Iraq: How Southern Iraq Views Oil Investors

What happened: Payment equality and environmental resentment are increasing in the Basra, Maysan and Dhia Qar oil areas.

Why it matters: Chinese operators are receiving a large share of attention, as they have dominated contracting in recent years and seem more trouble-prone than the remaining Western investors.

What happens next: There may be a local swing in favor of Western investors because they are novel and untested in some areas; the key risk of unrealistic expectations must be proactively addressed.

Local youth protests demanding employment in the oil fields are nothing new. A good example was the rallies and sit-ins at the Shuaiba refinery during Prime Minister Mohammed al-Sudani’s October visit to Basra. More interesting, we have recently noted two other strands of protest activity in southern Iraq that focus on more specific social concerns.

One is the logistical request to do with payments processed to Iraqi companies using US dollars instead of the Iraqi dinar. This relates to the reported salary disparity between local and foreign oil sector workers.

There is always talk about Chinese oil company employees receiving high salaries while their Iraqi counterparts receive lower wages in comparison. Years ago, there were similar protests over apparent disparities between employees of Western investors and joint ventures versus those of Iraqi government employees.

On 6 December, outgoing Maysan MP Haider al-Mutairi demanded that the Ministry of Oil review salaries to Chinese employees working in the Halfaya oil field. According to Mutairi, a Chinese worker makes $20,000 a month while an Iraqi employee with the same qualifications only gets $2,000.

This type of discourse is prevalent on social media, mobilizing the population, especially the youth. Protesters usually blame the Iraqi government, but MPs like Mutairi also claim that IOCs do not follow contracts dictating the employment of a certain percentage of locals in the oil fields.

On 9 December, crowds of bused-in employees from Iraqi oil service companies protested in Basra to demand that the Trade Bank of Iraq give them their payments in dollars. Those companies point out that this process is costing them at least 20% in payroll because Iraqi banks pay at 1,320 IQD/USD while the market rate is 1,141 IQD/USD. These companies do not blame IOCs but want the Iraqi government to exempt their payments from Central Bank regulations that were instituted more than two years ago.

Another theme on the rise is the environmental impact of oil production, which does not trigger as much outrage but is a growing topic of public discourse by environmental activists and civil society organizations.

In the last six months, environmental protests have been limited to social media avenues and have not resulted in demands to shut down oil facilities. The marshes are an area where environmentalists have begun to raise their voices against the impact of oilfield operations, with notable criticism directed at the Geo-Jade-operated Huwaiza field. This is worth tracking for other IOCs considering operations in the former marshlands belt between Nasiriyah and the Iranian border, including Lukoil’s West Qurnah 2 field.

Although a six-year drought — not oilfield operations — is a more realistic cause for desertification, the issue underlines how climate change may be blamed increasingly on investors.

Local officials and MPs usually target the federal government ministries, but they do make decisions to appear as if they are addressing local grievances. For example, Dhi Qar Provincial Council Chairman Azat Awda al-Nashi (see Featured Personality) held a session on 2 December focused on employment opportunities in the oil fields. He hosted the Dhi Qar Oil Company director of employment, and the Council voted to allocate 80% of positions for local employees in the province’s energy and non-energy projects.

Implementing the decision will likely be impossible in the near term. It is always worrying when local officials raise expectations in this regard. Any IOC entering these areas needs to be crystal-clear about employment expectations.

Chinese companies have been trouble-prone in this regard, reaching back as far as community resistance to the troubled Ahdab concession, the first post-Saddam upstream deal. It is arguable that Chinese firms are not currently receiving the same level of political protection they did in the early 2020s, back when militia parties like Badr were still actively pushing the agenda of the so-called Silk Road and the Iraq-China oil-for-development deal.

This is a trend worth watching, as the key militia parties are much more focused now on keeping the US happy and off their backs, sanctions- and airstrike-wise.