China Benefits from Oil Deals with Iraq

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When President George W. Bush sent American troops to liberate Iraq, critics said the war was only about getting more oil for the U.S. But it turns out U.S. oil companies were actually not the ones profiting from the vast Iraqi oil reserves.

Instead, China has quickly become the dominant foreign player in Iraq's oil industry.

Chinese engineers and laborers work alongside their Iraqi counterparts as they drill a new oil well near the Iranian border. The Al-Waha Oil Company partnership is a sign of China's growing dominance in Iraq's oil fields.

"We have now finished five wells and in progress three wells, and next month we will have three more rigs and more drillings - and the last of this year we will have ten rigs," said al-Ahdab Senior Engineer Ahmed al-Zinki.

After years of neglect, war, sabotage, and under investment, the Iraqi oil industry is slowly growing, though still far below pre-2003 production levels. The Iraqis have found a willing partner in China. During recent oil auctions, the Chinese snapped up three contracts, with little competition from western companies.

China's demand for oil has jumped more than 13 percent in one year alone, according to one industry report.

The communist country needs 8.4 million barrels a day to operate - so investing in Iraq's oil industry was good business for both countries.

The quest for crude has taken the Chinese to countries where others have hesitated to go, because of violence, human rights violations, or sanctions.

Aware of the risks, Chinese officials in central Iraq have taken several precautions. They have hired 350 local Iraqis to protect the oil infrastructure and make sure their investment pays off.

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