China Quietly Inks Billion Dollar Oil Deal With Iraq

BEIJING, CHINA - MARCH 05: Chinese President Xi Jinping applauds during the opening of the 3rd Session of the 12th National People's Congress at the Great Hall of the People on March 5, 2015 in Beijing, China. The government work report presented: the main targets of economic and social development; a projected 2015 GDP growth of about 7 percent; and consumer prices rising about 3 percent. (Photo by Lintao Zhang/Getty Images)
Lintao Zhang/Getty Images

The coronavirus pandemic continues to wreak havoc not just on physical but economic health across the world.  Yet for one country this has actually been a golden opportunity. Suspiciously so in fact. It is becoming increasingly clear that the advent of this global catastrophe is yielding positive outcomes for the very country that unleashed it in the first place: Communist China.

A while back on these pages I brought the readers’ attention to China’s maneuvers designed to address perhaps its most glaring Achilles’ heel in its drive to make the 21st Century the Chinese century.  That is its lack of energy independence. Unlike its rival/enemy (as they see us at any rate) the United States, China is very much dependent on foreign sources of oil and natural gas to power its growing economy. It is, in fact, the world’s largest importer of fossil fuels, at roughly 10.04 million barrels per day; its energy usage due to its 1.4 billion population accounts for 25% of global energy consumption.

While Americans from Congress to academic circles call for the eradication of fossil fuels, including the promotions of a budget-obliterating so-called “Green New Deal,” Beijing is well aware that oil and natural gas will be with us for decades to come…even as they take parallel steps to be the world’s premier renewable energy producer.

Since 2013 China’s oil production — what there is of it — has fallen 15% while its consumption has risen 30% to 13.8 million barrels per day, meaning 75% of China’s oil usage comes from imports. This places them in a very vulnerable position. And it explains why they have been so aggressive in heavily oil and gas-resourced Africa, South America, Canada, and the Middle East. In many ways, they are in the same position as was Japan in 1941 when its drive for world power status was threatened by a lack of energy independence. The U.S. oil embargo was certainly the main catalyst for Pearl Harbor and the horrors of the Pacific War that followed. Nazi Germany was in the same quest for oil when it launched its operation into southern Russia in 1942 which ended at the mass-graveyard of Stalingrad. But China is too smart to make those mistakes. Nor is there a need for overt military action when far more peaceful and advantageous opportunities in the aftermath of their exported pandemic abound.

Indeed, the coronavirus, and the low oil prices it has caused, have provided China with a target-rich environment. Here is the most recent, and in many ways most disconcerting, example. While the U.S. media and politicians in D.C. look elsewhere, China ZhenHua Oil Co., a state-owned enterprise formed in 2003, has just inked a lucrative supply deal with Iraq. Iraq is a true petrostate, wherein almost all of the government’s revenue comes from oil sales. As such its economy has shrunk 12% this year, due to the plummet in oil prices in the wake of the severe global recession courtesy of the Chinese pathogen. Says Bloomberg News: “The deal is the latest example of China, via state-controlled trading companies and banks, lending to struggling oil producers such as Angola, Venezuela and Ecuador, with repayment in the form of oil barrels rather than cash.”

It’s a great move by the Chinese. Unleash a virus (either on purpose or at least not stopping it once it gets out accidentally) on the world. Watch the global economy collapse, and with it, oil prices. Then, swoop into a place like Iraq that has been so cash-strapped it cannot pay its civil servants, and bail them out. In this case, the five-year deal ZhenHua struck included a prepayment for one year’s supply which would infuse $2 billion in desperately needed cash into Baghdad’s coffers in exchange for 130,000 barrels a day in crude oil. Basically, Beijing has acted as a lender with oil as collateral and payback, currency. Also, what is unique about this deal is that China may then ship the oil to wherever they wish as opposed to agreeing to the standard regional restrictions on re-sale. In return China will waive the usual yield for the upfront cash. In effect, for Baghdad it is an interest-free loan, paid back in oil.

The deal means China will be far less reliant on powerful exporters, mainly the U.S., to secure its energy needs. Such a beneficial agreement could only have been possible with a collapse in the price of oil. And that free-fall was a direct result of the imploding global economy, again courtesy of the virus that China-originated virus. It’s almost as if there was a method to Beijing’s coronavirus madness? Oh stop!

One must wonder if Saddam Hussein was still in power, would Iraq have been so amenable. Who knows? And I am certainly not pining for the Butcher of Baghdad. But what we do know is that, as with so much of our botched and criminally negligent foreign policy involving the Middle East and the neocons’ delusional obsessions with “nation-building,” we shed a lot of our own troops’ blood and taxpayer treasure just so that enemies like China — far too clever to get their hands dirty and noses bloodied in the Middle East quagmire when their US patsies were willing to do the fighting and dying for them — could reap the benefits.

The simple fact is that for decades now we have been outplayed by Beijing. Often with the willing complicity of U.S. power elites on Wall Street, Capitol Hill and, coming soon, the White House, again.  And like him or hate him, Donald Trump was the one president who intuitively understood this — even if we may legitimately debate the efficacy of his approaches. But he will soon be gone. Instead, the American people, in their manic obsession with ridding themselves of an unpleasant personality, have put in the Oval Office a career politician and Sinophile. Had the Chinese Politburo themselves been charged with nominating the Democrat candidate for president, they couldn’t have picked a man more suited to serve Beijing’s interests.

So while great swaths of the U.S. economy are decimated by the on-going arbitrary and ill-conceived lockdowns on the orders of incompetent and power-mad leaders in a futile effort to stop the spread of China’s most damaging export of all, Beijing continues to methodically use the virus’ disastrous aftermath to solidify its position of global dominance, while further securing its energy independence from its target rival, and isolate the very nation whose sacrifice over the past decade made its latest deal with the nation we liberated possible.

ZhenHua means “Revitalize China” in Mandarin. The coronavirus, and the opportunities it has presented Beijing, have gone a long way towards fulfilling that aspiration. More the fools us.

Brad Schaeffer is a commodities trader and writer whose articles have appeared in The Wall Street Journal, New York Daily News, National Review, Celeb Magazine, Zerohedge, Frumforum, and other news outlets.  He is the author of the acclaimed World War II novel Of Another Time And Place

The views expressed in this opinion piece are the author’s own and do not necessarily represent those of The Daily Wire. 

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