U.S. Aims to Counter China in Iraq, Impacting Global Oil Flows

The Trump administration is intensifying efforts to pull Iraq away from China's sphere of influence, a geopolitical shift with long-term implications for global oil markets and North Dakota producers, according to a report from OilPrice.com.

Last week's meeting between Iraqi Prime Minister Ali al-Zaidi and President Donald Trump at the White House was aimed at formulating a new cooperation framework to remove Beijing and Moscow from Baghdad's foreign relationships. A senior European Union security source told OilPrice.com the primary focus is on replacing Iraq's broad relationship deals with China with similar agreements with the U.S.

This push centers on Iraq's vast oil and gas reserves, which the report identifies as vital to China's economic and military expansion. The current U.S. strategy views the Middle East as a critical bridge between Asia and Europe, a region for military bases, and a source of the energy China needs.

The effort seeks to counter China's entrenched position, which was secured through a foundational 2019 "Oil for Reconstruction and Investment" agreement with Iraq. That deal, modeled on a China-Iran pact, grants Chinese firms priority for new field contracts and substantial discounts on recovered oil and gas.

For Bakken operators and royalty owners, sustained U.S. pressure in Iraq represents a double-edged sword in the global competition for market share. Successfully pulling Iraq toward Western alliances could theoretically open more investment opportunities for U.S. firms and align Iraqi production more closely with U.S. foreign policy goals. However, it also ensures Iraq remains a central, high-volume competitor in global oil markets, maintaining pressure on prices that affect Bakken well economics.

The geopolitical maneuvering occurs against the backdrop of the U.S. "2025 National Security Strategy," which outlines three core spheres: Asia dominated by China, Europe by Russia or NATO, and the Americas by the U.S. The Middle East, and Iraq specifically, is seen as a battleground between these spheres due to its strategic location and resources.

The report notes that China deepened its ties with Iraq during a period of perceived U.S. weakness, marked by increased attacks on Western forces by Iranian-backed proxies, even after the U.S. declared an "end of combat mission" in Iraq in December 2023.

The outcome of this quiet bid will influence long-term global supply dynamics. A Iraq more aligned with U.S. interests could see different terms for its massive oil development, potentially affecting the flow of discounted crude to China and altering the competitive landscape for all non-OPEC producers, including those in the Williston Basin.