China's Iraqi-oil dominance: Should the U.S. be miffed?

Counter-intuitively, this might actually be good news for U.S. consumers and companies

The Al-Waha Oil Company in southern Iraq: China has managed to snag lucrative deals with the oil-rich company.
(Image credit: AP Photo/Karim Kadim)

"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."

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Sergio Hernandez is business editor of The Week's print edition. He has previously worked for The DailyProPublica, the Village Voice, and Gawker.