This article will focus on the strategic involvement of Russia and China in Iraq’s and Syria’s energy industry, focusing on the National Oil Companies (NOCs) of both countries and their involvement in the most strategic assets of the Middle East, oil and gas. Baghdad’s oil and gas production is fundamental to strengthen the stability of OPEC, while supporting policies against market volatility in the whole world. Damascus is desperate to rebuild the scattered industrial facilities of the country, mostly to allow its shattered economy to recover once the Syrian Civil War will be over. So, which geopolitical and geo-economic factors have pushed Moscow and Beijing to play a leading role in Iraq’s and Syria’s oil and gas sectors’ contemporary scenario? What are their main interests in shaping their development?
The strategic interests of the Russian Federation in Iraqi and Syrian energy
Energy companies are primary actors of Moscow’s contemporary foreign policy. In the Middle East, their prominence is constantly increasing, capitalizing the country’s multilateral political commitments in Iraq, while openly sustaining President Bashar al-Assad in Syria.
With respect to the Iraqi context, Lukoil is one of the major players in the country’s oil recovery, where it manages 75% stakes of the West Qurna-2 giant oilfield. The project achieved the first oil production in 2014 and, so far, it represents the largest incremental production in Iraq, producing around 400,000 barrels per day (bpd) and representing almost 12% of country’s total exports. Rosneft and Gazprom, respectively the Russian oil and natural gas state-run companies, are equally present in Iraq. The firms are proxy agents of the government’s agenda, strengthening and advancing the political and commercial interests of Moscow in one of the leading OPEC members. However, Rosneft and Gazprom are also in competition with each other, to enhance their respective positions within the regional energy scenario.
Yet, the main game for Russian companies is now in the Kurdistan Region of Iraq (KRI). Gazprom Neft is participating in several oil and gas exploration projects in the region. However, the gas colossus schemes have been so far delayed due to logistical and security concerns. Gazprom is also managing the Badra field in Eastern Iraq, cooperating with an international consortium. On the other side, Rosneft has also substantially increased its activities in KRI and the rest of Iraq, becoming a key player in its the energy security. Since February 2017, Rosneft has signed manifold deals with the KRI government for a total value of over US$ 3.5 billion, securing a long-term partnership with the local government. Essentially, these arrangements reinforced the quest for the KRI’s independent management of its oil&gas resources. Rosneft has also continued exploration activities in the rest of the country, discovering new reserves in Block-12, in south-eastern Iraq, which could be added to exports. Lastly, in May 2018 Rosneft signed an agreement for the development of gas reserves in the KRI. The deal foresees the construction of a gas pipeline for exports to Turkey, which would entail a direct competition to Gazprom’s monopoly in pipeline supplies to Ankara and Europe.
Coming to the Syrian scenario, Russian efforts to militarily support Assad have so far allowed Moscow to increase its stance as a reliable and strategic partner to many Middle Eastern countries. Due to an enduring capacity of its leadership to employ energy assets as a foreign policy tool, Russia has been increasingly interested in optimizing military gains achieved in Syria to pursue broader geopolitical and geo-economic goals.
Due to the strategic location of Syria, Russia is now focused on shaping the future of the country’s oil and gas sectors. In January 2018, a “road map” agreement was signed for the reconstruction of several assets between Moscow and Damascus. In broader terms, the agreement sets the manner in which Russia will rehabilitate the damaged infrastructures of the country, while forming the next generation of Syrian oilmen. Gazprom, Rosneft or Tatneft, which has already developed reserves in the country, are the most likely to join the effort. Moreover, Russian presence in Syria gives Moscow a way to influence the future of the regional energy landscape. Before 2011 Damascus was discussing oil and gas pipeline agreements with partners in Iran, Egypt and Iraq. In particular, Stroytransgaz, a Russian service company, signed a deal with Baghdad to connect those fields operated by Lukoil and Gazprom, respectively in Iraq and the KRI, with the Syrian port of Baniyas. In order to achieve this goal, it planned the construction of an oil pipeline. Interestingly, the location of Baniyas is only 35km north of the Russian naval base of Tartus.
