China learning its growing responsibility

ARTICLE: China Oil Deal Is New Source of Strife Among Iraqis, By TIMOTHY WILLIAMS, New York Times, September 5, 2009

China is just beginning to learn the responsibilities of its new role as extractor-supreme inside the Gap:

WASIT PROVINCE, Iraq -- When China's biggest oil company signed the first post-invasion oil field development contract in Iraq last year, the deal was seen as a test of Iraq's willingness to open an industry that had previously prohibited foreign investment.

One year later, the China National Petroleum Corporation has struck oil at the Ahdab field in Wasit Province, southeast of Baghdad. And while the relationship between the company and the Iraqi government has gone smoothly, the presence of a foreign company with vast resources drilling for oil in this poor, rural corner of Iraq has awakened a wave of discontent here.

"We get nothing directly from the Chinese company, and we are suffering," said Mahmoud Abdul Ridha, head of the Wasit provincial council, whose budget has been cut in half by Baghdad in the past year because of lower international oil prices. "There is an unemployment crisis. We need roads, schools, water treatment plants. We need everything."

The result has been a local-rights movement -- extraordinary in a country where political dissent has historically carried the risk of death -- that in the past few months has begun demanding that at least $1 of each barrel of oil produced at the Ahdab field be used to improve access to clean water, health services, schools, paved roads and other needs in the province, which is among Iraq's poorest.

The ripples are traveling far beyond this province, too. Frustrations have spilled over into sabotage and intimidation of Chinese oil workers, turning the Ahdab field into a cautionary tale for international oil companies seeking to join the rush to profit from Iraq's vast untapped oil reserves.

A $3b development project with virtually no local impact, a point to remember as we track China's $3B investment in copper in Afghanistan.

The key thing is the local resolve to demand better. The connectivity is creating logical backlash, and this changes internal political dynamics in Iraq.

So, while painful, a good dynamic all around, yielding us a more uppity Iraqi population and a China that's forced to deal with it.

Yes, it will be nasty up front:

Some local farmers began reacting by destroying the company's generators and severing electrical hoses, angry because they believed that their fields were being unfairly handed over to the company. Other residents began expressing outrage that very few jobs were being opened to them.

But that's how you get people's attention.

This bit reminds you of descriptions of U.S. bases in Iraq:

Now, the field's 100 or so Chinese workers rarely leave their spartan compound for fear of being kidnapped, the company said, even though the Iraqi government recently deployed extra security to the area.

So, you see, the situation isn't that different. It starts with enclaves, but it's not sustainable. When you network into globalization's embrace, it typically unfolds as an all-or-nothing deal.

Why will China change its approach?

The Ahdab field contains about one billion barrels of oil, modest by Iraq's standards. In comparison, the Rumaila field in southern Iraq, for which the Chinese company and British Petroleum signed a development deal in June, is Iraq's largest field with an estimated 17.8 billion barrels.

Because this field is just the tip of the desired iceberg.

And so the dynamic will continue to unfold, with the usual accusations on both sides:

Earlier this year, the area's farmers complained that the oil company's electrical and seismic equipment -- used to help determine where wells should be drilled -- was damaging fragile homes and crops.

About the same time, electrical lines, many of which were laid across farmland, were severed or stolen, as were expensive generators and other equipment. This spring, a rocket was fired, though it fell harmlessly. Mr. Han said he believed that it had been aimed at a nearby American military base, though local farmers said they suspected that the Ahdab field was the target.

More trouble could be on the way next spring when 1,000 Chinese workers arrive to build a central processing plant.

Mr. Han said hiring Iraqis to do the job was out of the question. "We don't have enough time to train local people to do that work," he said.

The days when the Chinese will be able to hide behind the skirt of the U.S. military are coming to an end. They won't be able to bribe their way out of every local uproar.