China investing heavily in Iraq as U.S. companies hold back
By LEILA FADEL AND
THE WASHINGTON POST
July 04, 2010 12:00 AM
AL-AHDAB OIL FIELD, Iraq — China didn't take part in the U.S.-led invasion of Iraq or the bloody military battles that followed. It hasn't invested in reconstruction projects or efforts by the West to fortify the struggling democracy in the heart of the Middle East.
But as the U.S. military draws down and Iraq opens up to foreign investment, China and a handful of other countries that weren't part of the so-called coalition of the willing are poised to cash in. These countries are expanding their foothold beyond Iraq's oil reserves — the world's third largest — to areas such as construction, government services and even tourism, while American companies show little interest in investing here.
"The U.S. really doesn't know what to do in Iraq," said Fawzi Hariri, Iraq's industry minister. "I have been personally, as the minister of industry, trying to woo U.S. companies into Iraq. There is nothing yet. Nothing tangible."
The National Investment Commission said the Americans' response has been surprising.
"They have not come in with the force or magnitude we expected from them," said Sami al-Araji, the commission's chairman. "The entry is cautious. We're waiting for those few daring ones to come in and enter into the market from the front yard, not our back yard, and we will welcome them."
In the past two years, Chinese companies have walked away with stakes in three of the 11 contracts the Iraqi Oil Ministry has signed in its bid to increase crude output by about 450 percent over the next seven years. They also renegotiated a $3 billion deal that dates back to when Saddam Hussein was in power.
Only two American firms won stakes in oil deals, an underwhelming showing that industry analysts and U.S. officials say reflects deep concerns about doing business in a country besieged by insecurity, corruption and political turmoil.
"They made a mistake and overestimated the risk," said Ruba Husari, an oil analyst in Baghdad who runs the Iraq Oil Forum, a trade Web site. "I think they did not realize on the spot that it was the biggest window of opportunity, and they missed out."
In an effort to meet the rising energy demands of its fast-growing economy, China has invested aggressively in oil-rich nations. Chinese companies have made notable inroads in the Middle East and Africa, in part because of a higher tolerance for risk and a savvy diplomatic corps that has laid the groundwork for advantageous deals.
Iraqi officials say they are heartened by their expanding ties with China but are still pursuing investment from other nations.
"They have gained a number of plum contracts for energy," Iraqi Foreign Minister Hoshyar Zebari said of the Chinese. "Wherever there is an oil well in the world, you'll see a Chinese flag next to it."
At the Ahdab oil field in Wasit Province, roughly 100 miles south of Baghdad, about 200 Chinese laborers have begun work under a contract renegotiated by a Chinese state-owned consortium, Al Waha Oil Co., in 2008. Workers in red jumpsuits operate imported oil rigs alongside their Iraqi counterparts. Their workplaces are heavily protected by barricades and guards.
The French and Chinese have also made forays into the cement industry. The Chinese have started building a billion-dollar power plant in the south. The Chinese and the United Arab Emirates are in advance talks to build residential complexes. The French automaker Renault and Germany's Mercedes-Benz are in advanced talks to make trucks for industrial transport, according to Iraqi officials. The South Koreans signed a memorandum of understanding to build a multimillion-dollar steel mill in the south and a power plant, and the Turks have scored a series of construction and government services contracts.
Save a $3 billion contract with General Electric to purchase power-generating equipment for Iraq, Iraqi and U.S. officials are hard pressed to point to any significant U.S. investment in Iraq.
By LEILA FADEL AND
THE WASHINGTON POST
July 04, 2010 12:00 AM
AL-AHDAB OIL FIELD, Iraq — China didn't take part in the U.S.-led invasion of Iraq or the bloody military battles that followed. It hasn't invested in reconstruction projects or efforts by the West to fortify the struggling democracy in the heart of the Middle East.
But as the U.S. military draws down and Iraq opens up to foreign investment, China and a handful of other countries that weren't part of the so-called coalition of the willing are poised to cash in. These countries are expanding their foothold beyond Iraq's oil reserves — the world's third largest — to areas such as construction, government services and even tourism, while American companies show little interest in investing here.
"The U.S. really doesn't know what to do in Iraq," said Fawzi Hariri, Iraq's industry minister. "I have been personally, as the minister of industry, trying to woo U.S. companies into Iraq. There is nothing yet. Nothing tangible."
The National Investment Commission said the Americans' response has been surprising.
"They have not come in with the force or magnitude we expected from them," said Sami al-Araji, the commission's chairman. "The entry is cautious. We're waiting for those few daring ones to come in and enter into the market from the front yard, not our back yard, and we will welcome them."
In the past two years, Chinese companies have walked away with stakes in three of the 11 contracts the Iraqi Oil Ministry has signed in its bid to increase crude output by about 450 percent over the next seven years. They also renegotiated a $3 billion deal that dates back to when Saddam Hussein was in power.
Only two American firms won stakes in oil deals, an underwhelming showing that industry analysts and U.S. officials say reflects deep concerns about doing business in a country besieged by insecurity, corruption and political turmoil.
"They made a mistake and overestimated the risk," said Ruba Husari, an oil analyst in Baghdad who runs the Iraq Oil Forum, a trade Web site. "I think they did not realize on the spot that it was the biggest window of opportunity, and they missed out."
In an effort to meet the rising energy demands of its fast-growing economy, China has invested aggressively in oil-rich nations. Chinese companies have made notable inroads in the Middle East and Africa, in part because of a higher tolerance for risk and a savvy diplomatic corps that has laid the groundwork for advantageous deals.
Iraqi officials say they are heartened by their expanding ties with China but are still pursuing investment from other nations.
"They have gained a number of plum contracts for energy," Iraqi Foreign Minister Hoshyar Zebari said of the Chinese. "Wherever there is an oil well in the world, you'll see a Chinese flag next to it."
At the Ahdab oil field in Wasit Province, roughly 100 miles south of Baghdad, about 200 Chinese laborers have begun work under a contract renegotiated by a Chinese state-owned consortium, Al Waha Oil Co., in 2008. Workers in red jumpsuits operate imported oil rigs alongside their Iraqi counterparts. Their workplaces are heavily protected by barricades and guards.
The French and Chinese have also made forays into the cement industry. The Chinese have started building a billion-dollar power plant in the south. The Chinese and the United Arab Emirates are in advance talks to build residential complexes. The French automaker Renault and Germany's Mercedes-Benz are in advanced talks to make trucks for industrial transport, according to Iraqi officials. The South Koreans signed a memorandum of understanding to build a multimillion-dollar steel mill in the south and a power plant, and the Turks have scored a series of construction and government services contracts.
Save a $3 billion contract with General Electric to purchase power-generating equipment for Iraq, Iraqi and U.S. officials are hard pressed to point to any significant U.S. investment in Iraq.