Different regions, such as the Middle East, Africa, and Latin America, have become the stage for the global power struggle between the United States and China, particularly since the beginning of the 21st century. As competition between these two countries intensifies, the impact on third countries has grown significantly.
The Middle East, which has frequently experienced civil wars, terrorist incidents, and social crises in recent history, has emerged as a new geography with unique dynamics in the China-U.S. rivalry. Although China has had economic cooperation with Middle Eastern countries in the past, its military, political, and social relations are relatively new compared to those of the United States and other countries with connections to the Middle East. Nevertheless, China has accelerated its Middle East policies in several areas over the past decade, particularly through the Belt and Road Initiative (BRI) announced in 2013.
Since then, China has increased its cooperation with Middle Eastern countries, particularly with Iraq. Iraq’s geostrategic location and its trade through the Persian Gulf make it a crucial point in China’s roadmap for the BRI.
China’s economic interests place a high priority on importing energy from the Middle East. As the world’s largest oil importer, China purchases more than 10 million barrels of crude oil daily, and half of this is sourced from Middle Eastern countries. China’s dependence on imported energy and the significant role of oil-producing countries in the Middle East in meeting this demand make the region an indispensable energy market for China.
Energy investments play a significant role in the BRI, which was launched in 2013 to commercially connect China with the rest of the world via land and sea routes. Iraq has become an essential part of these investments and has been the third-largest partner for energy engagement in the BRI since 2013, after Pakistan and Russia.
In 2022, China imported a significant amount of crude oil from Iraq, totaling 55.49 tonnes. This represented a substantial increase of 47.49 percent in Iraq’s oil exports to China, resulting in $39.04 billion in revenue. In contrast, China only exported $22 billion of crude oil in 2018, but this number increased to $49 billion in 2022 thanks to its exports from Iraq. The significant increase in the oil trade alone highlights the strategic importance of the bilateral relations between China and Iraq in terms of energy policies.
China relies on oil imports from Iraq that are transported through the Persian Gulf. However, interstate tensions, civil wars, and terrorist incidents in the Middle East pose a threat to the stability of China’s energy supply from the region. To address this, China has set a goal to “provide security and stability” along the supply route from Iraq and other Middle Eastern countries.
The instability in the region also causes fluctuations in oil prices, which can have a serious impact on the Chinese economy. As a result, China’s primary expectation from the Middle East is for it to remain a reliable and stable trading partner. To achieve this, China is investing billions of dollars in bilateral agreements and infrastructure projects with Middle Eastern states. Between 2005 and 2018, China invested $114 billion in Saudi Arabia, the UAE, Iran, and Iraq, with 51 percent of this investment occurring between 2013 (when the BRI was launched) and 2018.
After the defeat of the Islamic State in Iraq, the Iraqi government began seeking new investments to reconstruct the cities that were devastated during the war. With limited economic power, Iraq needed foreign capital flows and investments, particularly to rebuild the infrastructure and superstructure of provinces such as Mosul, Kirkuk, and Saladin. In 2018, the undersecretary of the Iraqi Ministry of Planning, Kuzey Abdülfettah, estimated that $88 billion would be required to rebuild the country.
China, which is well known for providing loans and investments for reconstruction, was one of the countries that Iraq sought to develop closer relations with. In a statement released by the Mosul Governorate in 2020, Chinese companies were invited to invest in various sectors including oil, agriculture, and housing. Furthermore, during the 2019 visit of then-Iraqi Prime Minister Adil Abdul Mahdi to Beijing, Chinese companies agreed to a project to construct 8 million residences across almost all provinces in Iraq.
Although China is financially generous to Iraq, investments and loans from Chinese banks have gained notoriety in the international community. It is claimed that China’s loans have drawn some countries like Sri Lanka and Zambia into a “debt trap” after they were unable to repay their debts. Western authorities have expressed concerns about the issue. For example, Richard Moore, the MI6 chief, warned of China’s “debt traps” in his first live broadcast after taking office. Furthermore, some reports suggest that both loan amounts and guarantees are not transparently shared when China provides loans to low- and middle-income countries. According to AidData, 300 Chinese state-affiliated institutions and organizations have invested in projects worth $843 billion across 165 countries and provide loans.
Despite China’s willingness to provide loans, negative examples like Sri Lanka have led to an increase in opposition groups against Chinese investments in certain countries. Iraq is among the countries where such opposition exists, although these groups are currently in the minority. Some members of the public, particularly those critical of agreements made for the reconstruction of oil fields by Chinese companies, have voiced their concerns. Moreover, some sections of the government are also skeptical of China’s investments. Therefore, while economic relations between China and Iraq have progressed, public pressure on these relations may mount in the coming years.