Iraq: A Geopolitical Battleground for US and China Investments

The strategic rivalry between the United States and China finds a critical stage in Iraq, a nation that holds a pivotal position not only geographically but also economically. Its location weaves through influences from Iran, Turkey, and the Gulf States, while its wealth in oil reserves makes it a coveted asset in the global energy landscape, particularly as part of the Organization of the Petroleum Exporting Countries (OPEC), which accounts for nearly 80% of the globe's oil reserves.

Despite the rising prominence of renewable energy, Iraq's influence in the energy sector remains robust. In the wake of its fight against the Islamic State of Iraq and Syria (ISIS), Iraq has reached a state of relative stability, opening doors for Chinese and American enterprises to engage in its reconstruction and development, with subsequent political ramifications anticipated.

A History of Conflict

Post-ISIS, Iraq's Federal Government in Baghdad and the Kurdistan Regional Government have been proactive in luring investments, as seen with the Localization Fund. This initiative was established in collaboration with Elsewedy Electric from Egypt to diversify investment into non-petroleum sectors. However, the specter of violence remains, fueled by factors like Iran-backed militant groups, a potential ISIS resurgence, and regional instability since October 2023.

Investment Models Clash

The U.S. and China present contrasting investment models in Iraq. U.S. investments focus on transparency and regulatory improvements, whereas China's approach, often highlighted in official publications, emphasizes rapid infrastructure development with minimal political interference.

Economically, the U.S. fosters public-private partnerships, in contrast with China's state-directed investments via state-owned enterprises and concessional loans. This dynamic is evident in Iraq's oil-for-infrastructure agreements, some of which face speculation of being practically abandoned.

The American Strategy: Security First

The U.S. strategy in Iraq post-2003 involved establishing military presence and supporting transitional governance while engaging in reconstruction through entities like the World Bank and USAID. American firms, facilitated by projects like the Iraq Rapid Assistance Program (IRAP), foster transparency and civil society engagement. Companies like GE Power have contributed significantly to Iraq's energy sector, notably upgrading power plants to counteract the severe power shortages.

U.S. investment also targets Iraq's petroleum industry, with firms collaborating with local companies like RASEP to modernize fields such as Nahr Bin Umar, poised to become a major global oil and gas contributor, according to Forbes.

China's Approach: Infrastructure and Noninterference

China's willingness to invest in Iraq, despite security concerns, has been evident since CNPC acquired oil licenses post-2003. China remains Iraq's leading crude oil export destination, with over $10 billion invested through the Belt and Road Initiative since 2015, making it the fourth-largest recipient of Chinese investment, as per Green FDC. Huawei's active role in modernizing Iraq's telecommunications and solar power infrastructure further highlights their involvement.

Furthermore, China's strategic agreements, like the 20-year, $10 billion infrastructure-for-oil deal signed in 2019, underline the depth of this partnership. Chinese companies now control a significant 7.27% of Iraq's oil and gas projects, well ahead of American counterparts who hold less than 2%, according to S&P Global.

Iraq stands at a crossroads where leveraging both Chinese and American investment strategies could maximize its developmental prospects. By aligning projects with broader development goals and fostering a transparent investment climate, Iraq could effectively navigate the geopolitical currents shaped by U.S. and Chinese economic interests.