Iraq Moves Further Out of U.S.’s Influence With New Russia and China Deals

Yves here. It does not seem to be sufficiently well appreciated how we spent a lot of money and some lives on our Iraq adventures yet have not much to show for it, particularly securing oil supplies. At the time of the Gulf War, Iraq had the second largest proven oil reserves in the world. In 2020, Iraq voted to expel US troops, although there was no meaningful follow on. This followed the assassination in Iraq of Iran’s general Qasem Soleimani, who was en route to meeting Iraq prime minister Abdul-Mahdi and therefore operating in a diplomatic capacity. The UN’s special rapporteur on extrajudicial killings found the assassination to be illegal. Oh, and we managed to whack Iraq militia commander Abu Mahdi al-Muhandis at the same time.

Various experts have deemed America’s tender ministration in Iraq to have been a failure for us and Iraq, see for instance:

America’s Failed Strategy in the Middle East: Losing Iraq and the Gulf Center for Strategic and International Studies

How America Misunderstood Iraqi Politics and Lost the War Foreign Policy Research Institute

America Lost the Iraq War. These Cables Show How New Republic

Twenty Years After the War to Oust Saddam, Iraq Is a Shaky Democracy Council for Foreign Relations

Oddly, this sad outcome is not much part of American consciousness.

Simon Watkins, who publishes from time to time at OilPrice, presents good informational nuggest. Unfortunately he also seems to be cognitively captured by the Cold War. For instance, he asserts that Russia has a “long-term plan to control Iraq.”

By Simon Watkins, a former senior FX trader and salesman, financial journalist, and best-selling author. He was Head of Forex Institutional Sales and Trading for Credit Lyonnais, and later Director of Forex at Bank of Montreal. He was then Head of Weekly Publications and Chief Writer for Business Monitor International, Head of Fuel Oil Products for Platts, and Global Managing Editor of Research for Renaissance Capital in Moscow. He has written extensively on oil and gas, Forex, equities, bonds, economics and geopolitics for many leading publications, and has worked as a geopolitical risk consultant for a number of major hedge funds in London, Moscow, and Dubai. Originally published at OilPrice

  • Plans to increase Iraq’s oil production and then to send that extra output to China in the first instance moved up a gear in last week’s Cabinet meeting
  • At the same Cabinet meeting last week, it was also agreed that Iraq should now give its full support to rolling out all aspects of the wide-ranging ‘Iraq-China Framework Agreement’.
  • A key part of both deals is that China has first refusal on all oil, gas, and petrochemicals projects that come up in Iraq for the duration of the deal.

With the U.S.’s current primary Middle East focus being on trying to deter a widening of the Israel-Hamas War, China and Russia have been busy cementing their influence elsewhere in the region, most recently in Iraq. This remains a key target for Beijing and Moscow to expand their presence for three main reasons. First, it could easily become the world’s top producer of crude oil within a relatively short time if the endemic corruption in its hydrocarbons sector was curtailed. Second, its geographical positioning in the heart of the Middle East make it a vital link in building a network of logistical connections from the east of Eurasia into the west of Europe. And third, together with Iran under whose enduring influence its operates, it forms the core of the spiritual, political, military, and cultural Shia Crescent. A flurry of activity in the past couple of weeks involving Iraq, Russia, and China underline how seriously all these plans are moving forward.

Firstly, plans to increase Iraq’s oil production and then to send that extra output to China in the first instance moved up a gear in last week’s Cabinet meeting, chaired by Prime Minister Mohammed Shia Al-Sudani. At the meeting, a senior source who works closely with Iraq’s Oil Ministry exclusively told last week, the Cabinet agreed to increase crude oil exports to China by 50 percent – from 100,000 barrels per day (bpd) to 150,000 bpd. It was also agreed that the daily production capacity from Iraq’s largest oil field – Rumaila, featuring partners BP (47.6 percent), China National Petroleum Corporation (46.4 percent), and Iraq’s State Oil Marketing Organization (6 percent) – is increased from 1.3 million bpd to 1.4 million bpd by the end of this year. This is part of Iraq’s plan to increase its oil production to 8 million bpd by 2028. As analysed in depth in my new book on the new global oil market order, there is no fundamental reason why such an increase cannot be achieved – even 12 million bpd is perfectly feasible, given Iraq’s oil resources – with the only constraint being the pervasive corruption in its oil and gas sector that has hampered such progress for years.

