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  • Writer's pictureMECRA

Chinese investments in Iraq involve cooperation with Iran-backed Militias

A number of articles in recent months have focused on the issue of large scale Chinese investments in Iraq. According to a February 2nd report in the Financial Times, Beijing struck deals in the construction sector in Iraq worth $10.5 billion in the course of 2021. Iraq is the third biggest exporter of oil to China. Iraq is keen to secure Chinese investments in Iraqi infrastructure.

While US and European companies are reluctant to invest in Iraq, because of the deep structural corruption and the domination of the public space by militias often linked to Iran and by criminal elements, Beijing appears to be less reticent in this regard. The interviews below, obtained by MECRA with Iraqi individuals knowledgeable regarding this process who prefer to remain anonymous for their own safety, show how China is finding ways to work within this system. Iran is the de facto arbiter of power in Iraq, via its client military and political organizations. Working in cooperation with them hence unsurprisingly forms a key element in the pattern of Chinese activity in the country.

This testimony is interesting because it indicates an anomaly. China is known to prefer strong, centralized state authorities, and to be reluctant to invest in areas of instability. Iraq is unstable, the state is weak, militias linked to Iran and other bodies are the real sources of power. Yet Chinese investment in Iraq is increasing. This is perhaps an indication of growing Chinese confidence in the Mid-East space, as Beijing begins to navigate the ambiguous, partially fragmented spaces of the Middle East to its own advantage.

Professor Majd T, Expert on Iraqi trade issues and oil sector

Iraq is one of the worst countries with regard to money laundering in the world. Most of the cash that no one dares to talk about goes through Iran via counterfeit Iraqi currency. They exchange Iraqi dinars to dollars and then send to Iran. The rest of the money goes to corrupted leaders, militias and organized crime elements.

Iraqi political leaders have hundreds of millions of dollars through money laundering.

Iraqi oil is administrated by the Somo Oil Company (State Organization for the Marketing of Oil), which is run, and responsible for anything related to oil in Iraq. Powerful Shia parties and militias such as the Sadrists, Badr and Al-Dawa parties have influence within the company. The KDP and PUK also control elements within it.

Political leaders and militias are the first line when it comes to oil investment and they are the main factor in obtaining permission to invest in this area, in return for a commission. One of the main challenges that international oil companies face is corruption and commissions to organized crime and militias who represent a threat to oil companies.

Chinese investment came by agreement but not through official channels, but rather with militias and political parties’ leaders. The Chinese committed to providing services and creating opportunities in Iraq. The agreement is oil in return for rebuilding and services.

In the south militias are controlling everything related to oil import and export and they have shared this out among them. These militias belong to political parties in the Iraqi government and outside of it. We have heavily armed militias controlling oil fields – organizations like Nujaba, Assaib Ahl Al-Haq, Saraya Al-Salam, and others. There are also tribal militias that control entire oilfields and no one dares to challenge them.

Chinese investment starts in the south from Kut as a major place of investment. Also in Maysan Amara province and a part of Basra. In Basra, China has a petrochemical refinery, but in Amara they have an oil exploration and extraction operation. The Chinese United Energy Group (UEG) have a large operation in the Siba field in Basra. China invests in tens of oil fields in Kut province.

Iraq needs to fight the corruption in order to bring investors to Iraq because at present oil companies cannot make investment in such an environment. Companies from the UK, France, USA, and other countries want to but they cannot due to the militia and mafia that controls the sector.

MKI , a former official

China has begun investing in Iraq in oil fields, and they have powerful partners in Iraq. They are operating mainly in the south of the country, particularly around Basra. China is working with a strategic partner in this regard – Iran. The Chinese intend to re-establish the old Silk Road as a trading route, as part of their Belt and Road Initiative. They have signed a 25 year strategic agreement with Iran. Iran will undertake to facilitate everything related to this project. Iran has geographic advantages through neighboring countries such as Afghanistan, Syria, and Iraq.

Iranian-backed Iraqi militias are the main tools and instruments behind the investment of China in Iraq.

China is investing in oil fields in Iraq, including in the KRI (Kurdistan region), and they are collaborating with leaders of Shia political parties such as Nuri Al-Maliki, Ammar Al-Hakim and Hadi Al-Amiri. These leaders operate their own militias under different names and factions. Iran uses Iraqi political leaders and their associated militias to expand their power, also in the economic realm, in Iraq. China is powerful in Iraq because it is supported by and works with Iran.

Iranian-backed Iraqi militias are the main tools and instruments behind the investment of China in Iraq.

In the last years until now, Iran-backed militias have been working hard and consistently to control Sunni areas such as Salah al-din , Diyala, Anbar, Kirkuk and south Mosul. UK and France are seeking to create their own space there, in competition with China.

Chinese investment is ongoing in Shia majority areas and under control of militias’ political parties and factions. The main areas in question can be specified as follows: Basra, Amarah, and Nasriyah.

Iranian backed militias influence all political and economic decisions in Iraq. They are controlling most of the areas richest in oil, and they are using whatever can be used to protect these and maintain them under their control. They are supporting China because it is the enemy of their enemy – the USA.

These militias have been threatening oil companies not to obey (US requests – ed) to compensate the world oil market because of the Ukraine-Russia conflict. They are doing so because of issues related to Iran and China. It is a new power system controlled by China and Iran.

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