The Iraq-China relationship dates back to ancient times. The new era in Iraq-China relations began in 1958, with the establishment of diplomatic relations between the two countries that year. This period has been accompanied by many ups and downs.
With the reopening of the Chinese embassy in Baghdad in 2004, relations with Iraq developed but were initially weak, and even Chinese companies withdrew from Iraq.
China first became Iraq’s largest foreign investor and main trading partner in 2013, and in December 2015, their relations were upgraded to a strategic partnership.
Variables such as China’s support for the Iraqi government, expansion of visits, signing of agreements such as cancellation of Iraq’s debts to China (80 percent of the $8.5 billion debt), Beijing’s peaceful development, Iraq’s joining China’s BRI, the decline of the Middle East’s position to the United States, containment of China, Iraq’s geostrategic position and huge oil reserves, large cooperation mechanisms between China and Arab countries, etc. have led to the expansion of China-Iraq relations.
Relations between China and Iraq are passing through an unprecedented level of communication.
The Chinese President recently emphasized his great concern for developing ties with Iraq and his readiness to deepen friendly cooperation to raise the level of partnership to higher levels.
On the other hand, many Iraqi elites, in addition to the attractiveness of the Chinese development model, consider Beijing’s policy of non-interference in the internal affairs of other countries as “an opportunity for development in Iraq” and the best way to quickly rebuild the country, especially in the energy sector.
In recent years, opportunities for cooperation between Beijing and Baghdad have increased in the areas of foreign policy, regional policy, counter-terrorism efforts, opposition to separatist activities, and Iraq’s attention to China’s interests in Xinjiang.
Mohammad Shia al-Sudani’s approach to foreign policy, adopting convergent policies towards China, and strengthening comprehensive strategic partnerships,, etc. are strategic factors for the expansion of relations with China.
Energy relations
Oil revenues are more than 98% of exports and 40% of Iraq’s GDP. Energy cooperation is the foundation of relations between the two countries, and Beijing is an important importer of Iraq’s crude oil.
Chinese companies have gradually become the biggest foreign players in Iraq’s energy. In 2008-9, China’s state-owned CNPC won Iraq’s three contracts. Chinese energy companies have deepened their participation in all upstream, middle, and downstream areas in Iraq.
Chinese companies own the largest oilfield in Iraq and manage about 34 percent of Iraq’s proven reserves, plus two-thirds of the country’s current oil production.
Chinese investment in Iraq’s oil industry is approaching $10 billion, with the country currently investing in 41 different energy projects in Iraq, 31 of which are oil-focused.
China’s participation in Iraq is increasing, with total direct investment reaching $34 billion by 2023, making China the largest investor in the country. China has acquired ExxonMobil’s stake in one of Iraq’s largest oil fields since early 2024.
Chinese companies such as UEG and Geo-Jade have won most of the contracts in Iraq’s oil and gas exploration sector. Recent agreements and licenses for the exploitation of 10 more oil and gas fields could increase Iraq’s proven oil reserves to 160 billion barrels.
Earlier, smaller Chinese companies such as Geo-Jade Petroleum and United Energy Group (UEG) and Geo-Jade, have signed contracts to develop the Huwaiza, Naft Khana, and Sindbad fields.
The Iraqi government has been pursuing plans since October 2022 to achieve gas self-sufficiency and develop domestic gas resources, as well as repair and expand refineries with Chinese assistance.
Gas processing from the Halfaya oil field and the presence of the CAMC (CAMCE) Company of China, which has a contract for the supply of natural gas in Basra, are other dimensions of bilateral cooperation.
Chinese companies also participated in a consortium consisting of Chinese and Iraqi companies to develop the Mansourieh gas field in Diyala province in May 2024.
CNPC is supposed to deliver the construction of the new Nasiriya crude oil storage project by 2025.
Chin has an extensive presence in the refining sector by developing a refinery in Dhi Qar province and building a refinery and petrochemical complex in Alfav. China’s participation in Iraq’s electricity generation and power plant construction projects to meet half of the country’s electricity needs has also contributed greatly to reducing power outages in the country.
