China is ramping up its role in Iraqi reconstruction, reflecting its growing reliance on oil from the war-ravaged country, but geopolitical factors are also at play, according to a new report.
A paper compiled by consultancy BMI Research, and released first to Arab News, said: “On the one hand, China will look to direct investment into infrastructure assets associated with Iraq’s oil industry, which has emerged as an increasingly important export partner over the past decade. On the other, China will aim to garner geopolitical influence by participating in broader reconstruction efforts in a country lying along a key artery of its Belt and Road initiative.”
The burgeoning Iraq-China partnership was said to be anchored by a dramatic increase in oil trade. Iraqi oil exports to China rose from zero in 2007 to 270 million barrels annually by 2017, second behind only Saudi Arabia in the Middle East and accounting for roughly 8.8 percent of total Chinese oil imports.
China’s growing investment role in Iraq’s oil sector was highlighted in January when Iraq disclosed that it intended to construct an oil refinery at the port of Fao on the Gulf with two Chinese companies. Iraq’s ministry of oil named the firms as Power China and Nerco Chinese. The ministry said that the refinery would have a capacity of 300,000 barrels per day. Similarly, Baghdad has awarded a contract to China-based Zhenhua Oil to further develop the East Baghdad oilfield.
“Given the growing importance of China as an oil export market vis-a-vis traditional export destinations like the United States, Baghdad will remain keen on deepening partnerships with Chinese companies as bilateral interests align,” BMI said.
The geopolitical research consultancy added that China would also gain indirect exposure to Iraq’s infrastructure sector by extending bilateral loans aimed at rebuilding Iraq’s economy.