Secondly, at the same Cabinet meeting last week, it was also agreed that Iraq should now give its full support to rolling out all aspects of the wide-ranging ‘Iraq-China Framework Agreement’ signed in December 2021, but agreed in principle more than a year before that. This agreement is very similar in scope and scale to the all-encompassing ‘Iran-China 25-Year Comprehensive Cooperation Agreement’, as first revealed anywhere in the world in my 3 September 2019 article on the subject and fully examined in my new book. A key part of both deals is that China has first refusal on all oil, gas, and petrochemicals projects that come up in Iraq for the duration of the deal, and that it is given at least a 30 percent discount on all oil, gas, and petrochemicals it buys. Another key part of the Iraq-China Framework Agreement is that Beijing is allowed to build factories across the country, with a corollary build-out of supportive infrastructure. This includes, importantly for its ‘Belt and Road Initiative’ – railway links, all overseen by its own management staff from Chinese companies on the ground in Iraq. The railway infrastructure in Iraq will be completed out after the network in Iran has been finished, and this began in earnest in late 2020 with the contract to electrify the main 900-kilometre railway connecting Tehran to the north-eastern city of Mashhad. As an adjunct to this, plans were put in place to establish a Tehran-Qom-Isfahan high-speed train line and to extend this upgraded network up to the north-west through Tabriz. Tabriz – home to several key sites relating to oil, gas, and petrochemicals, and the starting point for the Tabriz-Ankara gas pipeline – is to be a pivot point of the 2,300-kilometre New Silk Road that links Urumqi (the capital of China’s western Xinjiang Province) to Tehran, and will connect Kazakhstan, Kyrgyzstan, Uzbekistan and Turkmenistan along the way, before it then runs into Europe, via Turkey.

Thirdly, given the scale and scope of the infrastructure developments to be implemented, there will be an extensive presence of Chinese ‘security’ personnel at the key projects throughout Iraq, the Iraq source told last week. These will, in turn, be supported by security personnel attached to Iranian companies that will also be involved in the China-Iraq projects, notably those from Khatam al-Anbia – a massive conglomerate controlled by Iran’s Islamic Revolutionary Guards Corps (IRGC). The IRGC remains the key guardians of the ideas of Iran’s 1979 Islamic revolution, whose messaging it achieves in large part from the funding, training, and logistical support of multiple proxy militias across the Middle East, including Hamas in Palestine, and Hezbollah in Lebanon. The expended presence of Iranian firms with heavy IRGC contingent in Iraq, such as Khatam al-Anbia, will further enable Iran to push ahead with its long-held plan to build a strategically crucial ‘land bridge’ to the Mediterranean coast of Syria. Additional personnel across all the key infrastructure development sites in Iraq will come from Rosoboronexport, Russia’s state-owned monopoly for the export of all military and dual-use products, services, and technologies.

Russia’s long-term plans to control a unified Iraq (along with China) – including the currently semi-autonomous region of Kurdistan in the north – as also analysed in depth in my new book on the new global oil market order, have also advanced in the last two weeks. October 11 saw Iraqi Prime Minister Al-Sudani meet with Russian President Vladimir Putin in Moscow, ostensibly to talk about the development of Iraq’s oil sector and the presence of Russian oil companies in it. In reality, according to the source who works closely with Iraq’s Oil Ministry, the discussions also included the future of oil exports from Kurdistan to Turkey, in which Russian oil giant, Rosneft, plays a key part, given its effective control over much of Kurdistan’s oil sector since 2017, as also covered in full in the book. Three days later, Iraq’s Deputy Prime Minister for Energy and Oil Minister, Hayan Abdul Ghani, met with Alexander Dyukov, Chairman of Gazprom Neft to discuss future oil and gas projects in the south and north of Iraq.

Print Friendly, PDF & Email


  1. DJG, Reality Czar

    Thanks for this piece. Much is going on behind the scenes that the U.S. foreign-policy swamp seems incapable of understanding.

    First: Those figures on Iraqi oil production are interesting. Now how is it that after years of U.S. meddling in Iraq, the U.S. isn’t making deals for petroleum?

    Second: The effectiveness of the Belt and Road / New Silk Road. Notice those plans for upgrading railroads. I imagine that the Isfahan line will be extended to Shiraz, then into Iraq via Basra and Baghdad. Wasn’t the U.S. of A. once well known for such engineering?

    Third, and to mix metaphors: The piece goes off the rails in the final paragraph, in which author Watkins feels obligated to posit that the Russians want to control Iraq. Iraq is a large country and regional power. It isn’t likely to be controlled. But I note with much interest how active Rosneft is in Kurdistan.

    Now where are the Americans? Oh, trying to secure illegal military bases in Syria…

    1. ilsm

      The larger developments in Iraq are in the basin which overlaps the Iran Iraq border. It may be that large US firms cannot work with the Iran sanctions thing?

      Russia China investing with Iran projects as well.

      Or most US firms are full in with ARAMCO and other oil regions?

    2. Mikel

      Or is it possible the swamp does understand the behind the scenes action and so now all of the prep to start blowing things up again in the region?
      They send all those ships there, more troops – all to be targets to give them an excuse.

  2. ilsm

    I follow Watkins. He has documented many of the big investment both Russia and China are making in the larger Gulf petro region.

    Yes I overlook the Cold War bent, the info is the thing.

    Russia China backing developments in Oman as well.

