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Why America Doesn't Care If China Gobbles Up Iraq's Oil

Eager to shed the risk of dealing in Iraq, American companies are happy to yield oil fields to energy-desperate China.

Iraq oil fields worker 2012 10 22Enlarge
Oil in Iraq. Yeah, it's complicated. (Essam Al-Sudani/AFP/Getty Images)

Donald Trump is irate.

When he learned that China is gobbling up Iraq's oil — to the tune of more than half its output — he freaked out.

"We spend $1.5 trillion, we lose thousands of lives, we destroy a country … but China is in there taking out all the oil, and we’re getting nothing ... " he said on Fox News.

Alas, Trump is missing the point.

American policy planners probably don't care if China sucks up all that oil.

Here's why:

1. Even as Chinese oil companies lock up the majority of oil from Iraq, four American development companies, including Halliburton, are sucking up half the development dollars that will be spent over the next ten years.

2. The reason Chinese firms are so successful in Iraq is that their companies aren't making much money on the deal. That's right, China is just in a hurry to get the energy in order to propell its massive growth. American firms are more worried about profit, and so have more trouble winning bids (and taking undue risk).

3. US oil companies already develop and purchase oil in (arguably) less dangerous regions (though Exxon did win rights to the Qurna oil field, one of Iraq's largest).

4. Oil is a global commodity. So more oil produced is better for everyone globally. Plus, as Max Fisher of the Washington Post put it, "Chinese-led [demand] spikes" in price per barrel hurt everyone.

So In the eyes of America: let China take the risk (that being, at this moment, a possible civil war in Iraq).

5. The US is set to be the largest exporter of oil by the year 2020. Being the largest exporter of oil when China is the largest importer has strategic significance.

Conversely, there's no reason to believe that China's oil contracts in Iraq will make the country more open to sanctions on Iran.

"China’s efforts to gain new suppliers should not be viewed as attempts to replace older relationships. They are attempts to expand their access to new suppliers who can help them meet future needs," said Mark Cozad, a Rand Corporation expert in strategic intelligence, to Business Insider.

"It’s highly unlikely that this will make China more amenable to sanctions against Iran.  China’s position on Iran is not based solely on its energy relationship.  China’s leadership would argue that its broader interest in Iran is [about] protecting national sovereignty and preventing a strong power from coercing a weaker one," said Cozad.

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