With strategic prodding by Iran, Iraq is set to expand its already game-changing oil and gas infrastructure deal with China.
Iran is seeking to push Iraq firmly into the Sino-Russian power bloc. Tehran is looking to include Iraq in the Sino-Russian power bloc in order to expand its influence in the oil-rich country.
This was highlighted by last week’s announcement that Iraq’s Parliamentary and Economic Investment Committee is to re-open the file of the Sino-Iraq agreement agreed last September.
This arrangement — agreed during the visit by Iraq’s then-Prime Minister Adel Abdul Mahdi to Beijing with the purpose of expanding China’s then $20 billion of investment in Iraq in addition to the $30 billion annual trade between the two countries — was already broad and deep enough to be a regional game-changer.
It comprised eight major memoranda of understanding that incorporated virtually unlimited oil and gas sector exploration and development, the provision of materials, technology and expertise, and an extensive infrastructure build-out over the next 20 years. This is in line with China’s One Belt, One Road multi-layered, multi-generational programme.
Chinese money, equipment and technology will allow Iraq to gradually increase its oil production to the 7 million barrels per day (bpd) targeted by end-2022, and then to 9 million bpd target.
It would also allow Iraq to move forward with the build-out of the Common Seawater Supply Project (CSSP) in the absence of ExxonMobil as part of the broader Integrated South Project.
It all began last October, with the announcement from Iraq’s Finance Ministry that the country had started a programme to export 100,000 barrels per day (bpd) of crude oil to China as part of the deal.
Chinese firms Zhenhua Oil and Sinochem were the importers of the Iraqi barrels involved, and all of the trade financing surrounding these exports was done by the China Export and Credit Insurance Corporation.
As recently as last October, Iraq’s Electricity Minister Louay al-Khateeb wrote: “China is our primary option as a strategic partner in the long run…We started with a US$10 billion financial framework for a limited quantity of oil to finance some infrastructure projects…[but] Chinese funding tends to increase with the growing Iraqi oil production…”