China has signed contracts with Baghdad for the construction of the Karbala heavy oil power plant with CITIC Construction, the 840-megawatt gas power generation of Maysan, the development of the power plant and desalination in Basra and the expansion of the production of the Mansouriyeh power plant in 2022.
Despite the Iraqi government’s plan to produce 12 gigawatts of solar energy by 2030, the construction of a 2,000-megawatt solar power plant, several infrastructure investments including power plants, and dozens of projects between the two countries are awaiting approval.
Opportunities and challenges
Under Article 111 of the Iraqi Constitution, the Iraqi government emphasizes that the oil law and supervision of all oil and gas production and investment in Iraq and the Kurdistan Region will be a strong factor for the unity of this country. Therefore, it will not accept the oil independence of the Kurdistan Region of Iraq. In this regard, China also respects this approach.
Iraq, with more than 140 billion barrels of reserves, has the fourth largest oil reserves in OPEC, and its oil reserves are a good opportunity for China to be present.
With various geopolitical factors and the necessary platforms to play an effective role in the Middle East and the world, Beijing intends to take full advantage of Iraq’s large energy market and consolidate its position in the country with its huge and long-term investments.
China’s oil refineries increased their refining capacity by millions of barrels from 2016 to 2024, and maintaining this trend requires Iraqi crude oil.
The Iraqi central government’s reconstruction plan, after the defeat of ISIS in late 2017, focused on attracting investment from Beijing and China. Iraq, with its damaged energy infrastructure, is eager to expand its industry to achieve oil production of about ten million barrels, solve domestic problems, add to GDP, and improve foreign exchange reserves.
In 2021, Iraq was one of the largest beneficiaries of China’s Belt and Road Initiative (BRI). Iraq’s membership in the China-based Asian Infrastructure Investment Bank (AIIB) has provided better financial support for energy projects in Iraq.
Iraq’s $17 billion strategic development road (the Basra-Europe transport corridor) will connect to China’s One-Road Initiative (BRI) and will be linked to Iran’s “energy corridor.”
Some fear China’s creeping influence in Iraq’s energy sector could lead to overdependence and a debt trap.
Some critics point to significant and apparent delays in the implementation of projects by Chinese companies in Iraq, the dependence of many Chinese companies on military institutions, and the lack of transparent costs and corruption.
China’s role has already caused some political opposition in Iraq and even some new investment proposals from China were rejected.
Constraints including lack of security, customs regulations, lack of immediate dispute resolution mechanisms, electricity shortages, global energy price fluctuations, limited transportation networks, and inadequate port facilities continue to pose challenges to developing energy-based relations.
However, energy plays a large role in the volume of trade between Iraq and China. Trade reached $41.4 billion in the first nine months of 2024, up 12 percent from $37 billion in the same period last year.
The volume of Iraq-China trade is expected to exceed $55 billion by the end of 2024, with China becoming Iraq’s largest trading partner.
Vision
It seems that many in Iraq still see China as a potential ally, a successful development model, and a vital balancing power against other external forces.
Iraq’s vision and efforts, China’s needs, the complementarity of economies, technological advances, continued investments in infrastructure development related to the BRI, etc., can further enhance the growth of energy-based trade.
Therefore, the multidimensional, geopolitical, and geoeconomic relations between Baghdad and China and the achievement of the $100 billion vision will remain prominent in many issues.
What is clear is that with the implementation of the previous economic agreement and the emphasis on infrastructure projects, energy will remain the cornerstone of the strategic partnership between China and Iraq,
and in the short term, Iraq will be the largest place for Chinese investment among Arab countries.
Farzad Ramezani Bonesh
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By: Farzad Ramezani Bonesh (ONE Team)
Farzad Ramezani Bonesh is a writer, senior researcher, and analyst focusing on the Middle East and South Asia. He has written research articles, short analyses, and journalistic pieces in both Persian and English. He has also appeared on international outlets such as Al-Jazeera, RT, and Al-Araby among many others.
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