SCO Members' Stakes In Central Asia

The Shanghai Cooperation Organization (SCO) founded in 2001, may have little to show in terms of practical achievements, but it continues to exist and even grow for two reasons: (a) it represents the members’ interest in keeping the Western powers away from Central Asia and (b) Central Asia has exploitable geopolitical and economic potential.

It is worth noting that in the matter of exploiting economic resources in Central Asia, the Chinese footprint is already large and dominant.

The SCO now comprises China, Russia, India, Kazakhstan, Kyrgystan, Tajikistan and Pakistan. In the 23rd summit held in New Delhi on July 4, Iran, Belarus and Mongolia were invited as Observers and Turkmenistan was invited as the guest of India, the Chair.

The summit adopted the “New Delhi Declaration” reflected the shared concerns which were quite large.

It said that the SCO is committed to “the formation of a more representative, democratic, just and multipolar world order based on the universally recognised principles of international law, multilateralism, equal, joint, indivisible, comprehensive and sustainable security, cultural and civilizational diversity, mutually beneficial and equal cooperation of states with a central coordinating role of the UN.”

Interference in other countries in the guise of fighting terrorism was disapproved. The member states should pursue a policy that excludes bloc, ideological and confrontational approaches to address problems of international and regional development, the Declaration said.

There was a joint statement on countering radicalisation and another on digital transformation. In reference to sanctions on Russia and Iran by the US and European countries, members jointly criticized non-UN sanctions as “incompatible with the principles of international law”, and as they have a “negative impact” on other countries also.

The SCO members also agreed to explore the use of “national currencies” for payments within the group to circumvent the dollar-based payment system. This was in line with moves already afoot because of the US policy of imposing sanctions using the dollar and its payment system as weapons.

However, the summit was used by the members largely to air their specific national concerns, sometimes against each other. There was a lack of consensus on some key issues.

India, for example, opted out of statements on economic cooperation apparently to avoid China. India is anyway opposed to China’s Belt and Road Initiative (BRI) because a BRI project, the China-Pakistan Economic Corridor (CPEC), passes through Pakistan-Occupied Kashmir. India and Pakistan clashed on terrorism.

In his address, Indian Prime Minister Narendra Modi indirectly hit out at Pakistan and China. “Some countries use cross-border terrorism as an instrument of their policies, provide shelter to terrorists (alluding to Pakistan). The SCO should not hesitate to criticize such nations. There should be no place for double standards on such serious matters (alluding to China),” Modi said.

Pakistan’s Premier Shehbaz Sharif had a bone to pick with his Indian counterpart. He complained that terrorism was being “used as a cudgel for diplomatic point scoring”.

Going further he said: “Instead of cherry picking for narrow political gains, terrorism in all its forms and manifestations, including State terrorism, must be condemned in clear and unambiguous terms. Similarly, religious minorities should never be demonized in the pursuit of domestic political agendas.”

Sharif was alluding to India’s kinetic policy on Kashmir and the government’s treatment of the Muslim minority.

Chinese President Xi Jinping asked SCO members “to make foreign policies independently” and to be “highly vigilant against external attempts to foment a new Cold War or camp-based confrontation in our region.”

This was directed against both the US and India which have been putting pressure on States over which they have influence, to avoid Chinese projects alleging that these would result in a debt trap and Chinese military penetration.

Characteristically, Xi proposed the enhancement of “high-quality” Belt and Road projects, including speeding up port infrastructure and regional and international logistic corridors and ensuring stable and smooth supply chains. Xi further said that China will provide SCO member states with 1,000 International Chinese Language Teachers Scholarships.

Without making any reference to the Ukraine war as such, Russian President Vladimir Putin blamed “external forces” for turning Ukraine into a “anti-Russian” State and supplying weapons to it. But this ploy would not work, he said.

Though the SCO members were essentially concerned with their own issues and ambitions, often clashing with each other, all of them want a firm foothold in Central Asia given its geographic location linking Russia and Iran along the North-South axis and Europe and China on the East-west axis. They are also eying the region’s enormous mineral deposits.

According to Meena Singh Roy of the Institute of Defense Studies and Analysis, confirmed oil deposits in Central Asia are between 13 to 15 billion barrels, which is 2.7% of all the confirmed deposits in the world. Natural gas deposits are around 270 to 360 trillion cubic feet, which constitute around 7% of world deposits.

“The main oil and gas deposits in Central Asian region are in Kazakhstan, Turkmenistan and Uzbekistan, whereas Kyrgyzstan and Tajikistan have enormous hydel potential. In Tajikistan, each sq. km. of the territory has up to 2 million kw hours of hydel resources and this is a high figure. The average for the CIS countries is just 150 to 200 kw per sq km.

Therefore, the cheap hydel energy available in this region can be of use to India if it can reach through viable routes, “ Roy says.

The Chinese are already present in Central Asia in a big way. It is a key trading partner for all Central Asian countries. Moreover, China provides the region with substantial investments, primarily in the energy sector, says Azimzhan Khitakhunov of the Eurasian Research Institute.

According to Khitakhunov, China-Central Asia bilateral trade had grown 25-fold in the last 20 years, from US$ 1.5 billion to US$ 38.6 billion in 2020. China’s investments in the region amounted to US$ 40 billion at the end of 2020. The number of China’s firms operating in Central Asia totalled 7700 at the end of 2021.

President of Kazakhstan Kassym-Jomart Tokayev mentioned that during 11 months of 2021, bilateral trade between Kazakhstan and China increased to US $17 billion setting a new record. He added that of the U$ 40 billion in Chinese investment in the Central Asian states, half was in Kazakhstan.

But trade is not balanced, Khitakhunov pointed out. The share of ores in China’s total imports from Kyrgyzstan amounted to almost 77%. It was 72% in the case of Tajikistan. China’s imports from Turkmenistan entirely consist of mineral fuels, in particular natural gas. The share of this product in 2020 reached 99.5%.

Uzbekistan is also an important supplier of mineral fuels to China. The share of mineral fuels in China’s total imports from Uzbekistan amounted to almost 43%. Other important import items include cotton (27%) and copper (13.6%).

Further, China is also an important source of loans for the Central Asian countries. For instance, 45% of Kyrgyzstan’s external borrowings (worth US$ 1.7 billion) is from China. The figure is 52% in the case of Tajikistan’s foreign debt which is US$ 1.2 billion.

Turkmenistan owes China the equivalent of 16.9% of its GDP, Uzbekistan,16%, and Kazakhstan, 6.5%. The countries of Central Asia, in particular Tajikistan and Kyrgyzstan, have difficulty repaying their debts. As a result, the Chinese companies receive concessions.

However, it is worth noting that China has started manufacturing units in Central Asia. Bus factories, cement plants, and agricultural and green energy projects have been set up. When China’s state-owned banks and corporations provide lending, they secure joint funding from local partners or other countries, Khitakhunov pointed out.

China is clearly way ahead of other SCO members in Central Asia. Being an early bird, it has got the worm.