When Iraqi Prime Minister Adel Abdul Mahdi led a delegation to China in September, Baghdad and Beijing activated an “oil for reconstruction” and investment program. Under the arrangement, Chinese firms work in Iraq in exchange for 100,000 barrels per day.
Iraq has said it needs more than $88 billion to develop and mend its rickety infrastructure after three years of combating the Islamic State (IS).
Speaking to the press, Abdul Mahdi said that, including this new deal, about 20% of Iraq’s daily oil production is being exported to China.
“We agreed [with Beijing] to set up a joint investment fund, which the oil money will finance,” he said, adding that Iraq requires that China not monopolize implementing projects inside Iraq but rather will work in cooperation with international firms.
Such an agreement isn’t new. In 2015, when Abdul Mahdi served as oil minister under then-Prime Minister Haider al-Abadi, Iraq signed up for China’s Belt and Road Initiative in a deal founded on the principle of oil in exchange for construction, investment and development. Back then, China was awarded 100 projects. Yet the agreement was halted due to the political and security tensions that resulted in a ministerial reshuffle.
Iraq has been rocked by demonstrations in recent weeks, and the prime minister has again called for Cabinet changes. The situation could affect the current deal as happened before, though nothing official had been announced.
Chinese investments in Iraq total $20 billion, mainly in the energy sector via a consortium with international firms or independently to develop power plants. Moreover, annual trade between the two countries exceeds $30 billion, with a total of $15 billion in Iraqi oil exports.
The current Iraqi government started turning its back on US companies following a $15 billion power deal with Germany’s Siemens to rehabilitate the infrastructure — leaving behind General Electric, which has operated in Iraq for years, and failing so far to sign a $53 billion deal with ExxonMobil to implement the “southern megaproject.”
Iraq has taken the first steps toward putting this deal into force by opening bank accounts, and a Chinese delegation will visit Iraq in the coming days to learn about strategic projects such as the suspension railway and Nasiriyah International Airport, and to reach an agreement regarding their implementation.