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Page added on June 7, 2013
China’s Iraqi-oil dominance: Should the U.S. be miffed?
“Imperialism doesn’t pay,” says Robert Scheer at The Huffington Post. That’s the lesson we Americans should draw from last week’s New York Times report detailing how China — and not the U.S. — is cashing in on Iraq’s oil. So much for “the myth of wealth following the flag.” The U.S. spent more than $3 trillion on the Iraq War, which cost the lives of more than 4,000 soldiers. Yet “it is the studiously neutral government of China that has most clearly benefited.” Since the invasion, Iraq has become one of the world’s top oil producers, shipping an average of 1.5 million barrels — half of its oil-field production — to China daily. And the Chinese are also profiting handsomely from the interest on “loans they made that floated the U.S. war debt.” Our indebtedness over the Iraqi debacle will only grow as we pay to protect the shipping lanes “connecting Iraq’s oil with China’s ever-expanding economy.”
This is all admittedly frustrating, says Gordon G. Chang at National Review, especially since China helped supply Iraqi insurgents during the war by funneling arms and money through Iran. But “there is nothing we can do to prevent Chinese state oil companies from competing against the Western majors for oil rights in Iraq.” The Chinese play hardball, and unlike U.S. and other foreign oil companies, they’re “willing to accept Baghdad’s terms that permit only razor-thin profit margins.” In fact, it’s easy for them: Chinese companies have no shareholders, no dividends to pay, and don’t even have to generate profits. But China’s investment in Iraq may backfire. China’s growth is slowing, as anyone can see from its tumbling manufacturing and electricity production. With an “anemic” economy on the horizon, “Beijing’s relentless drive to dominate Iraqi oil production may not look like such a wise move.”
In any event, it doesn’t hurt U.S. interests at all, says Steve Hargreaves at CNN.com. China’s dominant presence in Iraq’s oil fields, in fact, will actually benefit American consumers and companies. Under Baghdad’s “pretty lousy” terms, royalties, taxes, and other fees can eat up 90 percent or more of an oil-drilling firm’s profit. That’s why Western firms would much rather drill in other places where they can make a buck. China’s guzzling of Iraqi oil helps “keep a lid on gas prices,” and other companies — like ExxonMobil, BP, and Royal Dutch Shell — can earn bigger returns elsewhere.
There are foreign-policy benefits here, too, says Max Fisher at The Washington Post. By snapping up Iraq’s oil, Beijing becomes less reliant on Iran. That could make Chinese officials “more likely to enforce sanctions against Iran” to force it to finally compromise on its nuclear program. And “the more money and interest China has tied up in a stable Iraq,” the more incentive Beijing has to promote a stable Middle East. Having skin in the game in this volatile region could make Beijing “act less like a free-rider on a U.S.-enforced international system and more like a responsible stakeholder.”
15 Comments on "China’s Iraqi-oil dominance: Should the U.S. be miffed?"
westexas on Fri, 7th Jun 2013 6:05 pm
If we extrapolate the 2008 to 2012 rate of decline in Brazil + Iraq’s combined Export Capacity Index Ratio (or ECI, the ratio of liquids production* to consumption), Brazil and Iraq would collectively approach zero net oil exports in about 10 years. Note that their
combined net exports fell from 2.0 mbpd in 2008 to 1.8 mbpd in 2012 (million barrels per day, EIA).
Or in other words, the increase in Iraq’s net oil exports from 2008 to 2012
could not even offset the decline in net exports from Brazil (as Brazil slipped
into net importer status, even if we count biofuels as “oil”
production).
Given Brazil’s status as a net oil importer in 2012, even if we count biofuels, it’s
instructive to consider what the conventional wisdom was just a few years ago
regarding Brazil. In April, 2009 Bloomberg published a column discussing the prospect for Brazil continuing “To take market share away from OPEC.”
We should keep case histories like this in mind when we read in the media about
the “Fact” that the US will soon be a net oil exporter, and while there are
always uncertainties in forecasting future trends, we can be certain of three
objective facts: (1) All oil fields, sooner or later, peak and decline; (2) Global crude oil production is the sum of discrete oil fields that peak and decline and (3) Given an ongoing production decline in an oil exporting country, it is an mathematical certainty that unless domestic consumption in that oil exporting country falls at the same rate as the rate of decline in production, or at a faster rate, the resulting net export decline rate will exceed the production decline rate and the net export decline rate will accelerate with
time.
For more info on global net oil exports, you can search for: ASPO + Export Capacity Index.
*EIA data, production = total petroleum liquids + other liquids (mostly biofuels
in the other liquids category)
Plantagenet on Fri, 7th Jun 2013 6:25 pm
1. There is no “rate of decline” in Iraq’s oil production. Iraqi oil production is increasing.
2. China is winning oil contracts in Iraq over the USA not because the USA is an evil imperialist, as this article implies, but because the Chinese are willing to accept much lower ROI then American companies are.
DC on Fri, 7th Jun 2013 6:29 pm
What a muddled mess. China does not require the US to ‘protect’ shipping. In fact, its the US that has consistently tried to stop Iran, Iraq Pakistan etc from building overland pipelines to China\Asia. Why do you think the US is droning Pakistan? It sure as hell isn’t because of any ‘Al-Qaeda’. Its to create violence in order to make it much more difficult for those countries to do business with anyone other than US approved corporations. And the US has zero interest in seeing Iraqi\Iranian energy flow overland to Asia. IoW, if the US and its satraps stopped creating all the violence in the first place-there we be little need for ‘protection’.
