October 26, 2020

China Reaps Biggest Benefits of Iraq Oil Boom

China already buys nearly half the oil that Iraq produces, nearly 1.5 million barrels a day, and is angling for an even bigger share, bidding for a stake now owned by Exxon Mobil in one of Iraq’s largest oil fields.

“The Chinese are the biggest beneficiary of this post-Saddam oil boom in Iraq,” said Denise Natali, a Middle East expert at the National Defense University in Washington. “They need energy, and they want to get into the market.”

Before the invasion, Iraq’s oil industry was sputtering, largely walled off from world markets by international sanctions against the government of Saddam Hussein, so his overthrow always carried the promise of renewed access to the country’s immense reserves. Chinese state-owned companies seized the opportunity, pouring more than $2 billion a year and hundreds of workers into Iraq, and just as important, showing a willingness to play by the new Iraqi government’s rules and to accept lower profits to win contracts.

“We lost out,” said Michael Makovsky, a former Defense Department official in the Bush administration who worked on Iraq oil policy. “The Chinese had nothing to do with the war, but from an economic standpoint they are benefiting from it, and our Fifth Fleet and air forces are helping to assure their supply.”

The depth of China’s commitment here is evident in details large and small.

In the desert near the Iranian border, China recently built its own airport to ferry workers to Iraq’s southern oil fields, and there are plans to begin direct flights from Beijing and Shanghai to Baghdad soon. In fancy hotels in the port city of Basra, Chinese executives impress their hosts not just by speaking Arabic, but Iraqi-accented Arabic.

Notably, what the Chinese are not doing is complaining. Unlike the executives of Western oil giants like Exxon Mobil, the Chinese happily accept the strict terms of Iraq’s oil contracts, which yield only minimal profits. China is more interested in energy to fuel its economy than profits to enrich its oil giants.

Chinese companies do not have to answer to shareholders, pay dividends or even generate profits. They are tools of Beijing’s foreign policy of securing a supply of energy for its increasingly prosperous and energy hungry population. “We don’t have any problems with them,” said Abdul Mahdi al-Meedi, an Iraqi Oil Ministry official who handles contracts with foreign oil companies. “They are very cooperative. There’s a big difference, the Chinese companies are state companies, while Exxon or BP or Shell are different.”

China is now making aggressive moves to expand its role, as Iraq is increasingly at odds with oil companies that have cut separate deals with Iraq’s semiautonomous Kurdish region. The Kurds offer more generous terms than the central government, but Iraq and the United States consider such deals illegal.

Late last year, the China National Petroleum Corporation bid for a 60 percent stake in the lucrative West Qurna I oil field, a stake that Exxon Mobil may be forced to divest because of its oil interests in Iraqi Kurdistan. Exxon Mobil, however, has so far resisted pressure to sell, and in March the Chinese company said it would be interested in forming a partnership with the American company for the oil field.

If the United States invasion and occupation of Iraq ended up benefiting China, American energy experts say the unforeseen turn of events is not necessarily bad for United States interests. The increased Iraqi production, much of it pumped by Chinese workers, has also shielded the world economy from a spike in oil prices resulting from Western sanctions on Iranian oil exports. And with the boom in American domestic oil production in new shale fields surpassing all expectations over the last four years, dependence on Middle Eastern oil has declined, making access to the Iraqi fields less vital for the United States.

At the same time, China’s interest in Iraq could also help stabilize the country as it faces a growing sectarian conflict.

Tim Arango reported from Baghdad, and Clifford Krauss reported from Houston.

Article source: http://www.nytimes.com/2013/06/03/world/middleeast/china-reaps-biggest-benefits-of-iraq-oil-boom.html?partner=rss&emc=rss

Economix: Trust Me, We’re Rich

Within the developed world, Danes are the most trusting people and Chileans the least, according to new data from the Organization for Economic Cooperation and Development.

The results are based on survey responses to the question, “Generally speaking would you say that most people can be trusted or that you need to be very careful in dealing with people?” Within the United States, just less than half of people expressed a high level of trust in others.

DESCRIPTIONSource: Organization for Economic Cooperation and Development

Across the countries included in the analysis, levels of trust have increased modestly on average over the last decade. From an economic standpoint, that is probably a good thing, as higher levels of trust can help foster better economic relations. You’re more likely to do business with someone if you don’t assume that person will cheat you.

But this relationship is likely a two-way street: Not only does trust affect economic conditions, but economic conditions may also affect trust.

O.E.C.D. analysts found that higher levels of trust were generally correlated with higher household income levels:

DESCRIPTION Source: ESS (European Social Survey), ISSP (International Social Survey Programme), O.E.C.D. (2008) Growing Unequal? Income Distribution and Poverty in O.E.C.D. Countries (www.oecd.org/els/social/inequality).

Again, it’s not clear which is cause and which is effect. “Trust may promote gainful economic activity, or trust may be a luxury affordable only by richer countries,” the group’s report says.

Additionally, higher levels of income inequality correlated with lower levels of trust. The relatively egalitarian Nordic countries like Denmark, for example, have high levels of trust. On the other hand, more unequal societies like Mexico and Turkey have relatively low levels of trust.

DESCRIPTIONSource: ESS (European Social Survey), ISSP (International Social Survey Programme), O.E.C.D. (2008) Growing Unequal? Income Distribution and Poverty in O.E.C.D. Countries (www.oecd.org/els/social/inequality).

The causal relationship is debatable here as well.

“Income inequality may make it more difficult for people in different strata to share a sense of common purpose and to trust each other,” the report says. “Or low levels of trust may impede positive social bonds developing, which in turn contributes to high inequality.”

Article source: http://feeds.nytimes.com/click.phdo?i=7795276456fa3e100862accd257a118d