Dr. Pshtiwan Faraj

China’s economic rise across the developing world was built not only on trade but on infrastructure. Ports, railways, power plants, industrial zones, pipelines and highways became instruments through which Beijing expanded its economic presence and created long-term relationships with governments that had struggled to attract Western capital. For much of the past two decades, the Belt and Road Initiative offered developing countries an alternative source of financing when traditional donors were unwilling or unable to fund large public infrastructure projects. That model is now changing. The decline of Chinese sovereign lending does not mean China is abandoning the developing world, but it does mean that countries such as Iraq and the Kurdistan Region can no longer assume that Beijing will automatically provide the kind of state-backed infrastructure finance that defined the earlier Belt and Road era.

The scale of the change is significant. China’s sovereign creditors had issued more than $800 billion in loans to more than 150 countries by 2020, financing projects that became symbols of the Belt and Road era. Yet the share of Chinese lending directed toward infrastructure has fallen dramatically, while Chinese engagement has increasingly shifted toward private and quasi-private projects, energy extraction, minerals and investments that have a clearer commercial connection to Chinese economic interests. The source analysis shows that infrastructure accounted for 64 percent of Chinese lending commitments to developing countries during the 2000s, 55 percent during the 2010s, but only 25 percent so far in the 2020s. This is not simply a change in financing volumes. It is a change in the strategic logic of Chinese overseas economic engagement.

For Iraq, that distinction matters enormously. Iraq needs infrastructure on a scale that cannot be separated from its economic future. Electricity generation, transmission networks, oil and gas infrastructure, refineries, roads, railways, ports, water systems, telecommunications and logistics infrastructure all require sustained capital. Iraq also needs to reduce its dependence on oil revenues without undermining the energy sector that currently finances the state. As I argued in Iraq and the United States Are Redrawing the Middle East’s Energy Map with $60 Billion in Strategic Deals, Iraq is increasingly becoming an arena in which energy investment and geopolitical competition are converging. The question is therefore not whether Iraq needs foreign capital. It clearly does. The more important question is what kind of foreign capital Iraq should seek, under what conditions, and for which strategic sectors.

China remains exceptionally important to that calculation. Beijing has become one of Iraq’s largest economic partners, and Chinese companies have established a significant presence in energy, construction and infrastructure. But Iraq should distinguish between Chinese commercial investment and the older model of Chinese sovereign infrastructure financing. Those are not the same thing. The emerging Chinese model is increasingly focused on projects that generate direct commercial returns, secure energy supplies, obtain access to minerals or create opportunities for Chinese companies. The shift toward oil, gas and mining described in the source material is particularly relevant to Iraq because the country's greatest attraction to China remains its combination of enormous hydrocarbon resources, infrastructure needs and strategic geography.

That makes Iraq’s oil sector central to understanding the next phase of Chinese engagement. In China, Russia and the US Compete for Influence for Iraq’s Oil, I argued that the competition surrounding Iraq is increasingly being conducted through oil contracts, infrastructure investment, export routes and corporate participation rather than through conventional military confrontation. The Chinese retreat from large-scale public infrastructure finance therefore should not be interpreted as a Chinese retreat from Iraq. It may instead mean that Beijing becomes more selective, concentrating capital where Iraqi resources and Chinese economic priorities overlap.

This distinction is especially important for Kurdistan. The Kurdistan Region has long attempted to use its geography, energy resources and relationships with external powers to attract investment and strengthen its economic position. Yet the Region's experience has demonstrated that infrastructure can be both an economic asset and a geopolitical vulnerability. The dispute over northern Iraqi oil exports showed that possessing hydrocarbons is insufficient if the producer lacks reliable export routes, political agreements, legal certainty and access to international markets. My analysis of Turkey’s $1.47 Billion Oil Defeat Reignites Iraq-Kurdistan Energy Battle examined precisely this problem: the Iraq–Turkey energy corridor is not simply a pipeline but a political and legal system in which Baghdad, Erbil, Ankara and international investors all possess leverage.

