Iraq puts China's hard power failings on display

China has been the biggest beneficiary of the post-Saddam oil boom in Iraq, but the US’ reluctance to intervene in the current crisis poses a stark dilemma for Beijing, and there is little it can can do in response.

Hollywood directors have unusually perceptive eyes for shifting geopolitical events. George Clooney produced and starred in a 2005 geopolitical thriller called Syriana, in which one of the main plot lines is the struggle between the US and China over oil interests in the Middle East.

The film featured Arabic-speaking Chinese oil executives who were willing to play ball with the local emirs, out-foxing their American competitors. The Hollywood fiction has since morphed into reality on the ground: Chinese state-owned oil giants are major players in Iraq now, often outbidding their Western rivals and importing 60 per cent of Iraq’s total oil production or 1.5 million barrels a day.

There is little doubt that China is the biggest beneficiary of the post-Saddam oil boom. Chinese oil companies are far more willing than their American counterparts to accept tight-fisted oil contracts from the Iraqi government and are more eager to take on risk and stay out of politics and religious strife in the country.

“We lost out,” said Michael Makovsky, a former Defence Department official in the Bush administration who worked on Iraq oil policy. “The Chinese had nothing to do with the war, but from an economic standpoint they are benefiting from it, and our Fifth Fleet and air forces are helping to assure their supply,” according to The New York Times. 

It is ironic that the expanding Chinese interest in Iraq is only made possible by the presence of American forces including the marines and Fifth Fleet, at the least until the withdrawal of the American military forces.

The rise of the Islamic State in Iraq and the Levant terrorist force is threatening the large and growing Chinese oil interest in Iraq and the Americans are no longer there and willing to ensure the security in the country and prop up the hopeless sectarian Shia government of Nouri al-Malik.

The Middle East is far less important to the US than before because of the shale oil revolution that came about as a result of the passing of the Energy Policy Act in 2005, which exempted hydraulic fracturing from the Safe Drinking Water Act.

America is now producing more oil than Iraq and Kuwait combined and is expected to surpass Saudi Arabia, the world’s largest producer, in the coming years. The chief executive of Exxon Mobil has predicted that the US will become energy self-sufficient within this decade.

The US’ reluctance to intervene in Iraq poses a stark dilemma for Beijing, which is heavily reliant on Middle Eastern oil to power its economy. Iraq is China’s fifth largest oil supplier behind Saudi Arabia, Angola, , and Russia. China has already overtaken the US to become the world’s largest importer of crude oil, according to the US Energy Information Administration.

Not only does China have oil interests in Iraq, estimated to be 31 per cent of oil reserves in the country, it also has scores of other investments from telecommunication networks to power-generators in the country. The non-oil major projects are worth about 16.8 billion yuan, or $3 billion.

The deteriorating security situation poses a stark dilemma for Beijing and there is little China can do to respond to the situation.

At the strategic level, there is a long-standing policy of not using military forces abroad and there is also the question about Beijing’s ability to project its military force at such a long distance away from China.

Beijing’s extreme caution is reflected in its on-ground security protection policy. Chinese security guards, many of whom are ex-Chinese Special Forces including senior non-commissioned officers from elite anti-terrorism squads, are not allowed to carry weapons.

Zhang Donghui, the deputy head of the Chinese Association of security Personnel told Global Times, a state-owned media publication, “In order to avoid unnecessary political troubles and respect the sentiment of the local Iraqi population. We are not allowed to be armed and can only use weapons such as batons for self-protection.”

The crisis in Iraq and earlier debacle in Libya shows that the emerging superpower is not yet ready to project its hard power abroad to protect its rapid growing economic interests. But there is growing chorus of people demanding Beijing adopt a more proactive policy to safe-guard its overseas interest. 

Want access to our latest research and new buy ideas?

Start a free 15 day trial and gain access to our research, recommendations and market-beating model portfolios.

Sign up for free

Related Articles