China, Iraq, Oil, and Geopolitical Stability

I think this is right, we should encourage this:

A new dynamic for the Middle East, econbrowser: Maybe it's time to try something new. And maybe it's already starting.

Last week the New York Times reported:

In the first major oil deal Iraq has made with a foreign country since 2003, the Iraqi government and the China National Petroleum Corporation have signed a contract in Beijing that could be worth up to $3 billion, Iraqi officials said Thursday.

Under the new contract, which must still be approved by Iraq's cabinet, the Chinese company will provide technical advisers, oil workers and equipment to help develop the Ahdab oil field southeast of Baghdad, according to Assim Jihad, a spokesman for Iraq's Oil Ministry. If the deal is approved, work could begin on the oil field within a few months, Mr. Jihad said.

And today the Guardian confirms that the deal was approved by Iraq's cabinet.

There are some Americans who regard expanding Chinese global influence with fear and suspicion. But I maintain that stability and prosperity for Iraq and the broader Middle East should be the primary U.S. objective at the moment. Although China of course has its own reasons to be interested in the region, those interests are undermined by terrorism and regional instability just as much as ours. And precisely because China is a distinct power with separate interests from the U.S., its status as a more neutral third party leaves it in a position to assist in restoring stability to Iraq and the region in ways that the U.S. cannot. The perception that the purpose of toppling Saddam Hussein was to benefit U.S. oil companies greatly undermines our capacity to bring peace to the region. One way the U.S. can signal that our goal is instead regional stability is by embracing a larger role for China in Iraq and the Middle East.

Some may ask, What good does it do Americans if Iraqi oil gets shipped to China? The answer is, it is a global market for oil... [P]rice depends on the total quantity produced globally and the total quantity consumed globally. More global production means a lower price, and which country consumes which oil is of little practical significance... But it matters a great deal for the price that American consumers pay for oil whether the Iraqi oil is produced or is not produced.

Others may worry that higher oil production today just leaves the world with less of this depletable resource for the future. But to this I would counter that the transition to a world when global oil production no longer increases each year will raise some tremendous geopolitical stresses. The more stability and cooperation we can have as we enter that phase, the better off we will be.

You've heard it said, "What's good for General Motors is good for the U.S." But I say, "what's good for Iraq and China is good for the U.S."

Comments

[Chris]

Of course we went to war vs. Iraq to please Israel, not for the oil. We could have had the oil by negotiating with Saddam, no problem and no need for war. The oil argument came later, simply as one of the "lies" excusing the attack and invasion. In any case it is a lot better for Iraq to have China getting some of the profits from its oil than the USA that has killed and murdered so many innocent Iraqi citizens.

[hari]

Greenspan (in his book)...says US went into Iraq for oil. It makes sense with oilman Bush/Cheney in WH....

However the focus of this thread is the unpalatable political feat of an Iraqi regime (US funded/supported) now selling its strategic oil supplies - on forward contract - to mainland China. Confirming that crude oil is an international commodity.

Is it a good omen or a bad one for US decision-makers?

I suspect the q' itself is a non-secuter. What if the sale was to India? Can one see what difference it makes from a global strategic perspective? Or is the q' itself moot?

China mainland gets its supplies from Gulf States. Saudi's have a lucurative long term contract also with China. So what's the big deal with Iraq contract?

I suggest the signs are becoming more clear that we're entering a period of global paradigm shift in international politics. Consider the most recent developments:

*China (along with Central Asian States in Shanghai Group) objected to Russian recognition of break-away ethnic enclaves in Abkasia and South Ossetia in Georgia. Can you notice what Chinese/PLA is facing against rebel muslim groups in its own hinterland?

*China's 2008 Olympics - Opening Night and global audience.

*Emergence of China as a creditor of US Treasury - in difficult financial/economic crisis.

*Inspite of global downturn, China's economic locomotive is still bumping along @ 10% p.a.

By reinforcing mainland China's national interest in peaceful cooperation with the West, Chinese leaders are signalling that they don't approve of international conflicts. Their preoccupation is with their domestic rural/urban divide and growing income inequality - while the engine of exports industry is galloping along.

