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It is true that U.S. foreign policy under President Donald Trump now operates from the starting point of three core geographical spheres, dominated by a major power in each, as delineated in the ‘2025 National Security Strategy’. Asia is one, with China holding the primary role there; Europe is another, dominated by either Russia or European NATO members; and the Americas (comprising North and South America) is the third, with the U.S. being the key player. However, it is also true that Washington continues to regard the Middle East as vital to its political and economic interests going forward for three main reasons. First, it is the geographical bridge from the Asia bloc to the Europe one. Second, it is home to several major forward operating bases for the U.S. military on the southern flank of Russia and the western flank of China. And third, it contains vast quantities of the oil and gas that China needs to drive economic growth, which in turn powers its military expansion. Iraq stands in the very heart of the Middle East from a geographical, political, and religious perspective, and is also the repository for some of the world’s largest oil and gas reserves. It is little wonder, then, that the U.S. is again ratcheting up its efforts to decisively pull the country away from China’s and Russia’s sphere of influence and back into the West’s. Last week’s meeting between Iraqi Prime Minister Ali al-Zaidi and President Trump at the White House was crucial in the formulation of a new cooperation framework between the two countries aimed at removing Beijing and Moscow from Baghdad’s foreign relationship equation once and for all.
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The primary focus of Trump’s team in this respect is on replacing the broad and deep relationship deals Iraq still has in place with China with similar agreements with the U.S., a senior European Union (E.U.) security source working closely with Washington on such matters exclusively told OilPrice.com last week. In this respect, Beijing had negotiated its foundational cooperation deals with Iraq during the period in which the U.S. and its allies were nearing or at their weakest point in Iraq since the allied removal of then-President Saddam Hussein in 2003. This saw increasingly active antagonism towards Western military forces, spearheaded by attacks from Iranian-backed military proxies in Iraq, that continued even after the U.S.’s official ‘end of combat mission’ in Iraq in December 2023. Against this backdrop, the wide-ranging ‘Oil for Reconstruction and Investment’ agreement was signed between China and Iraq in 2019. The basic template for this agreement – which includes priority on new field contracts for Chinese firms and substantial discounts for them on oil and gas recovered – was the ‘Iran-China 25-Year Comprehensive Cooperation Agreement’ first revealed anywhere in the world in my 3 September 2019 article on the subject, and analysed in my latest book on the new global oil market order.
The 2019 China-Iraq deal was then substantially expanded in scale and scope by Beijing into the ‘Iraq-China Framework Agreement’ of 2021. Part of this featured even bigger discounts given to Chinese firms on oil and gas discovered in Iraq (up to 30%, depending on the field). However, crucially for China’s bigger territorial ambitions in Iraq and the Middle East, it also gave its firms that were developing such fields additional wide-ranging rights to station significant security forces in and around these areas and to engage in a massive build-out of accompanying infrastructure. This includes road and rail networks connected to bigger infrastructure hubs with links across the Middle East, the right for the Chinese military to use selected Iraqi military and civilian seaports and airports, and permission to construct further businesses, schools and other support facilities tangential to China’s ongoing interest in the region. Typical of the underlying idea and structure behind these cooperation agreements were three far-reaching infrastructure deals that heavily involved China in the heartland of Iraq. One was Baghdad’s approval of nearly IQD1 trillion (USD700 million at the time) for critical infrastructure projects in the city of Al-Zubair in the southern Iraq oil hub of Basra. Another -- just before the Al-Zubair announcement -- was the awarding by Baghdad of a further major contract to another Chinese company to build a civilian airport to replace the military base in the capital of the southern oil-rich Dhi Qar governorate. This airport project included the construction of multiple cargo buildings and roads linking the airport to the city’s town centre and separately to other key oil areas in southern Iraq. This, in turn, followed the third key deal, which centred on Chinese companies building out the strategically critical Al-Sadr City, located near Baghdad, at a cost of between US$7-8 billion.
The U.S. is eminently capable of funding and implementing a unified cooperation deal that matches or outmatches anything China has in place, of course, but none of the plans for this could be put into place before the wide-ranging and longstanding ties between Iraq and neighbour Iran (Beijing’s principal client state in the Middle East) had been weakened. Trump’s more aggressive approach to the relationship between Baghdad and Tehran in his second term -- analysed fully by OilPrice.com -- and the arrival of a new prime minister in Iraq in the shape of al-Zaidi, has shifted the ground in this context. There was another problem here too for Washington in the form of precisely what sort of a deal it should be. The template for Trump’s foreign policy agenda for re-establishing U.S. influence across the region was the ‘relationship normalisation’ deals between Arab countries and Israel (the ‘Abraham Accords’) brokered by Washington, as detailed in full in my latest book. However, the Iraqi parliament passed a strict anti-normalisation law in May 2022 that criminalises establishing relations with Israel. The legislation -- ‘Criminalising Normalisation and Establishment of Relations with the Zionist Entity’ -- mandates severe penalties, including life imprisonment or the death penalty, for any Iraqi individual, institution, or foreign resident who interacts with Israel. This follows from the fact that Iraq has maintained an official state of war with Israel since 1948, which makes any U.S.-brokered cooperation agreement that involves Tel Aviv politically impossible for the time being at least.
The answer, according to the E.U. source, is to construct a deep and wide set of agreements between the U.S. and Iraq that cover every conceivable area of cooperation, from energy agreements, through core infrastructure development deals, to security and intelligence collaboration. “And these will be across the whole of Iraq, including the Kurdish north,” the source underlined to OilPrice.com. In fact, in his statement on the talks in Washington with Trump, Iraqi Prime Minister al-Zaidi highlighted that Iraq needs a strategic partner of the scale of the U.S. to navigate its economic and technological challenges, and that the planned development and economic cooperation would extend to the Kurdistan Region, Basra, Anbar, and all Iraqi governorates. The specific inclusion of Iraq’s semi-autonomous Kurdish region, governed by the Kurdistan Regional Government (KRG), is a key requirement of Washington in the deal with Baghdad, as it directly challenges the long-term strategy of Beijing and Moscow to establish control across the Middle East. For a long time, the West has worked with Kurdistan on several security operations in the region, most notably using its Peshmerga army to pin back the advance of Islamic State from 2014. The U.S. and its allies have also continued to use Kurdistan as a base to expand their footprint in the south of the country, at the expense of Beijing and Moscow, with Washington and Tel Aviv also utilising it as a foundation stone for ongoing monitoring operations against Iran. Because of this, on the other side of the zero-sum geopolitical equation, Beijing and Moscow have long worked for Kurdistan to be subsumed into a single unified Iraq, governed out of Baghdad, with the West pushed out of the country entirely. As a very high-ranking official from the Kremlin exclusively revealed to OilPrice.com some years ago: “By keeping the West out of energy deals in Iraq, [Russia and China will see] the end of Western hegemony in the Middle East will become the decisive chapter in the West’s final demise.”
Given this latest meeting in Washington between al-Zaidi and Trump -- and the 48 deals struck between Iraq and U.S. companies stretching across multiple sectors of the economy -- it looks like the U.S.’s renewed engagement with Iraq could signal a major shift back in Baghdad’s geopolitical alignment away from Beijing and Moscow. The breadth of cooperation now being discussed gives the U.S. and its partners a realistic pathway to reassert influence without overreach, and if Baghdad continues in its current vein, then the prospects for a more Western-focused regime improve markedly. For the U.S. and its partners, this moment could mark not simply a retrenchment, but the beginning of a renewed phase of influence in the heart of the Middle East.
By Simon Watkins for Oilprice.com
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