Iraq has revived a landmark 2019 agreement with China known as the “Oil-for-Pojects” agreement that was suspended last November under U.S. pressure.
The 2019 deal aimed to fund Iraq’s reconstruction through oil exports, with projects like the construction of 1,000 schools, the Nasiriya city airport, power plants, and housing initiatives for low-income families. By 2022, construction had started on 177 schools, and in 2023, plans were announced to increase oil supplies to China by 50% (to 150,000 bpd) to fund further development projects.
However, in November, the administration of former U.S. President Joe Biden, amid growing concern about a long term Chinese-Iraqi partnership, following a separate May 2024 $8 billion agreement between Bagdhdad and Beijing where the China National Chemical Engineering Co. (CNCEC) agreed to construct a 300,000 bpd refinery in Basra, with potential expansion to a $20 billion project including a petrochemical plant and power plant, pressured Baghdad to suspend the agreement, which left many of the projects that had been started stalled.
Iraq, which is still under U.S. military occupation, and whos oil profits are still desposited in an account at the Federal Reserve Bank of New York since 2003, has had to balance the amount of leverage Washington has over it while seeking to diversify its partnerships as well as achieving its goal of becoming energy self sufficient, which it is not despite its vast oil and gas reserves.
In March, under pressure from the Trump Administration, Iraq ceased electricity and gas imports from Iran, which further exasperated Iraqs power shortages.
In May of this year, Iraq did sign another major deal with Geo-Jade Petroleum to expand production at the Tuba oil field, build a 200,000 bpd refinery, and construct two power plants after 2 U.S. companies signed oil deals with the autonomous Kurdistan region, which Bagdad claimed were illegal.
China has viewed Iraq as another location to expand its strategic Belt and Road Initiative (BRI), with the reival of the Oil-for-Projects deal with other deals with China underscoring Iraq’s urgent need to accelerate reconstruction amid improving oil market conditions.