China has initiated a global transformation through the Belt and Road Initiative. It has increased its economy-based partnerships and developed critical cooperation with many countries. The reflection of increasing partnerships has been the development of joint projects in various sectors in bilateral relations. Strengthening its influence in the Middle East region, Beijing’s influence, especially in Iraq, has recently intensified. Recently, Chinese companies, which have been carrying out some activities in Iraq’s oil and gas fields, are going through negotiations and agreements with Iraqi companies.
On June 9, 2023, negotiations were held between the Iraqi state-owned Missan Oil Company (MOC) and the Chinese company Geo-Jade to develop the Huwaiza block in Maysan. Geo-Jade signed a Development and Production Agreement for the license in February after winning the block in Iraq’s 2018 Fifth Licensing Round. In a statement on 1 June 2023, the MOC stated that the talks were “in preparation for the implementation of the signed contract”. Geo-Jade has committed to spend a “minimum $60 million” over three years under the contract. A Preliminary Development Plan (PDP) is also expected to be submitted within six months of approval on 21 February 2023.[1]
On the same date, the Dhi Qar Oil Company (DQOC) of Iraq announced that the construction of the 3.15 million barrels Nasiriyah New Crude Oil Storage Project, which will store and assist in the evacuation of crude oil in Dikar and Wasit provinces, has started again. The warehouse is planned to consist of seven 450,000 barrel storage tanks, with the first phase reaching 2.52 million barrels from 3.15 million barrels in total. In a statement made by DQOC on June 5, 2023, China Petroleum Pipeline Company (CPP), a subsidiary of Chinese state firm CNPC, is expected to deliver the project by 2025.[2]
In the 1980s, China turned to the Iraqi market in order to meet its increasing energy needs. Since that period, energy has been in a strategic position in the relations on the Baghdad-Beijing line. Oil trade can be characterized as the main component of bilateral relations. The commercial relations between the two have also developed considerably over the years. During the visit of former Iraqi Prime Minister Haider al-Abadi to China in 2015, numerous memorandums of understanding were signed between the parties, including diplomatic, military and energy fields. In addition, in 2019, a memorandum of understanding was signed for the implementation of projects in Iraq as a result of various meetings between the Iraqi and Chinese delegations.[3]
In 2016, Beijing became the number one investor in the Middle East geography. In this direction, relations between Iraq and China have also strengthened. Cooperation between the parties has deepened with the “Restructuring for Oil” program, which was formalized in 2019 with the Iraqi Government’s commitment to supply China with 100,000 barrels of oil per day.[4]
Moreover, China’s capital in the region has grown by 360% since 202.[5] In 2021 alone, Beijing made over $10 billion worth of infrastructure deals in Iraq. Moreover, Baghdad wants to secure more Chinese investment in the infrastructure sector.[6] As it can be understood, the need for energy necessitated the development of Beijing’s connections with the countries of the region. Especially for China, which has increased its dialogue with the Gulf countries, Iraq is the third largest supplier. China imports nearly 40% of Iraqi oil.[7]
At this point, the increase in the rate of oil imported by China from Iraq is important. Iraq, which exported 22 billion dollars worth of oil in 2018, exported 49 billion dollars in 2022. The total oil imported by Beijing in 2022 is around 55.49 tons. The said rate indicates an increase of 47.49%. Therefore, the process has a return of 39 billion dollars.[8] This increase in energy trade also affects the development of cooperation between the parties. Cui Wei, Chinese Ambassador to Baghdad, also stated that Iraq is an important partner as China’s largest partner in terms of contracts and its second largest commercial partner.[9]
The main Chinese companies operating in the country include four major oil groups such as China National Petroleum Corporation, Sinopec, China National Offshore Oil Corporation and Zhenhua Oil. Companies that have deepened their activities in the country are working to open new areas of cooperation. The mentioned activities of Geo-Jade and CPP can also be evaluated within this scope. In addition, United Energy Group (UEG) has signed an agreement to develop the Sindbad field located in the vicinity of Basra.[10] Therefore, in addition to energy supply, various studies such as pipelines, field management, drilling and infrastructure are carried out in order to improve bilateral cooperation.
