China may participate in reconstruction of Iraq

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Last updated at: (Beijing Time) Tuesday, December 30, 2003

China may participate in reconstruction of Iraq

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On December 23, US Secretary of Defense Donald Rumsfeld indicated that the Pentagon didn't prohibit China from participating in Iraq's postwar reconstruction. But earlier, US attitude was not like this. On December 9, US Deputy Secretary of Defense Paul Wolfowitz issued a memorandum, declaring that the United States would prohibit those countries which opposed the Iraq War from participating in the activities of bidding for Iraq's reconstruction, China was then in the "black list". On December 15, US President George W. Bush again announced the list of countries that could participate in the bidding for the contract worth US$18.6 billion for Iraq's reconstruction, again China was not in the name list. For a while, whether China could participate in Iraq's reconstruction became a topic of concern to the people.

Involvement in Iraq's reconstruction is of major significance for China. Strategically, Iraq is a big country of strategic importance in the Gulf and even the entire Middle East region, taking part in Iraq's rebuilding helps maintain and expand China's influence and benefit in Iraq, the Gulf and even the entire Middle East region. Iraq's oil reserves rank second in the world, participating in Iraq's reconstruction will help us to gain a stable oil source. From the perspective of immediate interest, participating in Iraq's reconstruction will create opportunities and conditions for Chinese enterprises to expand business and gain economic benefits. The US Foreign Relations Committee and the US Center For Strategic & International Studies and other institutions made estimations of the cost for Iraq's reconstruction, though the results were different, they all put the figure at above US$25 billion. If Chinese companies could participate in the reconstruction, it would really be quite profitable.

In addition, before the Iraq War, China had established multi-faceted economic ties with Iraq, which involved many contracts and lots of creditor's rights, in this sense, it would be a reasonable continuation of economic benefits for China to take part in the postwar rebuilding of Iraq. Relevant materials show that from 1986, the year before the Gulf War, to July 1990 alone, Iraq owed China US$1.087 billion worth of international trade and labor contract money as a result of deferred payments. The China Construction Engineering Corporation, the China Road and Bridge Engineering Group and others were the main victims.After the end of the Gulf War, China, as a main competitive bidder, actively participated in the UN "oil for food" agreement for Iraq, by the end of 2000, altogether over 60 Chinese companies signed with Iraq more than 650 contracts valued at above US$1.6 billion. Of which, over 500 contracts worth around US$1.34 billion had been granted UN approval for implementation, involved in these contracts included the China National Petroleum Corporation, the East Electric Power, Sinopec, China Construction Engineering Corporation and several other big Chinese companies.

However, the United States threatened to use force against Iraq after the "September 11" incident in 2001, especially the outbreak of the war interrupted Chinese enterprises' normal economic activities in Iraq. These companies expect that the Iraqi situation would become stabilized, so that they could continue to implement the contracts with Iraq. On December 23, the China Equipment International Engineering Co. Ltd. Delivered nearly 5,000 tons of large power station equipment to Baghdad, this was the first large Chinese company that began to resume its business in Iraq after the conclusion of the Iraq War. The company had signed a contract with Iraq before the war, under which it was to build a power station in Iraq, the project, which, with a total installed capacity of 1.2 million kilowatts and at a construction cost of US$720 million and an estimated period of seven years, was also a contract project under the "oil for food" agreement framework.

The United States, of course, wants to monopolize the big cake of Iraq's reconstruction, it also wants to avail itself of this cake to make it hot for those countries which sang a different tune on the Iraq issue, and to do something good for those countries which followed it closely, so there arose the different treatment in the bidding for contracts on Iraq's reconstruction. Perhaps it was due to the strong reaction of the international community, and maybe it discovered that too much money was needed for reconstruction, the United States has changed its intransigent attitude and loosened its stand, thus there is Rumsfeld's speech mentioned above. Bush has sent former Secretary of State James Baker to Europe to mediate, relax contradictions and explore ways for exchanging debts for contracts, France, Germany and Russia have expressed their willingness to reduce or exempt Iraq's debts. It is reported that Baker will come on December 29-30 to China to discuss the same matter.

Related experts hold that although certain progress has been made in the process of US political reconstruction in Iraq, there are still many changeable factors in the security situation in the country. Currently Iraq's economic reconstruction is focused on infrastructure construction, which involves a long investment period, slow effective result and a strong strategic nature. For these reasons, Chinese companies must be careful when they set foot in Iraq.

(This article on Page 2 of the Global Times, December 26, was written by Gao Zugui and translated by PD Online.)

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