The SCO was established in 2001 by six Eurasian states (China, Kazakhstan, Kyrgyzstan, Russia, Tajikistan and Uzbekistan) and has progressed fairly quickly from its inception to become a relatively prominent regional player. In December 2004 it gained official observer’s status at the UN General Assembly.
According to its Charter, the SCO is a classic intergovernmental organization based on the principles of sovereign equality, territorial integrity of states and inviolability of their borders, non-interference into their internal affairs and peaceful settlement of disputes between the member states through consultations and negotiations. Establishing the SCO, the member-states indicated the first main goal of SCO as strengthening mutual trust, friendship and good neighborliness between the member-states.[i]
The SCO plays an important role in the foreign defense and security policies of the Central Asian member states. Western experts and policy makers’ perceptions of the SCO, however, can often be influenced by their attention to the presence of the two leading members: China and Russia.[ii] China have developed and implemented its New Diplomacy toward the SCO since early 2000th. The basis of China’s New Diplomacy formed by the New Security Concept, the New Development Approach, and the New Civilization Outlook, which were introduced in early 2000s. The New Security Concept encourages nations to build trust through consultations and to seek national security by means of multilateral coordination. It emphasizes: (1) multilateral ties, which stress interdependence among nations in terms of security; (2) cooperation, which replaces confrontation as the effective route to security; (3) comprehensiveness of security, which is not only confined to military and political fields alone, but also includes economic, technical, social and environmental fields; (4) institutional construction as the legitimate road to security.[iii]
Most analysts agree that this regional organization is largely a Chinese initiative and that China plays a leading role in the SCO process.[iv] Some analysts suggest that China attempted to enter and manage this region via a multilateral approach. China is using the SCO for implementation of the “Beijing Consensus” in Central Asia. Since the political values and foreign policy are one of the three sources of the Chinese soft power, the SCO has gradually become the main mechanism or guide for China’s policy in Central Asia. Through the SCO mechanism Beijing already achieved several goals:
has solved the border issues between Central Asian countries in the previous “Shanghai five” framework and the SCO keeping these agreements guarantee today;
has obtained support of the Central Asian countries and Russia in combating “three evils” (terrorism, separatism, extremism) and neutralized the East Turkestan Islamic Movement (ETIM);
has consequently consolidated its economic power in the region. For example, currently there are more than 1500 joint Chinese-Kazakh enterprises in Kazakhstan;
has firmly established its presence in the oil and gas sector of the Central Asian economies. For example, China shares 25% of Kazakh oil and gas production;
has created logistic network among the countries, providing delivery of its goods and Central Asian row materials. For example, 80% of shipment flow from China to Europe today pass through Kazakhstan’s territory by the Alashankou-Dostyk railway;
has kept geopolitical balance in the “strategic hinterland” region;
has played a key role in the establishment of new structure of regional security process legally;
has provided political diversification in the former Soviet space.
During last 16 years of the SCO evaluation, China proposed several stages of the SCO development: Security issues; Economic and humanitarian cooperation; “Third center” after US and EU in the multipolar world.
The program of cooperation on security issues began shortly after establishing of the SCO. At that period it was very important for China to prevent the foreign intervention into the Central Asian states policy and security, as well to avoid supporting of ETIM by the other newly independent Central Asian Turk countries. In this light, following documents were signed in the SCO framework: The Shanghai Convention on combating terrorism, extremism and separatism (2001); SCO Regional anti-terroristic structure (2002); Agreement on combating drug trafficking (2004); Agreement on joint anti-terrorist activities (2006); Treaty of the long-term good neighborly and friendly cooperation among member states of the SCO (2007); Agreement on combating trafficking in firearms, ammunition (2008); Agreement on cooperation in the field of ensuring international information security (2009); Joint declaration on cooperation between the SCO and UN secretariats (2010); Provision on the political, diplomatic measures and mechanisms for regulating the situations that endanger security and stability of the region (2012). Also, the Peaceful Mission – joint anti-terroristic military exercises were first time kicked off within the SCO framework in 2002. The member-state military units practiced a joint anti-terrorist operation in the SCO territory annually. Combat units have worked out actions to confront terrorists on land, at sea and in the air. All these agreements provided legislative base for the SCO common security space and adopted political and military measures, building an unpredictable cooperative and stronger relationships within the regional community. Also, through the security cooperation the SCO passed the institutionalization process.
