Energy Policy & Regulation

Iraq is reviving its landmark oil-for-projects agreement with China, initially signed in 2019, after a three-year suspension reportedly due to U.S. pressure. Under the terms of the deal, Iraq will now increase crude oil shipments to China from 100,000 to 150,000 barrels per day, worth approximately ID2.6 trillion ($2 billion). The revenues are funneled into a special account managed by Iraq’s finance ministry and central bank, with funds allocated to Chinese companies executing infrastructure projects across the country.

Despite the deal’s ambitious vision to fund Iraq’s post-war reconstruction, it has so far resulted in only one completed initiative: the construction of 1,000 schools. According to Nabil Al-Marsoumi, a professor of economics at Basra University, Chinese contractors reaped substantial profits from this project, earning $700,000 per school after expenses. The total net profit for Chinese developers reached about $700 million, highlighting the financial gains made despite the limited scope of project execution so far.

Economic experts in Iraq confirm that the agreement was paused due to geopolitical tensions, particularly growing competition between the U.S. and China. Dia Al-Mohsen, a member of Iraq’s economists’ network, said the pact had originally been seen as a way to rebuild Iraq’s infrastructure, but external pressure from Washington complicated its implementation. This revived effort comes amid a broader uptick in infrastructure activity in Iraq, with several Chinese firms recently securing major contracts in sectors like oil, power, and petrochemicals.

One notable example includes a multi-billion-dollar contract awarded in May to China’s Geo-Gade company to develop an oilfield, build a refinery, and construct a large petrochemical complex and power plants. As Iraq heads toward its next parliamentary elections on November 1, 2025, the renewal of the oil-for-projects deal may signal a shift in Baghdad’s strategic alliances and an effort to accelerate long-delayed reconstruction plans despite lingering political and economic challenges.