and an adviser to private clients between London and the Gulf Cooperation Council region. X: @Moulay_Zaid
