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Established in 2006 as a Community of Reality

Welcome to the Neno's Place!

Neno's Place Established in 2006 as a Community of Reality


Neno

I can be reached by phone or text 8am-7pm cst 972-768-9772 or, once joining the board I can be reached by a (PM) Private Message.

Established in 2006 as a Community of Reality

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    Four Reasons Why China Is Cautious About Iraq’s ‘Development Path’

    Rocky
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    Four Reasons Why China Is Cautious About Iraq’s ‘Development Path’ Empty Four Reasons Why China Is Cautious About Iraq’s ‘Development Path’

    Post by Rocky Tue 06 Aug 2024, 4:59 am

    Four Reasons Why China Is Cautious About Iraq’s ‘Development Path’

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    Iraq has a geographic blessing and curse: it lies at the crossroads of Asia and Europe, and is bordered by Saudi Arabia and Iran, two major regional powers. But despite its vast oil reserves, Iraq’s coastline of just 36 miles (58 kilometers) limits its direct access to international waters. To export energy, Iraq relies on shipping its Arabian Peninsula oil through the Persian Gulf, the Red Sea and the Suez Canal to the Mediterranean.
    This makes peace in the surrounding waters and good relations with neighboring countries crucial to Iraq’s economic lifeline. To expand trade and diversify its economy, Iraq is planning to develop a 1,200-kilometer “Development Road,” a dual corridor combining rail and road transport. It starts at the port of Faw on the Persian Gulf, passes through Basra and the oil-rich areas, and extends north to the Turkish border.
    With the support of Iran and Turkey, the project aims to create an alternative Eurasian route, bypassing the Suez Canal and complementing the India-Middle East-Europe Economic Corridor (IMEC) under construction. Successful implementation of the “Development Road” project will undoubtedly boost local employment opportunities, facilitate cross-continental trade, create special economic zones and new cities focused on green development, and thus support a new reality of economic leverage and non-oil projects.
    However, the development road project faces a number of security and economic challenges. Decades of war have combined to weaken Iraq’s political cohesion. Because the “development road” will be a potential corridor for Eurasian trade, the free flow of goods must be guaranteed through a strong security structure. Who will provide such security guarantees? Who will ensure the continued political will to implement such a massive project across successive leaderships and administrations? Moreover, the future success of the development road depends on strong trade growth between Asia and Europe, especially between China and Europe. However, the current trade divide between the West and China has led Europe to begin implementing tariff plans on some Chinese products, most notably Chinese electric cars, and to shift manufacturing and trade supply chains away from China to other Asian countries. The volume of goods traded between China and Europe is not expected to grow significantly in the coming decade. This is problematic because the development road relies on high trade volumes to offset construction and operating costs, and the decline in trade between the two regions does not bode well for the financial viability and economic sustainability of such a massive infrastructure project.
    Development Road as a Complement to the Belt and Road Initiative
    Many wonder whether Iraq’s development path is an alternative to China’s Belt and Road Initiative (BRI). The BRI aims to modernize Eurasian trade by creating infrastructure links and trade corridors that did not exist before. Indeed, today’s Eurasian continental railway networks connect trade from China’s eastern coast through Central Asia to Western Europe. The BRI also connects land corridors from southwest China to Pakistan’s Gwadar port, where goods traded via the Suez Canal sail to Western Europe. Because “all roads lead to Rome,” there is no exclusive route, so with a potential transport corridor between Iraq and Turkey, Chinese goods could be shipped from Pakistan’s Gwadar port directly across the Persian Gulf to Iraq’s Faw port. This would make Chinese shipping faster and cheaper than similar goods exported by its global competitor, India, and thus provide a significant advantage for China.
    But the “development route” has another contender. The India-Middle East-Europe Economic Corridor (IMEC) is equally ambitious, but led by the United States and its regional allies. This multimodal transport corridor aims to boost trade links between India, which is emerging as a global trading hub; the United Arab Emirates and Saudi Arabia, which have large trade surpluses and are undergoing major economic transformations; Israel, a key U.S. ally and global technology leader; and Europe, the final consumer market. Given India’s growing importance in global manufacturing and the economic integration of participating countries, the India-Middle East-Europe corridor is poised to create a new paradigm for global trade.
    Almost in parallel, the Development Road and the India-Middle East-Europe corridor will come into direct competition. In the current geopolitical landscape, the India-Middle East-Europe route is best designed to facilitate trade from India to Europe, while the Development Road will primarily support trade from Russia and China.
    China cautious about Iraq's 'development path'
    Over the past decade, China has amassed the world’s most advanced expertise in infrastructure and urban engineering. We have seen the impact of this in the construction of Egypt’s new administrative capital in the middle of the Sahara Desert in record time, and in the tunnels and skyscrapers of NEOM, the futuristic city in Saudi Arabia, which are living proof of China’s engineering achievement.
    China has not been absent from actively participating in Iraq’s post-war reconstruction. It is the largest builder of power plants in Iraq, providing more than 6,200 megawatts of capacity, including the Basra power plant. Chinese companies have developed oil and LNG facilities, water treatment plants, airports, and schools. China is also Iraq’s largest trading partner, and the two countries have elevated their diplomatic relations to a strategic partnership.
    The financial feasibility of the project is uncertain, as the original budget for the construction of the Faw port was raised when it was built and its completion date was delayed to 2025.
    However, despite being a vital partner in infrastructure and trade, it has taken a cautious stance on Iraq’s $17 billion “Development Road” initiative for four main reasons:
    First, the project faces a potential problem due to differences in construction and engineering standards. South Korea’s Daewoo won the $2.6 billion construction contract for the Faw deep-water port, the starting point of the “Development Road,” while European companies conducted most of the initial feasibility studies for the “Development Road.” The differences in construction and engineering standards between the West and China are likely to add to the project’s costs and delays.
    Government inefficiency and corruption will hinder implementation.
    Second, the project’s financial viability is uncertain. The original budget for the Faw port was raised when it was built and the completion date has been pushed back to 2025. The current “development road” plans include building 15 stations along the route, a massive undertaking. And China is not convinced that government oil revenues will be enough to cover the financing needed to build a dual rail and road transport system across Iraq.
    Third, political and security risks surrounding the mega-infrastructure project remain. Government inefficiency and corruption will hamper the implementation of such a mega-project, and rent-seeking will hamper the plan’s implementation, which requires transparency and accountability in the work of regional governments. Instability within the government, particularly violent extremism in the Kurdistan Region, where the development route passes, could paralyze transportation along the route if violence breaks out.
    Fourth, China is not enthusiastic simply because it has alternatives. In June, China, Uzbekistan, and Kyrgyzstan agreed to build a railway linking Kashgar, in Xinjiang, with eastern Uzbekistan via southern Kyrgyzstan. The new $5 billion railway will connect with existing rail networks in Turkey and Western Europe. The new land corridor from western China to Western Europe will bypass both geopolitically contentious Russia and the Red Sea, a major breakthrough in Europe-Asia transport infrastructure. Compared with the Iraq-Turkey route, this alternative appears to be more financially feasible, less geopolitically disruptive, and more manageable once construction is complete.
    Finally, the assumption that China will automatically support the “development path” because of its growing trade and investment ties with Iraq and its declared alignment with the global South may not be entirely correct, as it seems.


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