September 2nd, 2008
06:29 PM ET

China gets $3 billion oil deal with Iraq

[cnn-photo-caption image=http://i2.cdn.turner.com/cnn/2008/images/09/02/art.iraq.oil.jpg width=292 height=320]

Editor's Note: Iraq has approved a $3 billion deal with China to develop the al-Ahdab oil field. It's the first oil deal to be honored by Iraq and its new Iraqi government since the fall of Saddam Hussein, originally canceled after the 2003 invasion. Under the contract, China National Petroleum Corp. will develop the field for 20 years. It's expected to produce up to 25,000 barrels a day after three years, and eventually reach 125,000 barrels per day. CNN's Baghdad correspondent Arwa Damon share's with us the mood on the ground:

Arwa Damon | BIO
CNN Baghdad Correspondent

The news that Iraq had signed a “service contract” with China made the A bloc in the locals newscasts, but caused little reaction among most Iraq’s still trying to grapple with the difficulties of day to day life. The contract is in fact but a tiny fraction of Iraq’s oil wealth, and is service only – the China National Petroleum Company is going to provide technical advice, oil workers, and equipment. Iraq has already sworn that all oil revenue would go straight into the Iraqi treasury.

Problem is – Iraq, though expecting to rake in an additional 70 billion dollars of oil revenue this year – can’t get its oil flowing at full capacity. The extra and unexpected surplus is due to the rising oil prices, and has little to do with oil flow. The country’s oil infrastructure is in shambles. This is the first deal that government signed to try to address that problem, and in that sense it is significant. And its also symbolic – its the first deal signed with a foreign oil company since the fall of Saddam Hussein.

Aside from needing to rebuild the oil infrastructure, there’s also the political side of if all. Iraq still needs to pass an oil law to define how much of the revenue goes into the central government’s pocket, how much to the provinces, and how to deal with who gets the money from unknown reserves. And that’s all caught up in tensions between the country’s Sunni, Shi’a, and Kurdish political blocs, each that wants what they think is their fair share of Iraq’s black gold. Even the spokesman for Iraq’s government concedes that that’s not going to pass anytime soon.

Iraqi’s are fully aware of how wealthy their country is and the potential that is out there, but few really believe it will turn into anything tangible that will improve their lives anytime soon.

As one of our Iraqi staff put it “From a burnt house you can take what you want, the house is burnt anyways”.

Filed under: Arwa Damon • Global 360° • Iraq
soundoff (12 Responses)
  1. Debrah

    Maybe that's how we have to pay China back the money we owe them.

    September 3, 2008 at 10:16 am |
  2. deborah, OH

    I agreewith Tom...from WHERE did China get the money?!

    September 3, 2008 at 1:00 am |
  3. Tracy H.

    This Iraqi-China oil deal is another example of the Bush war bearing fruits and opportunity for others, while the U.S. go broke over it!

    September 3, 2008 at 12:40 am |
  4. JC-Los Angeles

    With our leaders, politcians and executives failing the American people in countless ways, it's becoming clear that the 20th Century was America's time while the 21st Century will be the time of China, India and the Middle East.

    Tom Brokaw wrote so eloquently about the "Greatest Generation" where men and woman changed the world through sacrifice, devotion, and selflessness; unfortunately, our leaders are doing their best to reflect the worst.

    September 3, 2008 at 12:03 am |
  5. Richard

    we might get the "HOOK UP" with their oil!

    September 2, 2008 at 11:40 pm |
  6. BBinDC

    well, i guess that is why mccain wants to stay in Iraq for 100 years and bleed tax payers dry, that is how long it will take us to get some of our billions $$$ back!

    September 2, 2008 at 11:30 pm |
  7. rene

    Can any1 tell me if iraq plans to use any of that 3 billion to reimburse usa for ridding them Of sadam ?

    September 2, 2008 at 11:29 pm |
  8. Melissa, Los Angeles

    We gave China the money Tom, by shopping at Wal-Mart and all these other cheap discounters buying their cheap goods. Try and find anything not made in China.

    September 2, 2008 at 10:12 pm |
  9. Heather

    All I can think of is how Wolfowitz(yeah Im sure I spelled it wrong)went to Cap Hill and told them that the Iraqi oil profits would pay for what we were going to be doing. It seems he lied and we have been paying literally out of our pockets. Though that isn't entirely acurate. The US government keeps three different sets of books. The controller for our country who actually tells the truth told Lou Dobbs that. This guy quit recently he had enough. But the oil deal doesn't surprise me. China has a gigantic population and they need alot of everything oil,coal,steel. China is in Africa which is why we can't do much about the genocide because they have trade deals with us and their bank financed those lovely rebate checks. Now they are in Iraq. I have seen on another channel and it wasn't a news one this gigantic oil facility China has been building in Africa. They will do what ever they feel they need to do to get what they need. This deal reinforces the fact that we are literally competing for oil in foreign countries with India and China. We have to drill off shore and on shore. China is growing it's economy and so is India. We have to take care of ourselves before it is to late. I just love being lied to. I am happy for the Iraqi people. I hope they will have economic stability. I just hope the oil is isn't used as a political tool with terrorism. The Chinese don't really care about anything expect themselves. It could complicate things in the future. Of course oil is traded in dollars and the dollar is starting to gain against the euro. Congratulations!?

    September 2, 2008 at 8:05 pm |
  10. Lesley

    McCain wants to continue to stay in Iraq until we have victory. This has become a hollow sentiment used solely to attempt to bolster his credentials and make up for the fact that he voted for the war. I am tired of this attitude and hope that the rest of America is as well. It looks like China is the victor here. The more we do, the less they do. The deployment of additional troops during the surge was a waste of our military personnel. If we had begun pulling out sooner, they would have gotten their act together quicker. This was the statement of the then-CentCom Commander at the time in Iraq, no more troops because the Iraqis are too dependent on them. McCain ignored that advice to the Senate Armed Services Committee by the general in command at the time. Now we are left holding their hands, spending our taxpayer dollars funding the continuing conflict and rebuilding their infrastructure while they take their sweet time deciding who should get the billions of dollars in oil evenues. Besides pulling out our soldiers, let's pull out our money and see how long it takes them to get the money rolling.

    September 2, 2008 at 7:44 pm |
  11. Tom

    I wonder where China borrowed the money from..,

    September 2, 2008 at 6:51 pm |
  12. Melissa, Los Angeles

    I can't believe my eyes...we go to war and China gets an oil contract?! Thanks a lot Bush!

    September 2, 2008 at 6:43 pm |