The lesson from China’s changing infrastructure strategy is therefore particularly relevant to Kurdistan's own development model. Infrastructure cannot be treated simply as something that foreign companies build while governments collect the economic benefits. Whoever finances, owns, operates or controls infrastructure acquires influence over the political economy surrounding it. That is why the Kurdistan Region must think beyond individual projects and develop an integrated infrastructure strategy connecting energy, electricity, transportation, logistics, telecommunications and industrial development. Kurdistan Strategic Outlook 2027: Between Autonomy, Centralization and a New Regional Order makes a similar argument from the energy perspective: Kurdistan needs to treat energy as strategic infrastructure rather than merely as a source of government revenue.

The same principle applies to gas. Kurdistan possesses an increasingly important strategic asset in the Khor Mor field and its wider gas infrastructure, but the value of that resource depends on what happens beyond the field itself. Gas requires processing, pipelines, electricity generation, regional demand and commercially sustainable contracts. In Who Really Controls Kurdistan’s Gas? The Dana Gas Deal, the KRG’s Silence and the Hidden Cost of Selling Energy to Iraq, I argued that the question is not whether Kurdistan needs foreign investment—it clearly does—but whether the government can ensure that large investments are accompanied by sufficient transparency and commercially defensible agreements. China’s changing model reinforces this point because infrastructure investors increasingly seek projects that provide identifiable returns rather than financing infrastructure simply as a development objective.

There is also a broader geographical question. China’s Belt and Road strategy helped popularize the idea that infrastructure could transform geography into strategic power. But Iraq does not need to become a passive component of someone else’s corridor. Its geography gives Baghdad an opportunity to become a bridge between the Gulf, Turkey, Iran, Syria and the wider European market. The strategic significance of the Development Road therefore lies not simply in constructing a railway or highway but in creating a wider economic architecture involving ports, logistics, energy, industrial zones and trade. This is one reason why Turkey and Iraq’s Emerging Partnership: How the Regional Order Is Being Rewritten is important to understanding the emerging regional picture: Ankara increasingly sees Iraq not merely as a neighboring state but as part of a wider economic and connectivity system.

Turkey's role becomes even more important when viewed through the changing Chinese model. If Beijing is becoming more selective in public infrastructure finance, Ankara has an opportunity to deepen its role as an investor, transit state and economic partner. Turkey's geographical position gives it an interest in connecting Iraqi energy and trade with Mediterranean and European markets. My analysis of Could Shifts in Iraqi Kurdistan Turn Former Foes into Turkish Partners? examined how energy cooperation, cross-border trade, security coordination and infrastructure are increasingly binding Ankara and Kurdish actors together. But this also creates a strategic dilemma for Kurdistan: connectivity can create economic leverage, but excessive dependence on a single corridor or external partner can reproduce the vulnerability that infrastructure was supposed to solve.

This is why diversification should become the central principle of Iraqi and Kurdish economic strategy. Diversification does not mean choosing Washington over Beijing, Beijing over Ankara, or Ankara over another external power. It means preventing any single external actor from acquiring disproportionate control over the infrastructure upon which national economic security depends. South Korea’s Strategic Relationship with Iraq and the Kurdistan Region illustrates why this matters. South Korea represents a different model of external economic engagement in which energy security, infrastructure, construction and technology can produce long-term commercial relationships without necessarily reproducing the same geopolitical structure associated with great-power competition.

The same logic applies to the United States. Washington cannot realistically ask Iraq to abandon China. Iraq has too many economic reasons to maintain relationships with Beijing, and China's importance to Iraqi energy and trade is too substantial for a binary choice to be sustainable. The more realistic American strategy is to ensure that U.S. companies, financial institutions and strategic infrastructure remain deeply embedded in Iraq's economy. That is precisely why the economic dimension of Victoria Taylor's recent Iraq visit matters. As I argued in Victoria Taylor’s Iraq Visit: What Washington’s New Iraq Test Looks Like from Baghdad, Washington's challenge is not simply to compete with China for political influence but to remain relevant to the infrastructure and commercial architecture that will shape Iraq's future.

