Iraq today is seen by China as being central to the success of its global development strategy, known as the Belt and Road Initiative (BRI), in the Middle East. Beijing’s economic expansion in the region, however, may force Baghdad to look for a new balance in its relations with China and the United States.
The BRI was proposed by China in 2013 to improve connectivity and cooperation on a transcontinental scale. China is selling the BRI as a collaboration project between itself and the countries that sign onto it. A few months before Iraq joined this agreement, China said 125 countries had become a part of this initiative. Even so, an official list of participating countries does not exist.
According to a report released in October by the European Council on Foreign Relations, Beijing’s presence in the Middle East has been growing in the past decade, quickly making it the biggest trading partner for many countries in the region. Although China does not have much of an appetite for being engaged in the Middle East geopolitically, it’s growing economic might will inevitably draw attention from other players in the area, such as the United States.
China’s goals in the Middle East revolve around energy, infrastructure, trade, and investment, as admitted in two key Chinese government documents. With Iraq having the world’s fifth-largest oil reserves, and a strategic geopolitical location, China sees the country as the main missing piece in its plans to dominate trade across Europe and Asia, as well as a bridge between its shipping lanes in countries such as Israel and Turkey and countries in the Gulf.
— Ali Al-Mawlawi (@aalmawlawi) April 7, 2018
China is Iraq’s largest trading partner, with trade between the two nations reaching about $30 billion last year. Similarly, Iraq is China’s second-largest supplier of crude oil, and the fourth biggest trading partner of China in the Middle East.
In September, Iraqi Prime Minister Adil Abdul-Mahdi visited China and signed eight agreements to further increase ties between the two countries. These deals pertained to a diverse set of areas, including in finance, trade, security, construction, and foreign affairs. Chinese President Xi Jinping said the two countries would cooperate mainly on oil and infrastructure projects.
In another example of increased trade between the two nations, Iraq is also turning to Chinese companies to replace ExxonMobil in an infrastructure megaproject. ExxonMobil has been discussing versions of the project for several years with Iraq, when PetroChina was brought in as a partner in 2015.
But in mid-September 2019, negotiations were held up by disagreement over the commercial terms of the project, and ExxonMobil was blamed for the hold up by Iraqi oil minister and Deputy Prime Minister Thamer Ghadhban. PetroChina is now looking to bring in fellow Chinese oil companies China National Offshore Oil Corp. and Sinopec.
Kojin Ahmed, a petroleum engineer at Suez Water Technologies & Solutions, told The Globe Post that these developments will affect, if not reduce, American influence in Iraq.
“Iraq’s massive crude reserves and geopolitical status can not be neglected by China that can play key role in success of BRI in the Middle East,” he said.
Ahmed added that Iraq is one of the biggest Chinese goods consumers in the Middle East.
It has “a low population and a huge budget to spend in addition to lots of natural resources that China is leveraging,” he explained. “Iraq can be a corridor toward both Jordan and Syria which serves the purpose of China’s economic expansion in the Middle East as well as increasing its hegemony.”
Ahmed also pointed towards the Chinese base in Djibouti as evidence of these plans.
He noted that ExxonMobil’s falling out of favor in Iraq was affected by the fact that “Exxon requires more time, capital and effort to execute the project,” while Chinese companies can do it with less.
However, Abbas Kadhim, Senior Fellow and Iraq Initiative Director at the Atlantic Council, told The Globe Post that Iraq joining the BRI is not necessarily a departure from its current partnership with the U.S.
“It’s up to Iraq to make its relations reasonably balanced,” he said. “The U.S. will always play a major role in Iraq, and there will still be a space for other partners like China to fill.”
Development of Ties
In July 2018, the eighth Ministerial Meeting of the China-Arab States Cooperation Forum (CASCF) was held, bringing together the foreign ministers of the 22 Arab League member states and Chinese State Councilor Wang Yi. Last year’s meeting in Beijing emphasized the importance China is placing on stability in the Arab world if the BRI is to achieve its goals. To assist in stabilizing the region, China committed $23 billion in loans and aid to Arab states, with money to be specifically used for infrastructure and reconstruction projects, humanitarian aid and efforts to support social stability.
In addition to the oil deals that have been struck between the two nations, some of the investment within the BRI framework is set to help transform Iraq’s electricity-generation sector as well. The lead developer on a power station under construction in central Iraq’s Salahuddin province is the China Machinery Engineering Corp (CMEC). Once construction is complete, the power station is set to generate enough electricity to meet all the commercial and residential needs of the Salahuddin, northern Baghdad and western Diyala provinces. The power station will add to the substantial level of power generation already being delivered by other China-backed projects across Iraq. These facilities account for about half of Iraq’s total electricity supply.
Furthermore, the China Construction Third Engineering Bureau signed a $1.39 billion contract with Iraq to build a plethora of facilities in the south of the country, including residential, medical and educational buildings in August 2019.
China’s acquisition of Iraq into the BRI is a big step towards its goal of gaining economic hegemony in the Middle East. In 2018, every region in the world saw a significant decline in Chinese investment or construction projects except for the Middle East and North Africa. In recent years, key U.S. allies such as the UAE have sent nearly three times more exports to China than the United States, and for Kuwait, Qatar, and Oman, the gap is even larger. They exported nearly eight times, nine times, and 28 times more goods to China than to the United States.