The news from Baghdad must have stunned the erstwhile neo-con script-writers as they saw the much-vaunted 'freedoms' for the Iraqis head off in an entirely unexpected and unscripted direction.

The consolation prize for the Bush-era empire-builders in Washington was an Exxon-Mobile-Shell alliance winning phase one of the West Qurna field.

Exxon-Mobile had been favourite to win the 17.8 billion barrels of the Rumaila field but that went to a British Petroleum-China National Petroleum Corporation (CNPC) alliance, which won the contest because, unlike Exxon-Mobile, they were prepared to cut their fees to the $2 per barrel demanded by the Iraqi Ministry of Petroleum.

CNPC in alliance with Total of France and Petronas of Malaysia were also the winners of the right to develop the Halfaya field which has predicted reserves of 4.1 billion barrels and a projected output of 535,000 barrels per day.

Russia's Lukoil with its partner Statoil got the second phase of the large West Qurna field which has projected reserves of 12 billion barrels and expected production rates of 1.8 million barrels per day. Meanwhile Gazprom, also a Russian concern, won the Badra field with its expected 170,000 barrels per day of production.

Not much consolation there for American rightist interests after approximately $2 trillion of expenditure, the loss of hundreds of American lives and those of perhaps one million Iraqis, though the exact number probably will never be known, but much to cheer in Beijing and Moscow as their de facto interests coincide to the detriment of Washington's. Also among the losers was a joint Turkish-Indian bid for the Halfaya field.

China, then, is making strong gains in its bid for energy security around the world while, at the same time, it feels that its reserves of rare earth and other precious materials vital in the manufacture of electric motors for hybrid cars and such everyday modern 'necessities' as Blackberries are being rapidly exhausted.

Ironically while its reserves are shrinking, over-exploitation and cut-throat competition in exports are driving prices down in the international market.

For example, China's reserves of rare earth ten years ago were 88 per cent of the world's total whereas they were down to 52 per cent in 2008 while exports boomed to almost ten times previous levels. Beijing still leads the world in rare earth while its reserves of wolfram and indium are the world's largest and production accounts for 80 per cent of the world total. Since these are all strategically vital in the information, aeronautics, astronautics and weapons fields many nations around the globe buy and stockpile them because they cannot be recycled.

According to the Chinese Ministry of Land and Resources only 6 out of 45 of Chinese indigenous resources will be able to satisfy domestic demand. If demand continues at the current rate, says the ministry, in 50 years at the latest China will no longer be able to claim its leading position in deposits of rare earth, indium and wolfram. But as exports of the valuable commodities have continued to accelerate, so prices have declined by 30 per cent to 40 per cent. Profits are wafer-thin and prices for rare earth are less than three-quarters of what they were 15 years ago. As an example, prices for indium, 80 per cent of which comes from China, are now at $1,000 per kilogramme, as low as one-fifth of what the Chinese authorities consider a reasonable price.

But it's not only China that is concerned about this developing situation. In fact so concerned are the Americans and Europeans that they have filed suit against China with the World Trade Organisation (WTO) alleging that Beijing has been guilty of restraint of trade by plans to limit its exports of its precious resources. Significantly it's the first WTO challenge from the United States against China since President Barack Obama took office. And it is unlikely to be the last as China continues to threaten American dominance of world trade.

The Chinese authorities have, not surprisingly, not taken this threat well asserting that the country's export policies are drafted to protect its resources and the natural environment within the rules of the WTO. The government also maintains that every country has the right to protect its natural resources under the rules of the United Nations.
By tweaking the Beijing authorities in this way the United States seems only likely to exacerbate the situation and create a much more rigid and ideology-driven response from the Chinese side with a set of policies and a bureaucracy designed to police the trade in precious resources.

Already the Ministry of Industry and Information Technology has issued new regulations on raw materials. The new rules show that China will strengthen supervision of exports to guarantee national and economic security.

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