As I surfed the web, flipped channels and sifted through topics, I hoped to find the world’s latest fixation to be mildly tolerable. What is everyone discussing these days? Better yet, what are they thinking but not discussing?
Salvation appeared in the form of comedy (what else?). More accurately, the messenger of salvation was one called Jon Stewart and his satirically hilarious faux award ceremony. Two clear winners emerged from that episode: Daniel Day Lewis (what hasn’t he won?) and China. No one can argue with Daniel Day Lewis’ talent to get to the heart of a character, but China? Well, it just so happens that China is not only winning the war in Iraq but it’s on its way to becoming a local hero.
Let’s define winning within this context. From my perspective (and that of several journalists from Bloomberg to the NY Times), winning is defined in terms of economic benefit. Winning should not be confused with profitability because by that standard Western companies –Exxon and Shell – are still the most profitable companies in Iraq. Based on economic benefit, China is whistling a victorious tune all the way to the bank. In fact, China is highhandedly acquiring half of the entire oil production in Iraq. However, China’s role is not just confined to purchasing oil.
The Chinese state owned corporation CNPC has acquired development rights for the next 20 years with an investment upwards of $2 billion. Besides pouring cash into a cash strapped nation (and cash strapped oil industry), China is willing to play by the current government’s strict rules. Another game changer to the oil development industry brought about by China is the CNPC’s willingness to accept lower profits. Slowly, intricately and manipulatively China is suffocating Western companies by undercutting them. Essentially, China is changing the way business is being conducted in Iraq. Whether or not these new business practices are actually benefittingl the Iraqi people is yet to be determined. This is especially troubling when one considers that Iraq is a volatile mix of economic, social and religious issues that could implode if not handled assiduously.
From a macro perspective, the US and India are by far Iraq’s strongest trading partners. Together they account for a combined 45% of the country’s entire export market. China comes in at distant third place with only 13% of the total exports. China may be producing and consuming the Iraqi oil but the US still remains a key partner in the country (and the entire region). The question is for how long? It is indisputable that balance of power is shifting. China is already on a course to overtake the US as the largest trading partner in the world. With China’s insatiable appetite for oil and growing demand for other commodities, it is likely that China will use its vast industrial power to tilt the region (and the world) to its personal benefit. What will be the USA’s next move in this game of diplomatic and economic chess? More importantly, who are the pawns?
Does It Matter If China Wins?
From a romantic and idealistic perspective it is acceptable that someone else emerges as the winner. Having said that, Iraq is now a free market and the country should be judicious about contract allocation. Hopefully this nascent democracy will set its own rules and focus on developing the country and responding to needs of the people as opposed to those of corporations. It’s a delicate situation on a tightrope, and I’m sure that the reality with which the Iraqi people live everyday is much more complex than the Utopian imaginings of this author.
Still, America (or at least some parts of America) feel cheated with this result, especially considering the FUBARs Iraq and Afghanistan turned out to be. This is a product of typical colonialism mentality where individuals and nations are treated as bounty prizes that can be split among would be conquerors and liberators. In short, it seems like a modern day retelling of the Treaty of Tordesillas.
It’s Not All Bad
In actuality, this end result isn’t all bad for the US. In fact, a Chinese victory benefits us all. I can think of at least three crucial benefits from China’s growing presence in Iraq. The largest benefit the US receives from China’s hold in Iraq comes at the expense of Iraq’s neighbors. By allowing China to become the key player in the region, long time US frenemies, such as Russia and Iran, are immediately weakened. The US has effectively stirred the power struggle between China and Russia. With the victory of China in Iraq, Russia is starting to lose relevance in the region. A second benefit from pawning Iraq to the Chinese is that China is allowed to satisfy its need for oil without denting global prices. Because China has the upper hand in the exploration and development of oil, it has literally picked up the slack created by the Iranian oil embargo (yes, there is an oil embargo on Iran since 2012). China, through the CNPC, has done a hell of job expanding the oil production in Iraq. Finally by allowing China to bear some of the costs of the war (and thus the oil production and infrastructure) the US has “saved face” with the American people. Officially it’s the CNPC enduring lower profit and larger investment requirements. The sore losers here are Exxon, Shell and BP, who are now forced to compete under new conditions that they cannot control. That’s certainly not a bad thing.
So, who really won in the end?