Why China stays quiet on Iraq, despite being no. 1 oil investor

When Li Changrong arrived in Iraq last February to work on a Chinese-built power plant he expected a well paid job, not to find himself trapped by the threat of civil war.

Now, sheltering from fighting between jihadist rebels and Iraqi troops near the plant outside Samarra, he says he can hear shooting “night and day."

“My colleagues and I are very worried about our safety,” he added in a telephone conversation.

Mr. Li is one of an estimated 10,000 Chinese workers who have traveled to Iraq in recent years, mostly on contract to Chinese oil companies that have taken a hefty stake in the country’s oilfields to become the industry’s largest foreign investor.

Most of the Chinese expatriates work in the south of Iraq, in predominantly Shiite areas far from the current fighting and where the Sunni rebels are unlikely to venture. But Li, along with about 1,200 other Chinese employees, has been caught by the rebels’ rapid advance at the power plant 75 miles north of the capital, Baghdad.

Li said the Chinese embassy had sent a helicopter twice to the plant site Wednesday; it evacuated about 35 workers to Baghdad airport. Buses had collected more than 200 of their Chinese colleagues from the plant several times, Li’s wife Guo Jing said he had told her by SMS text messages, but they had been turned back on the road to Baghdad by unidentified gunmen at checkpoints.

“I am still waiting to be evacuated,” Li said in the interview Thursday. “I hope I can leave here as soon as possible and go back to China. “It is dangerous here.”

The Chinese Foreign Ministry spokeswoman Hua Chunying said last week that Beijing would “closely watch the situation in Iraq and take necessary measures to protect the Chinese firms, institutions and citizens.” So far, however, China has not organized a large scale evacuation. On Friday, state media reported the start of an evacuation by air and road. 

Lack of traditional leverage

Nor, despite the scale of Chinese multi-billion dollar investments in Iraq, is there much Beijing can do about the current crisis, says Yin Gang, a Middle East expert at the Chinese Academy of Social Sciences in Beijing.

“China cannot protect our interests in Iraq,” he says, since it has little political influence over the government and no intention of sending any troops to support the Iraqi authorities.

“Though China has important interests in Iraq…it is not a traditional Mid-East player…and has few historical roots in Iraq,” adds Ma Xiaolin, a Beijing-based Middle East commentator. “It has the least influence in Iraq of any permanent UN Security Council country and it does not have the strength to solve the problems.”

That makes Beijing immune to calls for China to play a less passive role in the Iraq crisis, and to act more in keeping with its status as a would-be world power.

“China is just a business partner,” says He Wenping, an Iraq analyst at the Institute of West Asian and African Studies. “We don’t have much involvement in Iraqi politics or its military affairs and none of the chaos there has anything to do with us.”

Beijing has “expressed Chinese wishes” to the Shiite-dominated government of Iraqi Prime Minister Nouri al-Maliki “for more political talks” with Sunni leaders “to try to find a political solution,” says Prof. Yin. Those wishes match US hopes, but China has little leverage to make them reality.

Oil stake in southern Iraq

Nor is Beijing necessarily under any great pressure to get involved. The state-owned China National Petroleum Corp. (CNPC) – whose 5.6 billion dollar investment in the Rumaila field and stakes in three other fields makes it the largest investor in the Iraqi oil industry – operates in the south of the country. The current fighting in the north has disrupted neither its production nor exports of oil; even if, in a “worst case” scenario, Iraq were to break up along ethnic and religious lines CNPC’s fields are all in solidly Shiite areas that would be most unlikely to fall into the hands of the radical Sunni rebels of the Islamic State in Iraq and the Levant (ISIS) group.

Though another Chinese state-owned oil giant, Sinopec, owns a part share of an oilfield in Iraqi Kurdistan, in the north, Kurdish militias defending the autonomous region would be expected to fight off any ISIS attack.

CNPC lifted 299 million barrels of oil from Iraq last year, one third of its total overseas production, and China intends to buy nearly 25 percent of Iraq’s oil exports this year, but Iraqi oil is by no means critical to the Chinese economy.

As the fifth largest supplier of oil to China, Iraq accounts for ten percent of Chinese oil imports, but that represents only one percent of its total energy consumption, which is heavily based on domestic coal. 

Though China does not appear to be vulnerable to direct effects from the current crisis, the rise in the world oil price that would be expected to result from prolonged fighting in Iraq would hurt Chinese economic prospects.