For Kurdistan, the strategic implications are even more direct. The Region sits at the intersection of Iraqi, Turkish and Iranian economic and security systems. It also remains relevant to American strategy and increasingly visible in China's calculations. In The Kurds as the Connecting Link in Washington’s New Regional Strategy, I argued that Kurdish actors are increasingly part of an emerging regional architecture built around energy, trade, infrastructure and connectivity rather than military alliances alone. This transformation means that infrastructure policy is becoming foreign policy by another name.

China's own engagement with Kurdistan also illustrates this changing environment. Why the PUK Is Looking East: What Its High-Level Visit to China Reveals About Kurdistan’s Changing Foreign Policy examined the growing economic and political dimensions of Kurdish-Chinese relations, including Chinese interest in energy, infrastructure, telecommunications and industrial development. Meanwhile, Kurdistan Comes to China: How Kurdish Language Is Opening a New Door to Beijing showed that China's engagement is not restricted to physical infrastructure. Education, cultural exchanges, elite networks and institutional relationships can gradually create a wider ecosystem of influence.

That broader ecosystem is becoming increasingly important because the contest over infrastructure is also a contest over strategic autonomy. The Kurdistan Region has repeatedly discovered that geography can create opportunity only when supported by institutions capable of converting that geography into bargaining power. Kurdistan in the New Middle Eastern Geopolitics argues that Kurdistan's future will depend on whether its actors can convert geography, energy, security, economic connectivity and international relationships into durable strategic influence. That is ultimately the deeper lesson of China's infrastructure retreat.

The retreat itself should therefore not be interpreted as the end of the Belt and Road era. It is better understood as its transformation. China is moving away from a model in which sovereign lending financed enormous volumes of public infrastructure and toward a model in which commercial logic, energy security, minerals, investment returns and strategic supply chains carry greater weight. The source analysis notes that Chinese entities agreed to $71.5 billion in oil and gas projects in 2025 even as infrastructure's share of state-owned bank lending declined sharply. For resource-rich states, this may mean that China remains highly active, but increasingly on terms shaped by commercial priorities rather than development finance.

That creates both a warning and an opportunity for Iraq and Kurdistan. The warning is that foreign infrastructure capital is never politically neutral. Loans, concessions, energy investments, pipelines, ports and transport networks can create long-term dependencies if governments negotiate from weakness or sacrifice transparency for speed. The opportunity is that the retreat of Chinese public infrastructure financing may create space for other actors—including the World Bank, European institutions, the United States, Gulf states, South Korea, Japan and private investors—to compete by offering better financing, stronger transparency and more sustainable infrastructure partnerships.

The central question for Baghdad and Erbil is therefore not whether China is retreating. It is whether Iraq and Kurdistan are prepared to negotiate the next infrastructure era from a position of strategic clarity. They should welcome Chinese capital where it serves national development, but they should simultaneously diversify investors, strengthen procurement rules, publish major contracts, protect infrastructure from political capture and ensure that energy and transport corridors serve broader economic objectives. Infrastructure should not simply connect Iraq to foreign markets. It should connect Iraq's economic interests to one another.

The most important lesson is simple: the era of infrastructure financed primarily by geopolitical ambition is giving way to an era in which infrastructure will be financed increasingly by strategic economic calculation. Iraq and Kurdistan cannot control that global transition, but they can control how they respond to it. If they build transparent institutions, diversify external partners and treat infrastructure as an instrument of economic statecraft rather than a collection of isolated projects, China's retreat could become an opportunity rather than a vulnerability. If they fail to do so, they may simply exchange one form of dependency for another.

Dr. Pshtiwan Faraj is a geopolitical and energy analyst, journalist and founder and editor of Kurdish Policy Analysis, specializing in Iraq, the Kurdistan Region, Iran, Turkey, energy security, infrastructure and regional geopolitical competition. His work combines policy research, primary-source analysis and long-form geopolitical reporting for international audiences.

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