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SCO Will Remain Pragmatic

Tuesday 8 November 2011

(China Daily, Dmitri Trenin) – Prime ministers of member countries of Shanghai Cooperation Organization (SCO) met in St. Petersburg, Russia, on Monday amid the unfolding European Union drama. With economic growth in the EU possibly stymied for a decade, and a Japan-style stagnation threatening the United States, emerging economies have started focusing more on their own markets.

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The author is director of the Carnegie Moscow Center. His most recent book, Post-Imperium: A Eurasia Story, has just been published by the Carnegie Endowment.
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Some observers consider the SCO a useful platform to boost economic cooperation and even for integration among its members: China, Russia and the four Central Asian countries of Kazakhstan, Kyrgyzstan, Tajikistan and Uzbekistan.

The situation, however, is more complicated than it looks. The SCO, founded 10 years ago, focuses on two aspects: economic cooperation and security. China usually emphasizes economic cooperation and Russia lays stress on security, which strike a sort of balance within the organization, allowing each of its informal co-leaders to pursue their national agenda.

Over the past decade, China has become a major economic player in the Central Asia region with some help from the SCO.

But Russia continues to value the SCO as a means of regional interaction with China, and a rare international forum where it enjoys a privileged position. When it comes to economic cooperation and security in Central Asia, however, Moscow prefers formats that guarantee it a clearly leading position.

Just a few weeks before this SCO prime ministerial meeting, St. Petersburg was the venue for a meeting of the heads of Commonwealth of Independent States (CIS) who signed a deal establishing a free trade area among eight CIS countries. Besides, the customs union, formed by Russia with Kazakhstan and Belarus in 2009, will be transformed into a single economic space from Jan 1, 2012.

Russian Prime Minister Vladimir Putin recently revealed his master concept, called Eurasian Union (EAU), which foresees an even tighter integration among the three former Soviet countries all the way to a currency union. There are also efforts to reach out to other countries such as Kyrgyzstan and Ukraine. Interestingly, for Putin, a more consolidated economic space for the former Soviet Union would bolster Moscow’s position in the bargain with the EU over the modalities of an eventual “greater Europe”, composed of the EU and the Russia-led “Eurasian community”.

The “full” Eurasian project, not to speak of an EU-EAU project, may never become a reality, but it is indicative of Moscow’s post-superpower thinking. Moscow does not want to be torn between Brussels and Beijing. Instead, it seeks to consolidate the entire economic space between the EU and China. For Russia’s partners, however, economic benefits do not negate the need to strengthen their political independence from Moscow, achieved only 20 years ago.

The SCO offers a convenient political cover for bilateral economic deals between China and Central Asian countries. This cooperation is particularly salient in the field of energy. Unlike the sea lanes from the Middle East, the oil pipeline from Kazakhstan or the gas pipeline from Turkmenistan can continue to supply fuel to China even during an international crisis thus enhancing Beijing’s energy security. Russians do not really mind China breaking Gazprom’s monopoly on exports from Central Asia, for Moscow’s main concern is protecting Gazprom’s share in the lucrative EU market.

Energy apart, transportation, infrastructure development and communications are the prime fields of economic cooperation between China and its SCO partners in Central Asia. Since the disintegration of the Soviet Union, the former Soviet republics have rediscovered that they have become transit countries on the crossroads between Europe, the Middle East and Asia, with China being the gateway to the east and Russia to the northwest. There are some mineral resources other than energy, which are of interest both to China and Russia.

It is only natural that there is great scope both for economic cooperation and competition among the SCO member countries, and all of them can benefit from more trade and investment. China’s financial support can be critical to some former Soviet republics, which would look to Moscow for matching assistance. Pricing disputes, however, occur in the oil trade and they have so far prevented the finalization of a China-Russia gas deal, which has been in the works for many years.

Despite that, the prospects for greater economic cooperation within the SCO are generally good. But that would be true as long as China’s economic growth continues.

Nevertheless, the cooperation within the SCO is likely to remain pragmatic and interest-based. Occasional commercial disputes, irrespective of their public relations fallout, will not spoil the overall picture. What is unlikely to happen, however, is the transformation of the SCO into a purely economic platform. And since Russia has other plans for the region, the Central Asian countries will continue to seek a balance between their two big neighbours.

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