Factors that Could Transform the Shanghai Cooperation Organization Into a More Powerful Entity

The 14^th Summit of the Shanghai Cooperation Organization (SCO) was held from September 11^th to September 12^th in Dushanbe Tajikistan. Though security concerns resulting from the United States’ withdrawal from Afghanistan and the economic consequences of sanctions against Russia due to the crisis in Ukraine dominated the meeting, fora such as this serve as useful venues for regional powers to discuss common concerns. Given that SCO is looking to admit new members this could increase the utility of the organization. For these reasons an understanding of SCO is more important than ever.

The Shanghai Cooperation Organization was formed in June 2001 by the Republic of Kazakhstan, the People’s Republic of China, the Kyrgyz Republic, the Russian Federation, the Republic of Tajikistan and the Republic of Uzbekistan. The stated goals of SCO were to cooperate on issues of concern such as security, environmental degradation, and economic cooperation and development. Despite some successes in combating terrorism, narcotics trafficking, and smuggling SCO faces significant limitations in its ability to project power. A key limitation of the organization is its refusal to interfere in the internal affairs of other countries. All of the members of SCO have domestic problems to which they are sensitive to thus any action on the part of SCO members that could be perceived as sanctioning intervention could set a precedent that would serve as justification for the international community to interfere with the internal affairs of these countries. This is why such precedents will be avoided. This reality begs the question, "How can an entity project power if it refuses too?" This reality combined with other internal tensions, such as Russia and China’s ambition to dominate the organization, means that effective power projection is unlikely anytime soon.

Despite structural factors which limit the Shanghai Cooperation Organization’s ability to project force beyond anti-terrorism/law enforcement operations the organization’s activities should be monitored as it is possible that greater economic cooperation amongst members and neighboring states (the so-called Silk Road Economic Belt) could lead to the further development of Central Asian energy resources. Two key questions we should be asking are:

• How effective is SCO as a forum for formal and informal discussions of member and observers such as Iran, India, and Pakistan?

• What factors exist that could encourage cooperation or conflict?

The first question will be answered largely by whether or not there are enough factors to encourage cooperation (aside from border security and anti-terrorism/joint law enforcement operations) amongst states with differing interests. To a degree we might be seeing such an alignment of interests now. Essentially, we have a group of countries all of whom have a vested interest in further developing the energy sector of Central Asia while limiting Western interference in the region. There are several developments that have and/or are emerging whose implications we must ponder:

• The sanctions imposed on Russia due to the crisis in Ukraine has led Moscow to impose import bans on Western products and forced Russia to seek new markets for its oil and natural gas.
  May’s 30 year 400 billion USD natural gas deal between China and Russia is an example of this eastward shift. (Russia got a very poor deal here as Moscow was desperate to secure a deal and Beijing knew it had all the leverage).

• China is actively working towards developing its interior. Access to cheap energy is an essential component of this strategy. Central Asia can serve as such a source.

• Many Central Asian countries’ economies are heavily tied to Russia and are dependent upon remittances sent back from expatriate workers residing in Russia. A fluctuating ruble or a reduction in remittances is heavily damaging to their economies so they have a vested interest in ensuring that Russia is making money. If Moscow cannot profit off trade with the West it will have to look elsewhere. Clearly, this is what Russia is doing. Central Asian countries have an interest in facilitating this process.

• Interest in developing the energy resources of the Caspian is growing while factors that have limited development in the region are arguably diminishing. Traditionally, Azerbaijan has been the dominate player in the region vis-à-vis energy exports but if the Trans-Caspian Pipeline were built and sanction against Iran were dropped Turkmenistan and Iran could both become significant energy exporters. Russia has opposed the Trans-Caspian Pipeline as it would undermine Moscow’s ability to force countries to respect Russia’s will or risk having their energy supplies cut off. Iran has significant supplies of natural gas but due to sanctions has been unable to attract the capital and technical know-how to best exploit them. Russia will of course do what it can to prevent competition from developing however Moscow is facing constraints that it did not have to contend with prior to the crisis in Ukraine. It is not impossible that we will see greater investment in the Caspian. The question is how involved will Russia be? The Caspian 5’s summit on September 29^th could provide some answers. If some of the territorial disputes over the Caspian were resolved amicably it would set the stage for significant investment in the region. If this were to happen it would indicate that Russian companies would have a privileged position in any consortium which would exploit the resources of the Caspian.

All of these developing stories have the potential to influence global energy markets. For this reason it is more important than ever to keep tabs on summits such as the annual meeting of the Shanghai Cooperation Organization. This will become even more true if India, Pakistan, and Iran were ultimately admitted to SCO. There are of course reasons that can prevent these countries from joining the organization. Russia wants India to join to weaken Chinese influence in SCO. If this were to happen China would want Pakistan to join to offset India admission. Meanwhile no one really trusts Iran and SCO members currently use the sanctions against Tehran to justify not offering admission. Despite these challenges it is difficult to argue that SCO truly represents Eurasia if these countries are not admitted. However, one does not need to be a member of the Shanghai Cooperation Organization to work with it. It will be interesting to see if the factors discussed earlier makes SCO into a more important organization.