The Iraq-China Economic Agreement: A Controversy over Goals and Benefits

The Iraqi government, headed by Adel Abdul Mahdi, before its resignation on the impact of popular protests at the end of November 2019, signed a framework agreement for cooperation in the economic field with China, which includes “exchanging oil revenues for the implementation of projects in Iraq.” The agreement sparked a political, economic and even popular debate. The debate was exacerbated by the government’s failure to present the agreement to the Iraqi parliament, and the continuing blackout on its provisions.

This paper sheds light on the background to the signing of the agreement, reviews the most important leakages of its provisions, addresses the political positions on it, and discusses claims that it is in Iran’s interest.

The political context for the signing of the agreement

The signing of the Iraqi-Chinese agreement on September 23, 2019 in the Chinese capital, Beijing, coincided with the outbreak of popular protests calling for political reform, fighting corruption and ending the chaos of arms, in which the political forces found an additional reason for disagreement, which soon spread to the economic and popular circles, which were divided between Supporter, opponent, and suspicious, given that it was blocked from parliamentarians and the media that later managed to obtain part of its leaked texts This raised great concerns about what was considered a lack of transparency, and a governmental desire to hide the risks surrounding entering into a strategic commercial partnership with one of the great countries that dealt with the most corrupt political regimes around the world.

During his travel to China, Adel Abdul Mahdi, at the head of a huge delegation that included most of his cabinet ministers and about 14 out of 18 governors, seemed keen to promote the agreement as the first of his plans to advance the national economy, and blow it into the media by talking about an accumulated volume of investments that exceeds $ 500 billion. This exceeds all investment expenditures allocated by successive Iraqi governments after the year 2003 for infrastructure projects, most of which went to waste due to networks of political and financial corruption. Abdul-Mahdi was seeking, through the promotion of the agreement, to consolidate his government’s precarious position in the face of the series of interrogations that threatened a number of his ministers, and the end of the year deadline set by the leader of the Sadrist movement for him to achieve tangible achievements in improving the conditions of citizens, before going to the street and leading a protest movement to overthrow him. Note that the agreement was originally reached during the government of Haider al-Abadi, and it was formally signed by the Iraqi Undersecretary of Finance and the Chinese Minister of Finance on May 11, 2018, without drawing the interest or objection of any of the political parties.

From the constitutional point of view, any international economic agreement at this level is not considered effective until after its approval by the House of Representatives, but the government of Adel Abdul Mahdi followed in the footsteps of its predecessors in circumventing this obstacle, by going to include the projects to be implemented within the agreement in the General Budget Law. For the year 2020, with the aim of immunizing it against the usual political bargaining, forcing Parliament to pass it under pressure of calls to release more job ranks in the public sector, paying the dues of companies, contractors, farmers and suppliers of all supplies to the various state institutions, and paying the internal and external debts, all of which depend on passing the budget law the public.

Declared part of the agreement

In summary, as revealed by Adel Abdul Mahdi’s economic advisor, Dr. Mazhar Muhammad Salih, after the escalation of controversy between political forces, media circles and public opinion, the agreement is a Chinese credit loan of 10 billion dollars to be repaid by setting the proceeds of 100 thousand barrels of Iraqi crude oil exports To China in a special account in a Chinese bank, and the value of those proceeds is about two billion dollars a year, at today’s prices, which are estimated at 55 dollars. The term of the agreement is twenty years. The agreement in terms of general form is devoid of penal conditions, and falls within friendship agreements, and in the event of a dispute, international arbitration bodies are resorted to, and it is subject to extension and increase if the Iraqi side wishes, and it includes several things, including:

The establishment of an Iraqi-Chinese fund for reconstruction, supervised by the Iraqi government through the Central Bank and the Chinese government, with the guarantee of the Chinese insurance institution “Sinosure”, in which it withholds revenues of 100 thousand barrels per day of Iraqi oil sold to China, in exchange for the Chinese government to set an amount of $ 10 billion in interest Supported by her.
If the first package of projects succeeds, and Iraq desires to increase investments, the ceiling of Iraqi oil sales revenues will be raised to 300 thousand barrels per day, and in return China will increase the lending ceiling to 30 billion dollars, then the amount is deposited in the “Citibank-China” bank, which is based Later, by transferring it to the Iraq account at the US Federal Reserve Board in New York (which oversees the total Iraqi oil sales), before transferring the amount to a new account called “Investment Account”, another account called “Debt Services” is created, and is allocated to support the interest rate, The amount is deducted from the investment account.
Targeted projects: The fund includes covering several infrastructure projects, including: airports, schools, paving external roads, railways, treating water pollution, building housing complexes, energy projects, and others as requested by the government. If the cost of one of these projects is one billion dollars, then the amount is taken from the fund in the amount of “850 million dollars from China and 150 million dollars from Iraqi oil sales.”
Iraq has the right to choose international companies “European or American” to be partners with China, according to the type of project.
According to the terms of this agreement, there are several accounts that manage the process of managing the phases of the agreement, namely:

The Adjustments Account: It is the first account that undertakes the task of depositing 10% of the net monthly oil export revenues of 100,000 barrels per day to the account of two Chinese companies “whose names were not mentioned”, within Iraq’s share in OPEC and not outside it.

Related Articles

Leave a Reply

Your email address will not be published. Required fields are marked *

Back to top button