March 30, 2023

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Oil and reconstruction, a solid relationship between China and Iraq

Rich in oil but poor in infrastructure, Iraq is becoming one of China’s bastions, building up vindictively at the risk of plunging Baghdad into debt, undermining even Westerners’ privileged position in the country.

China, a long-standing presence in Iraq, has recently diversified its plans there as its own energy needs increase.

After 40 years of wars, Iraq has an “urgent need for foreign investment, particularly in the energy infrastructure sector,” notes John Calabrese of the Middle East Institute in Washington.

According to Mushar Saleh, an adviser to the prime minister, China has been quick on the offensive: it has become the number one importer of Iraqi crude oil, and captures 44% of the 800,000 barrels of oil exported by Baghdad each day.

In southern Iraq, China’s PetroChina jointly operates the Halfaya oil field with France’s Total Energies and Malaysia’s Petronas.

“China is in its infancy,” its ambassador Qi Wei recently asserted, when trade will exceed $30 billion by 2020, according to the Chinese Embassy.

The exchanges, Mr. Calabrese underlines.

– “The Belt and Road” –

Iraq is one of Beijing’s partners in the Belt and Road mega-project, which aims to improve land and sea infrastructure to better connect China to Asia, Europe and Africa.

But the West sees the initiative as a tool of China’s influence in poor countries. In particular, they accuse them of driving them into high debt, suspect corrupt practices, and denounce a lack of respect for human rights.

A spokesperson for the Chinese Foreign Ministry assures AFP that “China has actively participated in the reconstruction of Iraq’s economy”. Baghdad, he continued, is a “key partner” in the “Belt and Road”.

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Iraq was China’s “third most important partner” in the energy sector between 2013 and 2022 in this multi-billion-dollar mega-project in 21 Arab countries, notes Christoph Nedobile of Fudan University’s Center for Green Finance and Development. In Shanghai.

To take advantage of the infrastructure construction boom, China signed a deal with Iraq in 2019 called “Oil for Construction.”

For example, in Nasiriyah (in the south), Power China Group is building a school. It is one of two Chinese companies selected by Baghdad – along with Sinotech – to build 1,000 schools over two years. Eventually, 8,000 schools and an airport should see the light of day.

– Mandarin Lessons –

Iraq pays for oil projects under construction by selling 100,000 barrels of oil per day to China.

The resulting proceeds must be used to fund projects developed with Chinese companies.

Haider Majid, a spokesman for the Iraqi Prime Minister’s Secretariat, explains that Chinese companies must hire Iraqi companies that will “provide labor and raw materials.”

But Yasser al-Malekhi, a researcher at the Middle East Economic Survey, warns: “Most of these contractors are not well-known”. And to fuel “rumours about their connections with politics and thus the risk of corruption”.

The danger is that the Iraqis will “abuse” the “oil for construction” for “useless projects”. “Like many African countries they will be in debt,” he says.

China also attracts Iraqis who want to do business there. The Iraq-China Friendship Association understands this well: recently, it offers Mandarin lessons.

Sajjad al-Ghajaz, a teacher, learned the language while studying in China. “When I returned to Baghdad, I realized that many people wanted to learn Chinese,” he explains.

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Most of his students are businessmen, like Laith Ahmed, who imports electronics from China.

“When I go there, it’s hard to communicate because most of the Chinese don’t speak English,” he told AFP.

So, without waiting, he took the mandarin. Already a profitable investment, he says, because “Chinese products are flooding the Iraqi market.”