Why the Iraqi ruling elites pivot to China

  • Sardar Aziz

    Former senior adviser in the Kurdish parliament

    كبير مستشارين سابق للبرلمان الكردي

Over the past 15 years, China has executed a strategy in Iraq that has been incredibly effective. Although the two countries recently commemorated their 65th anniversary of friendship, arguably this relationship really began in earnest in 2007 when the two countries’ presidents met and China agreed to cancel Iraq’s debt. China’s debt relief served as a prelude to its eventual entry into the Iraqi oil industry, and included renegotiating oil agreements which were held since 1997 under Saddam Hussein’s regime. The preference of Iraq’s elites for China has significantly bolstered the Sino-Iraqi relationship. In just under three decades, Iraq’s exports to China have seen a huge rise, growing at an annualized rate of 50.3 per cent, from $564,000 in 1995 to $34 billion in 2022. By February 2024, Chinese firms have come to oversee two-thirds of Iraq’s oil production output, showcasing the depth of their involvement in the country’s economy.

Iraq views China as an ideal partner

China and Iraq are complementary partners in many respects. China is one of the world’s largest oil users, and Iraq is an oil-rich country with more than 140 billion barrels of reserves. Since Iraq is one of the major oil suppliers to Chinese refineries, energy is undoubtedly important to the partnership. Its increasing dominance in the energy sector has also given China a platform to grow in other Iraqi industries. As a result, China controls a large number of other sectors in Iraq, such as trade which reached around $50 billion in 2023, according to Shoresh Khalid, Iraq’s ambassador to Beijing. China is also growing in sectors like telecommunications, solar energy and e-government, aiming to reach a point where Iraq is largely reliant on China.

China’s meteoric rise in Iraq is the outcome of capitalizing on the unique sociopolitical, economic and geopolitical conditions in the Middle Eastern country. China has proven that it can take advantage of the intricate state-to-non-state dynamics in Iraq. In addition to local and domestic structures, both Iran and the US, through their indirect struggle in Iraq, have played a role in making that happen. Therefore, the multilayered relationship between China and Iraq differs from other relationships in many ways and defies the common formal relationship between states. In this sense, the formal state-to-state relationship between China and Iraq also includes party-to-party and individual roles.

The ruling class in Iraq and their political economy fit more comfortably with the Chinese model of governance than with the Western model. This convergence is not only a result of Beijing’s policy of non-interference in the domestic affairs of other countries or its avoidance of using reprimanding rhetoric. There are similarities between the Chinese and Iraqi models in terms of the role that political parties play in governance, corruption, dislike of human rights, democracy and other purported Western ideals. When it comes to political economy, under the influence of the Chinese model, doubling down on development rather than democracy has become central to Iraq’s political planning, as is apparent with China-backed projects like the ‘development road’ project, oil for infrastructure, and others.

The elites in Iraq believe that the Chinese model is the best way to rapidly and extensively re-build their country. Since visiting China, a number of Iraqi officials have voiced their admiration for the Chinese model. After visiting in 2019 with the Iraqi prime minister, the former Minister of Energy Luay Al Khatteeb wrote, ‘We went to China in search of speed in execution, efficiency in performance, quality in production, competition in offers, technological advancement, and an honest and balanced long-term strategic partnership’. Al Khatteeb later changed his mind and now cautions the Iraqi government about the risks associated with over-reliance on China’s oil companies.

Other members of the same 2019 delegation expressed admiration in a similar way, according to my interviews. The former prime minister Adel Abdul Mahdi, leading the delegation, may be seen as a key player in aligning the Sino-Iraqi relationship – as is Jalal Talabani, the PUK leader and former president of Iraq. For a while in their lives, Abdul Mahdi and Talabani were both Maoists.

China’s ability to navigate between state and non-state

The Iraqi political economy is notorious for politically sanctioned systematic corruption, which is carried out and condoned at the highest levels. China accepts this as an element of the local and cultural way of life and does not challenge it. Chinese companies have been engaged in paying bribes abroad, a phenomenon that President Xi Jinping recently identified and is trying to tackle under the Foreign Related Rule of Law.