  3. The Rev Kev

    If they are going to increase Iraq’s oil production and then to send that extra output to China, I would like to know about the payment method. For the past twenty years the money from all Iraq oil sales goes to a bank account in the US. Of course Washington has weaponized this to keep on wrecking the Iraq economy and leave them poor, no matter how many hoops the Iraqis jump through for their own allowance, errr, money-

    So are the Chinese going to pay for that oil with direct deposits into the Iraq central bank? If in Chinese Yuan, I would not see that being a problem for the Iraqis as they would recycle that Yuan to pay for Chinese goods and services. Of course the US will use local militants to try to attack and Chinese infrastructure like they do with Syrian infrastructure in Syria, hence this talk of Chinese security. So now you are talking – perhaps – on the Chinese military having a presence in Iraq to counter the US presence which the Iraqis have been trying to get rid of.

  4. Lex

    It’s a peculiar form of US analysis for every global situation that the only conclusions which can be drawn are assumptions that every other nation will do what the US would do. Is it possible that China and Russia are engaging with Iraq to assist Iraq’s development and that both country’s will get some benefit without it becoming a desire to control Iraq?

    No. That’s inconceivable. It can only be a nefarious plan to control Iraq and it must be stopped because the US needs to control Iraq.

    Or, it’s pretty funny that the world is full of bad men and they’re bad because they want to do what the US does.

    1. Polar Socialist

      From the opinions I’ve read it seems that both Russia and China would prefer stability in Western Asia (as it was know before the Eurocentric “Near East” replaced it) – for example see: China mediated rapport between Saudi-Arabia and Iran.

      Achieving this regional stability is impossible without internal stability in both Iraq and Syria. Not surprisingly, Russia and China do see USA as the source of instability in both of these countries. And today it’s obvious that also Israel is a significant source of instability in the region. That’s why Putin commented yesterday (?) that Russia is already engaged in battle against the same forces the Palestinians are fighting.

      Watkins should ask why Iraq finds stability and prosperity preferable over instability and exploitation, and why it’s the “Bad Guys” offering the better option?

    2. MarkT

      When you are the world’s most exceptional and indispensable nation then it is only natural that every other nation wants to be like you /sarcasm

  5. Louis Fyne

    see also this week’s statement, if war expands, Iraqi military says it is ready to fight the Americans still in Iraq.

    US doesn’t have enough assets to protect every US base in the mideast and Israel

  6. schmoe

    No discussion of Iraq severing itself from the US can be complete without acknowledging this:

    “Since 2003, all Iraqi oil revenues have been paid into an account with the US Federal Reserve. Although Iraqis formed a sovereign government after the US invasion and occupation of their state, Iraq is still restricted from opening accounts for its oil earnings outside the United States.”

    1. John k

      Didn’t know this. So the us base(s) is the enforcing mechanism? So how China pays for the oil is germane… does this mean yuan payments, which is just a swap of oil for Chinese stuff, is forbidden? Interesting how this plays out. Seems there might be more ‘terrorists’ action vs the us bases.

      1. schmoe

        Perhaps, but that is why Iraq cannot evict US forces. If they do (as their parliament voted to do in ~2020), we will likely confiscate their national bank account.

  7. Kooshy

    This not a well thought analysis, just like the neocon he is he hashed up a few times unrealized plans he read in the news sites and drew an scary scenario that everything is against the US plan. The only thing true about this analysis is that US spend a lot of money on an illegal war without any benefit and not because of US’s own short comings but because the majority Muslim country and region in hole hate US and now westerners for their unjust hegemonic colonial policy and superiority on west Asian population. That is the real reason to be analyzed.

  8. Ashburn

    I find it annoying that Watkins uses the framing device of the “Israel Hamas war,” instead of ‘Israel’s war on the Palestinians.’ I note Seymour Hersh used the same framing in his recent Substack piece. Do they not see what is actually happening in Gaza?

  9. dao

    China’s involvement and investment in Iraqi oil production goes back to 2008 and even earlier, so this is not “news”. I always found it curious that China was seemingly the biggest winner in getting oil contracts, not the U.S.

    Nothing like this happens by accident. It was by design. The “Why” is anybody’s guess.

    I do know the two major reasons the U.S. invaded Iraq. First, the Bush crime family wanted revenge against Saddam Hussein (just like in a Mafia movie plot). Add second, the United States knew it was sitting on huge shale oil deposits but couldn’t exploit them unless oil went much higher.

    Within 5 years after the invasion of Iraq we got record oil prices and the shale oil started flowing. Mission accomplished.

  10. Rubicon

    There’s a problem we see in this article. Other than citing the author’s own work, he only cites “a senior source from Iraq’s Oil ministry told Oil Price last week that…………………”

    At the meeting, a senior source who works closely with Iraq’s Oil Ministry exclusively told last week, the Cabinet agreed to increase crude oil exports to China by 50 percent – from 100,000 barrels per day (bpd) to 150,000 bpd. It was also agreed that the daily production capacity from Iraq’s largest oil field – Rumaila,

    When we enrolled in US universities, long before they were fully financialzed, our professors were adamant that when composing a factual thesis, you first had to use legitimate and cite legal sources to back up your thesis.
    Not seeing much of that here.

Comments are closed.