The strategic interests of the People’s Republic of China in Iraqi and Syrian energy
Alongside Russia, another external player is increasingly interested in advancing its interests in the region, expanding its role in Iraq and Syria. China became the world largest importer of crude oil in 2017. Securing the availability of oil and the stability of markets is a primary concern for the leadership of Chinese Communist Party (CCP) in Beijing.
In 2018 Iraq accounted for nearly 9% of all oil supplies to China, second only to imports from Saudi Arabia. Iraq remains a fundamental partner in China’s foreign policy in the Middle East and a stable provider of much-needed oil to ensure Beijing’s energy security. In fact, China has an extensive history of interactions with the oil and gas industry of Iraq, benefiting from solid commercial relations established after the ‘opening up’ and Deng Xiaoping reforms since 1978 onwards. A subsidiary of China National Petroleum Corporation (CNPC) started operations in Iraq and Kuwait back in the early 1980s, offering its logistic apparatus and skilled workforce. The US invasion of Iraq, in 2003, deeply upset China’s leadership, especially as the top 6 suppliers of oil to China at that time were all Middle Eastern countries. Among those, Iraq figured second only to Saudi Arabia. It is now evident that CNPC has become one of the biggest beneficiaries of the post-war oil & gas situation in Iraq, as the company secured its strong position in the upstream management of the industry.
Nowadays, Chinese companies are present in approximately 20% of Iraqi oilfields and their expansion is far from being tempered. Deals, in order to increase the share of Iraqi oil flowing to China, have been on the table for years, especially as Baghdad lowered its export prices in 2013, seeking to expand its Asian market portfolio. China’s remaining National Oil Companies (NOCs), including SINOPEC and CNOOC are stakeholders in some of the biggest projects developing in the country. The former has focused on exploration and production in the KRI, where Beijing has officially opposed the secession of the region from Iraq, due to its long-standing policy in favour of national territorial integrity. However, China has all the political and economic reasons to considerably gain from an independent management of oil & gas reserves by Erbil in the future.
Syria, instead, has a very different energy outlook compared to Iraq. Its oil and gas resources cannot have a serious impact on the global energy market and Damascus has never played an important role as an exporter of raw materials. However, due to the close ties developed throughout the Civil War between Beijing and Damascus, President Assad has referred many times to China as a “good” partner. China has keenly supported Damascus through diplomatic, logistical and humanitarian assistance. At the same time, rumours had emerged about a possible intervention of Chinese Special Forces in Syria, that sought to target Uyghur jihadists fighters in the country, in order to prevent the risk of spreading tensions in Xinjiang if these fighters were to return from the areas of conflict.
Now China, jointly opposing with Russia any efforts to sanction Syria in the UNSC, can engage Damascus at a privileged level. The Syrian Ministry of Petroleum and Mineral Resources Ali Suleiman Ghanem has estimated in early 2015 that the conflict disrupted facilities for a value of over US$ 27 billion. China’s investments in this sector could help strengthen the partnership with Assad, contributing to the efforts of stabilizing the country while helping to praise the New Silk Road’s beneficial impacts on the Middle East.
CNPC, which produced modest quantities of oil from several fields before 2011, is also a stakeholder in the two largest Syrian oil companies, the Syrian Petroleum Company and Al Furat Petroleum. Syrian offshore reserves in the Mediterranean Sea are very promising in terms of natural gas reserves and CNOOC is a suitable partner for the exploration and production activities. Moreover, the Five-Year Plan for 2011-2015, elaborated before the war, pledged a development of renewable energy sources in which China can play a leading role in the future, by establishing a domestic market for wind and solar energy in Syria.
Russia and China both show high capabilities to project their strategic interests in the area through NOCs. Still, despite the common opposition to the US predominant influence in the region, Beijing and Moscow display different approaches in advancing their goals in Iraq and Syria. On the one hand, Russia has recently strengthened its confidence in the Middle East, and seems more than proficient in exploiting its energy companies as strategic and foreign policy tools. On the other hand, China is willing to enhance and expand its regional role as a reliable energy partner, presenting itself as the most qualified investor in the foreseeable future of the oil and gas sectors in Syraq.
 President al-Assad in interview to Russian NTV Channel
 Chinese Troops Arrive in Syria to Fight Uyghur Rebels, Jerusalem Center for Public Affairs, December 20, 2017