One example of corruption is through manipulating subcontracts, such as the contract to build 1,000 schools by Chinese companies to accommodate the growing number of students in the country as a part of the oil-for-construction deal. However, the deal raised a number of questions. For instance, why does Iraq require a Chinese company to construct schools when local companies can do it? Asking this question in the context of Iraq’s political-economic system gives it a distinct resonance. Infrastructure and contracting are one of the major areas of corruption in the country. When the Chinese companies involved in the school-building project ‘subcontracted the contracts at a much reduced price to Iraqis’, local companies created opportunities for political parties and militias to take their cut of the deal.

Corruption both as a norm and a practice makes the elites and institutions in Iraq favour China. However, this support is conveyed quietly, especially after Abdul Mahdi’s toppling and the myth that signing deals with China led to his removal as prime minister. While corruption is also present among Western companies operating in Iraq, the preference of the Iraqi political elite for Chinese companies stems not merely from their tolerance of questionable practices. A significant factor is that Chinese firms do not interfere with Iraq’s relationship with Iran, a nation under Western sanctions.

China and the Federal Commission on Integrity of Iraq signed a memorandum of understanding in December 2023 for the prevention and fight against corruption. This sought to create a secure business climate for international enterprises in Iraq, particularly Chinese businesses. The memorandum indicates that corruption does exist in Iraq and that it must be combated.

At the same time, the memorandum also embodies another of the mutually acceptable traits that defines the Sino-Iraqi connection – namely, a lack of transparency. It is the memorandum that governs China’s ties with Iraq; as such, parliament has no say in the matter. In reality, China disdains parliaments in general, and relates to both the Kurdistan and the Iraqi national parliaments in the same way. According to the Iraqi MP Muthanna Amin, the parliament had no interactions with China in the last 10 years.

China focuses instead on political parties in Iraq, especially through party-to-party links. This is in part due to China’s strong focus on the executive branch of the Iraqi government and in part to avoid publicity and maintain a low profile. Through the Communist Party of China’s Central Committee and International Department, Beijing has relations with 11 Iraqi political parties, according to a senior Kurdistan Democratic Party (KDP) cadre. Altogether, these different Chinese approaches combine to maintain and enhance Iraq’s current political culture and practices. Additionally, those approaches could support China’s civilizational approach to international affairs, which places a high value on social and cultural resistance to Western hegemony, alongside a stress on sovereignty and non-intervention. This translates into supporting the maintenance of the status quo in Iraq.

China is expanding its influence in the Iraqi government, especially among many of the political parties that back Prime Minister Mohammed Shia’ al-Sudani. In addition to dominating the oil sector, trade and industry, there is social and political backing for the relationship. For instance, the notable Chinese construction firm CMEC signed a memorandum of understanding with the Al-Muhandis Group, which has affiliations with the Popular Mobilization Forces (PMF) in Iraq.

Another unusual feature of the relationship is an ostensibly grassroots Iraqi campaign called the Popular Movement for the Silk Road, which has held rallies, conferences and meetings from Karbala to Basra advocating for closer economic ties with China and shunning Western, South Korean and Saudi Arabian investment opportunities. The movement’s popularity in Iraq and its prolific activity signal the extent to which advocating for Chinese commercial interests resonates with certain political groups that want to reap the benefits of foreign investment while maintaining their stance against the West.

Chinese influence on wider Iraqi society

Iraq’s governing elites are accomplishing many objectives by turning their focus to China. They are seeking to reduce the influence of the US and other Western powers in Iraq in order to eliminate all obstacles to achieve their national goal – unrestricted access to resources and maintaining control over the country. Furthermore, by maintaining Iraq’s dependence on China, the Iraqi elites are trying to preserve the status quo – that is, to retain their private armed groups and elude legal consequences – because they know China is unlikely to contest any of these things.

A low profile, an aversion to publicity and risk, and the speed in which it has developed makes the Sino-Iraqi relationship opaque and mysterious. The economic and political footprint of the relationship has expanded so quickly that Iraqi elites and society at large are struggling to fully comprehend it. Consequently, Iraqis might have to grapple further with the implications of this relationship, especially as the country suffers from weak state institutions and weaker civil society.

This article is part of a series from Chatham House that provides in-depth insights into the inner-workings of Iraq’s government and evaluate what recent developments – both public and behind the scenes – reveal about prospects for a more a stable, accountable and prosperous Iraqi state.

This series is part of the workstream on the political economy of reform, under the Middle East and North Africa Programme’s Iraq Initiative, led by project director Dr Renad Mansour.