The economic and humanitarian cooperation within the SCO was evaluated by China along with the security issues. However, Beijing started to seek economic collaboration within the SCO after the main border, defense and security questions were solved among the member-states. China held great hopes for the ability of the SCO to organize multilateral economic cooperation. Beijing wanted to use the SCO in order to export its products, labour and capital to the neighbouring countries. Thus, Beijing several times proposed the idea of establishing the SCO Free Trade Area (FTA)[v]. Following agreements on economic and humanitarian cooperation were signed within the SCO: The Program of long-term multilateral economic cooperation (2003); Action plan of the Program of long-term multilateral economic cooperation (2004); SCO Interbank Consortium (2005); SCO Business Council (2006); New action plan on multilateral economic and trade cooperation (2008); Emergency assistance agreement (2005); Agreement between governments on cooperation in education (2006); Agreement between governments on cultural cooperation (2007); Agreement between governments on scientific cooperation (2007). Moreover, in order to promote the economic development of the SCO member-states and deepen their economic cooperation, China represented by the President Hu Jintao at the 2005 Astana Summit offered $900 million preferential buyer’s credit loans to the other SCO members. In 2006, the China Import and Export Bank signed preferential buyer’s credit with Kazakhstan, Kyrgyzstan and Tajikistan providing $1.2 billion of preferential buyer’s credit in 2007. A decision on allocating another $10 billion governmental loans was announced by the President Hu Jintao at the 2012 Shanghai Summit. According to the Chinese customs statistics, the trade turnover between China and the SCO member-states increased from $12.15 billion in 2001 to $67.47 billion in 2015 showing 6.6-fold increase. According to the Ministry of Commerce of China, in 2003, the amount of the Chinese foreign direct investments (FDI) to the SCO member-states amounted to $59 million reaching $534 million in 2015. Therefore, it could be stated that since the establishing of the SCO, its member-states have become China’s main partners in foreign investment. However, despite these positive developments serious obstacles to further progress in strengthening economic cooperation still remain. To date, high customs tariffs are the main barriers for deepening trade relations among the SCO states. Therefore, in order to minimize the tariff and non-tariff barriers, as well as to facilitate trade and investment in the region, the SCO members put the creation of the FTA on the agenda. It is considered that creating the FTA would stimulate the development of the economies of all the SCO members, increase the employment rate and welfare in the region. According to the forecasts made by the Chinese Academy of Foreign Trade and Economic Cooperation, after the creation of the SCO FTA, the overall trade turnover among the SCO member-states will increase by $34.18 billion (27%). According to the predictions, exports among the SCO member states will grow by 10%-20% on average, which significantly exceeds the effect of creating favourable conditions for trade and investment. In addition, annual growth of the SCO member-states’ GDP will be 0.5%-1.8% in average, while the employment rate will grow at an average rate of 1%-2.3%. Nevertheless, to date these initiatives have not been fully welcomed by the SCO member states. In fact, during the last SCO Summit 2017 held in Astana, Kazakh President Nursultan Nazarbayev stated that the growth of mutual trade in future can contribute to the creation of a the SCO FTA, countries can move forward step by step, starting with the study of projects of economic cooperation of their interest.[vi] Therefore, taking into account the fact that China has already established the FTA with Pakistan and launched joint research with India in creating the FTA it could be determined that China has formed some preconditions for the FTA creation within the framework of the SCO.[vii]
In 2013, relying on the SCO as a base platform, Chinese President Xi Jinping put forward a new initiative, the creation of the New Silk Road Economic Belt (NSREB). The establishment of the NSREB has solved an issue of the future enlargement of the SCO membership. The NSREB attracts great support and positive response from all members of the SCO. Since the initiative includes both investment and logistics projects, China-led Silk Road Fund and Asian Infrastructure Investment Bank started implementing different projects among the SCO member-states. The promotion of peace and prosperity is exactly the quintessence of the SCO. The full commitment to the co-called Shanghai spirit, which was proposed within the SCO and promoting mutual trust and prosperity will certainly lead to the materialization of the NSREB effectively connecting the Asian and European markets and significantly facilitating common development and prosperity of all people along the belt. Earlier commenting on the Regulations on Observer States of the SCO in June 2004 Secretary General of the SCO, Zhang Deguang, stated that the priority for the SCO was not enlargement but more substantial international cooperation and development. Most experts agree on the opinion that Beijing would not be interested in expanding the SCO membership to include the states of South-East Asia unless clear parameters of the economic interaction within the framework of the SCO are established.
Pakistan and India achieved their full membership in the SCO during the Summit on June 8, 2017 in Astana. At the previous summit all member-states voted for this expansion. This became the first enlargement of the organization since its establishment. Thus, China started seeking geopolitical agenda of the SCO. Now after expansion of the SCO, four of its member states – Russia, China, India, and Pakistan have nuclear weapons. With the admission of these two respected and authoritative countries, the SCO will unite around 44% of the world’s population, and the organization’s responsibility will extend to a vast expanse from the Arctic to the Indian Ocean, from north to south, from Chinese Lianyungang to Russian Kaliningrad, from east to west. Thus, the SCO becomes a trans-regional or even a trans-continental organization and will act as a link between different regions of the world. The importance of the SCO is growing significantly as one of the largest regional organizations after the accession of the above-mentioned countries. With the joining of India and Pakistan, the SCO will never be the same mechanism of China-Russia and Central Asia cooperation, where China and Russia are the main powers and the Central Asian states are much pliant allies.
