The News
Five Chinese companies won bids to explore Iraq’s immense oil and gas fields, Iraq’s oil ministry said Saturday, while not a single US firm got a contract. It is the latest sign of China’s growing influence in the Middle East as the US struggles to maintain its footing in the region, despite the Iraqi government meeting with American firms last month about potential deals.
European, Arab, and Kurdish firms also won contracts to take on some of the 29 projects up for grabs.
Washington initially had traction in Iraq’s vast oil fields following the 2003 Iraq war, but since 2009, China has become a dominant force in the country after signing its first post-invasion contract with Iraq. Since then, Iraq has become China’s third biggest source of oil. Meanwhile, Washington’s grip on Iraq oil continues to slip, with ExxonMobil exiting the country earlier this year after the China National Petroleum Corporation was granted lead contractor rights over one of Iraq’s largest oil fields.
The shift to Beijing highlights Iraq’s reticence in becoming involved in the geopolitical conflict between the US and Iran, but also reflects China’s strategic success in courting the Middle East with substantial investment and development projects.
SIGNALS
Domestic problems complicate Iraqi oil sector
Iraq oil production currently exceeds OPEC+’s quota of 4 million barrels per day, but domestic political and infrastructure woes have complicated any efforts to up exports and keep Western investors onboard, according to S&P Global. After a financial dispute with Turkey last year, a major pipeline into Turkey was closed down, forcing contractors to overhaul production at other sites not dependent on the pipeline. Iraq’s lack of water supply to maintain pressure at its oil fields forces contractors to independently invest in infrastructure, including seawater treatment plants. And in 2022, the Iraqi government ruled the autonomous Kurdistan region cannot independently market oil and gas, and “the lack of clarity over control is reducing investor confidence,” according to S&P.
Iraq courts China amid US-Iran clash
To avoid getting caught between the US and Iran’s potential military clashes, Iraq has been purging both countries’ influence from within its borders, including negotiating the withdrawal of US troops and revoking trade permits for banks funneling money to Iran. But Baghdad still needs foreign investment and security help — and it is courting Beijing as an alternative, according to Turkish broadcaster TRT World. “Maintaining stability and order in the Middle East is crucial to China’s global projects, particularly regarding energy supply,” TRT wrote. China, in return, is exporting a large number of arms to Iraq, filling the security vacuum left by the US.
Cheap Chinese green tech also floods Iraq
Determined to increase oil exports, Iraq is hoping to offset its fossil fuel contributions by expanding its domestic solar energy footprint. China’s cheap green tech is a lynchpin for that transition, and in 2023 Baghdad set a target to produce 12 gigawatts of solar energy, according to the Emirates Policy Center. With virtually no competition from European or American firms, “China becomes Iraq’s only renewable energy source,” the center wrote. But even if a viable Western firm approached Iraq, it likely won’t get far. The green tech industry is also implicated in Iraqi government corruption, according to the center, and “the Chinese dominance model is the increasing emphasis on development rather than democracy.”