[Barkley Rosser]

It should be kept in mind that this is just the revival of a deal that was in the works under Saddam, but got put aside when we invaded Iraq.

[Larry]

China has become a fearsome economic player. Their economy was the world's largest for thousands of years before the US emerged, and appears likely to regain the top spot again soon, this time with a global reach.

It may be worth noting that during those millenia, Persians, Romans, Mongols, Turks, and Anglos had global empires - but never Chinese. And everybody who ever invaded China won handily. Won't China again seek stability rather than empire as its power grows?

[Alex Tolley]

Some may ask, What good does it do Americans if Iraqi oil gets shipped to China? The answer is, it is a global market for oil... [P]rice depends on the total quantity produced globally and the total quantity consumed globally. More global production means a lower price, and which country consumes which oil is of little practical significance... But it matters a great deal for the price that American consumers pay for oil whether the Iraqi oil is produced or is not produced.

Let's just reconsider what is being said here in other terms. The US invasion of Iraq was just a cost to ensure that the oil will flow. This is very similar to the "imperial expansion" theme of Kennedy's "Rise and Fall of the Great Powers" where imperialists take on the cost burden of military support for trade. The result is teh same for teh US today, we take on unsupportable costs to ensure the oil flows, but the beneficiaries are the "free riders". Those who don't learn history are doomed to repeat it.

[Barkley Rosser]

Alex,

It is a widespread delusion that the invasion of Iraq was done to "insure that the oil would flow." Needless to say, until a couple of months ago, the result of the invasion was that a lot less oil flowed, especially out of Iraq, although arguably that was not foreseen. OTOH, some of the "it was all for the oil companies" folks have argued that in fact reducing the flow so as to push up the price of oil and the profits of the oil companies was exactly what it was about. I think that was a crock, just as I think that the argument that it was about "insuring that the oil would flow" is also a crock.

[paine]

bark
then
what crock
DO
u buy ???
surely not chris's
mini me's zionical hypno politics

"uncle sam u are growing sleepy sleepy...
uncle sam i want u to ...attack iraq "

[Ashley]

I thought the invasion of Iraq was to further privatize our military?

[Barkley Rosser]

paine,

There were lots of actors involved in the push to invade Iraq, with pro-Israeli neocons very important among them. But, despite a lot of peoples' delusions, the oil companies were not a part of the push to do it, with some of them even quietly trying to oppose it out of fear that it would "disrupt the markets," which it did, although to their benefit as it turned out.

However, I think the bottom line was strictly personal, involving George W. Bush, who had Cheney pushing this stuff hard on him, being a Real Reaganite Man unlike his daddy who "did not finish the job," and also to get revenge on Saddam for going after his daddy. After all, during the first Bush presidency, W. was the "hit man" who went after the "enemies" of his dad. (Of course, Cheney's company, Halliburton, did make gobs of money, and I would not deny that for him in particular that motive did count.)

[paine]

thanx bark

i always value your thinking and judgement

[Trance]

Thanks Mark.

[Mark Thoma]

Leave out the racial reference and you'll get a different outcome.

[Alex Tolley]

Barkely - I'm just rephrasing the article's opinions. However, despite what you say, there is evidence that Iraq was at least partially about oil and how it was to be allocated.

[ElamBend]

The more China has interest in multiple sources of oil in the ME, the more their interests align with ours. Take Iran. We prefer a stable Iran, but one that cannot dominate the ME (such that an Iran with nukes could do). Up to a certain point, China was not helpful in this. However, recently they have come around on such a point. Now that they have interest in Iraq, they do not want to see that country destabilized by Iran.
Thus, we may be able to achieve our goal of a stable but non-nuclear Iran with China's coercive help AND without any real military confrontation.

I agree, what is good for Iraq and China is, often, good for the USA.

[Graeme]

Barkley- you say that oil had nothing to do with it, yet plans to privatize the Iraqi oil industry were being drawn up almost immediately as the Bush administration gained power and the oil fields were the first objectives secured by the invading forces.