Nowadays China portrays itself as a developing country that pursues “an independent foreign policy of peace”, the Five Principles of Peaceful Coexistence and “never seeks hegemony”. However, China advocates the idea of multi-polarity and the newly enlarged SCO acts as a regional organization of non-traditional security. Chinese side noted that the expansion of the SCO is not the aim, it is rather a derivative of the progressive evolution of the organization. Actually, expansion of the SCO is an essential stage of its evolution. This enlargement, of course, provides a significant base for the transformation of SCO from regional security organization into geopolitically impact one. Xi Jinping brought up a four-point proposal of the SCO development:
First, to promote mutual trust, mutual benefits, equality, consultation, respect cultural diversity, and seek the “Shanghai Spirit” for common development.
Second, to jointly safeguard regional security and stability.
Third, to focus on the development of pragmatic cooperation; pass on and carry forward the Silk Road spirit; Facilitation of the International Road Transport connecting the Baltic Sea and the Pacific Ocean, and linking Central Asia with the Indian Ocean and with the Persian Gulf; establish SCO Development Bank and SCO special account; establish stable energy supply-demand relationship to ensure energy security; establish food security cooperation mechanism, and strengthen cooperation in agricultural production, trade of agricultural products, food safety and other fields.
Fourth, to strengthen people-to-people communications and non-governmental exchanges, laying solid public opinion and social foundations for the development of the SCO.[viii]
In conclusion, China now urges greater geopolitical role for the SCO. Currently China presents SCO as an active and dynamic alliance that primarily seeks to promote itself to the world as a guardian of global and regional security. For China the SCO provides a useful multilateral platform for the implementation of its economic initiatives. Now the SCO’s area of responsibility covers an area inhabited by over 3 billion people – about 1/3 of the world’s GDP. Thus, the organization entered a new stage of its institutional development as the “Shanghai eight”. In this institutional dimension, China has more freedom to play, since it has economic power, international reputation and credibility since China is still in the process of developing the comprehensive and multidimensional approaches of its New Diplomacy. However, there is no doubt that with its New Diplomacy, China will aim to guide the SCO member states in their political and economic activities. It is clear that Chinese foreign diplomacy will become more active and such institutions as the SCO will provide important support to international problems in the near future, representing the one center of the multi-polar world and the non-Western values and principles.
References
[i] The SCO Charter. http://www.kremlin.ru/supplement/3450
[ii] R. Mcdermott. The SCO’s impact on Central Asia security: a view from Kazakhstan. Problems of Post-Communism. Vol.59, No. 4, 2012, pp.56-65.
[iii] Gao Fei. The SCO and China’s New Diplomacy. Discussion Papers in Diplomacy, No. (The Hague: Netherlanda Institute of International Relations ‘Clingendael’, 2010).
[iv] J. Yuan. China’s role in the establishing and building the Shanghai Cooperation Organization. Journal of Contemporary China, 19(67), 2010, pp.855-869; C. Chung. China and the institutionalization of the Shanghai Cooperation Organization. Problems of Post-Communism, 53(5), 2006, pp. 3-14; P.Guang. A new diplomatic model: a Chinese Perspective on the Shanghai Cooperation Organization. Washington Journal of Modern China 9(1), 2008, pp. 55-72; J. Yuan. China’s role in the establishing and building the Shanghai Cooperation Organization. Journal of Contemporary China, 19(67), 2010, pp.855-869.
[v] 上海合作组织建立自由贸易区可行性分析. 吴宏伟文章来源：载李进峰，吴宏伟、李伟主编《上海合作组织发展报告（2013）》，社会科学文献出版社2013年9月第1版。http://studysco.cass.cn/shyj/jjhz/201311/t20131125_880359.html
[vi] http://www.kazpravda.kz/news/ekonomika/prezident-rk-predlozhil-sozdat-zo…
[vii] L. Huaqin. The idea of creating a free trade zone of the SCO: calculations, problems and prospects // Eurasian Economic Integration, 2015.
[viii]习近平指出上合组织国际地位持续提升的四大原因. http://world.huanqiu.com/article/2016-06/9095172.html
Note: The views expressed in this blog are the author’s own and do not necessarily reflect the Institute’s editorial policy.