The other thing thats strange here is the articles seems to imply China is making out like a bandit here? Huh? If the US had left Iraq alone-those 10+ years ago, Iraq would still have been selling oil to China, and others, and probably not in US dollars either just fine TYVM. The invasion blocked world access to Iraqi exports-first through sanctions-then extreme violence. China is just trying to take up where they were over 10 years ago before the US decided to start playing its game of strategic resource denial.
Bob Owens on Fri, 7th Jun 2013 7:29 pm
Where would we be today if we had invested the 1 Trillion dollars this war cost us into our renewable energy structure? I’ll tell you: We wouldn’t need any of these crazy countries or their oil! Instead our country is headed down the rat-hole of stupidity. Wake up America! Stop being stupid.
Plantagenet on Fri, 7th Jun 2013 7:44 pm
It makes no sense to invest 1 TRILLION dollars in “renewable energy structure” because natural gas is now so cheap thanks to tracking. Why pay 10x more for renewable energy when we’ve got a 100 year long supply of cheap NG?
DC on Fri, 7th Jun 2013 7:53 pm
Bob, your Wars cost you close to 4 trillion. There never was any hope of an economic ‘payoff’ at those levels. US control of the global trade in oil is the only thing that keeps amerika dominating the world. A renewable energy grid in the ‘homeland’ would seriously cut into the oil cartels profits-amerika is still after all, the oil corps cash cow even if consumption has softened of late.
Thus,the US commits over 1 trillion dollars every year to its war-machine and not to wind turbines or Solar arrays or even mundane things like mass transit. A US powered by renewable energy is completely at odds with your corporate rulers agenda.
Those countries are not ‘crazy’. Its not our society or culture granted, but most of them have been around for thousands of years to your 200. Arabs had superior science and sheltered the wreckage of western science and literature while our ancestors in Europe were burning people alive for suggesting the earth was round.
mo on Fri, 7th Jun 2013 9:49 pm
100 year nat gas supply is a bogus claim
Plantagenet on Sat, 8th Jun 2013 12:35 am
Obama says the US has a 100 year NG supply. Are you saying our President is a liar?
BillT on Sat, 8th Jun 2013 1:11 am
Planet, our prez is more than an liar, but I’m not going to invite a drone to my house by saying what he really is.
I will say that you are sucking down the Big Petro ‘cool aid’ by the gallon if you believe that we have many years of cheap natgas or oil. We are the beggar on the street selling pencils. China can finish us anytime she wants and Washington knows it.
Juan Pueblo on Sat, 8th Jun 2013 2:07 am
Anyone who claims we have one hundred years of cheap natural gas is either lying or misinformed. Who writes the energy reports the President reads? In the USA, decisions are based on EIA and IEA data and forecasts that have been repeatedly proven very wrong. Just read any report from a decade ago and compare it with the reality out there today.
energy investor on Sat, 8th Jun 2013 4:58 am
These folk are pretty ignorant. Were they unaware of China’s ownership of the Greek port of Piraeus and the construction of several deepwater ports between Thailand and the Red Sea?
The Chinese will protect their own supply lines as they project their naval influence into the Indian Ocean by about 2015.
Arthur on Sat, 8th Jun 2013 7:36 am
Let me see, three trillion, that is close to three trillion piek watt, either wind or solar. Divided by 300 million Americans, that would have been 10kW per American. You could have been driiving an electrified SUV per family if you had decided to kick these neocon *sses instead of letting to fool yourself over non-existing WMDs, invade, blow up the country, get hundreds of thousands killed, make 14% of all the children orphan and hand the country over to the Iranian sphere of influence and the oilfields to the Chinese. Now planes from Moscow and Teheran land in Damascus around the clock and together with Hezbollah, Assad is winning on al fronts, as Israeli publication Debka File has to admit. Obviously, the US could print another three trillion, invade Syria and hand the entire ME over to Turkey, before the US finally collapses financially.
Arthur on Sat, 8th Jun 2013 7:46 am
http://app.debka.com/p/article/23017/Battle-for-Damascus-is-over-Is-Israel-intelligence-slow-on-Syrian-war-
Roaring laughter.
westexas on Sat, 8th Jun 2013 11:14 am
It’s true that the new and reworked oil wells in Iraq have recently offset production declines elsewhere in Iraq, but unless they have repealed some laws of physics, depletion marches on.
Regarding Iraq’s ECI ratio (Export Capacity Index, or the ratio of liquids production to liquids consumption, EIA), the ratio fell from 4.1 in 2008 to 3.4 in 2012, because the rate of increase in Iraq’s consumption exceeded the rate of increase in production from 2008 to 2012.
At this rate of decline in the ECI ratio, Iraq would approach zero net oil exports in about 26 years, but note that this extrapolation assumes a perpetual increase in production , which is probably not a likely outcome.
Keith_McClary on Sun, 9th Jun 2013 5:08 am
“And the Chinese are also profiting handsomely from the interest on “loans they made that floated the U.S. war debt.””
What is the interest rate?