China Power

China’s Iraq Investment

Iraqi Prime Minister Nouri al-Maliki eyes greater Chinese investment during a visit to the country last week.

The visit by Iraqi Prime Minister Nouri al-Maliki to China didn’t just fail to grab much international media attention – there was also little coverage in the Chinese media, too.

Most Chinese associate Iraq with Saddam Hussein and the US-led war that unseated him. Those with a deeper understanding of international affairs will also be aware of Iraq’s vast oil reserves. As of October 2010, Iraq had proven oil reserves of 143.1 billion barrels of oil – the world’s second largest. Its oil reserves are its strongest draw for foreign capital, and the development of Chinese-Iraqi relations means that China will have a significant stake in the country’s oil interests.

Already, China is working with Iraq on its oil and gas development. In 2008, PetroChina and another Chinese oil company, China ZhenHua Oil, signed a contract worth $3 billion with the Iraqi government for oil exploration rights for 23 years. This was the first major deal signed with foreign firms following the fall of Saddam Hussein in 2003. Drilling began last month, and is eventually expected to produce about 60,000 barrels of oil per day.

In 2009, PetroChina and a British firm obtained exploration rights to Iraq’s biggest oil field, which has oil reserves of about 17 billion barrels of oil, which is more than 10 percent of the country’s oil reserves.  

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But Maliki’s visit wasn’t just about oil.

On the second day of his visit, Maliki met with China’s business representatives, with only one media outlet – China’s official Xinhua News Agency – invited to cover the meeting.

The main issues discussed included Maliki’s hopes that more China companies will invest in Iraq, as well as the prospects for enhanced bilateral cooperation in energy, oil, transport, housing, telecommunication and agriculture.

After years of conflict, Iraq is now looking at reconstruction in the country, and the prime minister believes China can assist with infrastructure development. He hopes, for example, that China will follow the United States and South Korea in establishing a reconstruction fund, which will solidify China’s efforts in Iraq. So far, the Chinese government hasn’t launched any such initiative, although Chinese Premier Wen Jiabao has reiterated the Chinese government’s determination to assist in Iraq.

To some Chinese enterprises, the biggest challenge for bilateral cooperation is the ongoing question mark over safety in Iraq. According to a source in a state-owned construction firm, the company has a number of projects ongoing in Iraq, but is afraid to expand further amid safety concerns. The fact is that if a terrorist attack hits construction work, then it’s a nuisance, but it can be lived with. But if there are casualties, it will undoubtedly cause disquiet in China, and could hurt plans for future expansion.

On this note, Maliki also reportedly mentioned that the Iraqi government welcomed Chinese military aid, and that if Iraq buys Chinese military weapons and equipment, China should also offer some support.