My American Enterprise Institute colleague Derek Scissors points out to me that, according to China’s General Administration of Customs, Iraq has surpassed Iran as a source of crude oil exports to China in the first three quarters of 2013. That is both good and bad news. Good news because, despite all those who said sanctions would not work on Iran and that China would fill the gap left behind by Western companies, it seems both that China has decided to look elsewhere and that Iranian capacity to fulfill demand has declined. Earlier this year, the Iranian Statistics Agency announced that the Iranian economy had retracted 5.4 percent; the Islamic Republic is certainly feeling the bite of sanctions and decades of its own mismanagement. No wonder Tehran wants quick relief in response to a diplomatic charm offensive.
The United States no longer gets much oil from the Middle East—the markets are fungible, but Middle Eastern oil largely supplies China, India, and Europe. China and India, and to some extent Europe, are essentially free-riders benefiting from decades of American security investment. That Iraqi oil exports are increasing is good news for Iraq, and would be better news if Iraq would invest more of that income in its economy and not simply use it to pay the salaries of a bloated bureaucracy that is an order of magnitude too large.
Still, while Chinese investors are ubiquitous in southern Iraq and increasingly in Iraqi Kurdistan, it is a shame that after so much investment in blood and treasure, too many American investors continue to give Iraq a wide berth. President Obama has long looked at Iraq as original sin and rushed to wash his hands of it. Sure, there were diplomatic pronouncements and agreements about continuing relationships, but Obama has done little if anything to fulfill those agreements. In effect, because of disagreements about Saddam’s ouster more than a decade ago, Obama decided to forgo a lasting relationship with Iraq, even though the Iraqis want one to balance out Iran, Russia, and China. That China has become a primary beneficiary of the Iraq War wasn’t inevitable, but simply the result of White House disinterest if not disdain.