As a reflection of the energy partnership, China’s investments and infrastructure works in related countries have also developed over the years. At this point, the Chinese presence in Iraq has also increased significantly. However, Beijing is showing its influence on the stability and infrastructure developments of exporting countries in order to secure oil supply and secure energy connectivity. At this point, Iraq is China’s main partner in the region. The power vacuum created by the US withdrawal from the region can also be seen as a factor that increases Beijing’s influence.
However, after the influence of the terrorist organization Devlet al-Iraq and al-Sham (DEAS) in Iraq was broken in 2017, Chinese investments in the country began to increase. For example, in 2019, it was announced that Chinese companies will build more than 8 million homes in Iraq as part of the oil deal in return for multi-billion-dollar projects signed between the two countries..[11] During this period, the Iraqi Government also invested in energy resources to ensure the development of the country.
On the other hand, Iraq has a very important position in terms of Beijing’s Belt and Road Initiative activities. Its geostrategic location and its resources have further reinforced the value of Baghdad and the strategic importance of Iraq has increased within the scope of the initiative. Energy and infrastructure works are also implemented for the Belt and Road Initiative. In 2021, Iraq was the largest beneficiary of the Belt and Road Initiative, with construction contracts worth approximately $10.5 billion.[12]
Both the activities of Chinese companies and intergovernmental cooperation indicate that the proximity on the Beijing-Baghdad line will increasingly continue. It is seen that China’s influence in Iraq will deepen with investment and project activities within the framework of energy cooperation and the Belt and Road Initiative. With its resources and geostrategic location, Iraq is of critical importance for China and for the objectives of the Belt and Road Initiative. As a result, it is likely that the parties will be involved in the implementation of new projects on infrastructure and investments. In this context, various diplomatic visits may also take place.
[1] “China’s Geo-Jade: Iraq Development Near”, Mess, https://www.mees.com/2023/6/9/news-in-brief/chinas-geo-jade-iraq-development-near/7197e530-06bb-11ee-a374-5dd54e45403f, (Date of Accession: 10.06.2023).
[2] “Iraq Restarts 3mn Barrel Nasiriya Storage Project”, Mees, https://www.mees.com/2023/6/9/news-in-brief/iraq-restarts-3mn-barrel-nasiriya-storage-project/927548a0-06bb-11ee-8160-b7bc2b8ace1c, (Date of Accession: 10.06.2023).
[3] “الاستثمارات الصينية في العراق”, CGTN, https://arabic.cgtn.com/n/BfJIA-CEA-DIA/IHbfAA/index.html, (Date of Accession: 10.06.2023).
[4] “China’s Economic Presence in Iraq: Challenges and Survival Strategy”, CFRI, https://cfri-irak.com/en/article/chinas-economic-presence-in-iraq-challenges-and-survival-strategy-2022-11-10, (Date of Accession: 10.06.2023).
[5] “التواجد الاقتصادي للصين في العراق: التحديات وإستراتيجية البقاء”, Shaf, https://shafcenter.org/ي-للصين-في-العراق-التحديات-وإستراتيجي/, (Date of Accession: 10.06.2023).
[6] “Chinese Investments in Iraq: Rules-based International Order Facing Beijing’s Onslaught”, Geopolitica, https://www.geopolitica.info/chinese-investments-in-iraq/, (Date of Accession: 10.06.2023).
[7] “China’s Economic Presence…”, op.cit.
[8] “Iraq’s Oil Exports to China Jumped by Nearly 50% in 2022: Statement”, Bas News, https://www.basnews.com/en/babat/795790, (Date of Accession: 10.06.2023).
[9] Ibid.
[10] “Iraq’s Gas, Oil Deals With UAE, China Mean More Energy Independence From Iran”, The Media Line, https://themedialine.org/top-stories/iraqs-gas-oil-deals-with-uae-and-china-mean-more-energy-independence-from-iran/, (Date of Accession: 10.06.2023).
[11] “Chinese Firms to Build 8mln Houses in Iraq”, Zawya, https://www.zawya.com/en/business/chinese-firms-to-build-8mln-houses-in-iraq-o1dqf8f7, (Date of Accession: 10.06.2023).
[12] “Brief: China Belt and Road Initiative (BRI) Investment Report 2021”, Greenfdc, https://greenfdc.org/brief-china-belt-and-road-initiative-bri-investment-report-2021/, (Date of Accession: 10.06.2023).
