Shanghai Cooperation Organization (SCO)

- Overview

The Shanghai Cooperation Organization (SCO) is a regional international organization consisting of countries in Europe, the Near East, Central Asia and Southeast Asia. The SCO regulates cooperation in the political, military, economic, energy and cultural fields. 

The SCO member states have a population of nearly 1.5 billion, about a quarter of the world's total population. Including these four observers, the SCO even covers nearly half of the world's population.

Furthermore, observers India and Pakistan bring together four nuclear powers, in addition to member Russia and China, and observer Iran is likely to be reaching that status. 

The total area of ​​the SCO member states is 3/5 of the territory of Eurasia. An important part of economic cooperation is energy. Russia, Kazakhstan, Uzbekistan and Iran are major exporters of energy, and China and India are important importers. China and Russia are the world's top three militaries, and Russia and even China are major players in the SCO. 

- The Main Focuses of the SCO

Comprising a considerable territory in and around Central Asia, which accounts for a large portion of the world's population, energy, nuclear weapons and important armed forces, the SCO theoretically has enormous economic, political and military potential.  

Since its establishment in 2001, the SCO has mainly focused on regional security issues and combating regional terrorism, ethnic separatism and religious extremism. To date, the SCO's priorities have also included regional development.

Please refer to the Shanghai Cooperation Organization (SCO) for more details.

- The Member States of the SCO

The Shanghai Cooperation Organisation (SCO) is an international alliance that consists of 8 member states and 4 observers from Eurasia. It was established on 26 April 1996 as the Shanghai Five. In addition to the 8 member states and 4 observers, the SCO currently has 9 dialogue partners and 4 guest attendance entries.

• Member States: China, India, Kazakhstan, Kyrgyzstan, Pakistan, Russia, Tajikistan, Uzbekistan. 
• Observers: Afghanistan, Belarus, Iran, Mongolia.
• Dialogue Partnerss: Armenia, Azerbaijan, Cambodia, Egypt, Nepal, Qatar, Saudi Arabia, Sri Lanka, Turkey.
• Guest Attendances: ASEAN, CIS, Turkmenistan, UN.

Iran and Turkiye pursue permanent positions in the SCO.

- Economic Opportunities in the SCO

Trade between SCO member states has grown from $667 billion in 2001, when the organization was founded, to $6 trillion in 2020. Countries are finding new ways to trade with the world as sanctions hit many shipping routes through Russia due to the war in Ukraine. The SCO summit in the historic Uzbekistan city of Samarkand is therefore important for at least two reasons: first, from a security and political perspective, and second, because of the potential to influence the region's economy through cooperation and trade.

The size of the SCO in terms of its markets and energy resources cannot be underestimated. The total population of the SCO member states is 3.33 billion (2021), accounting for 42.49% of the world's population. The combined GDP of the eight member countries is 23.307 trillion US dollars (2021), accounting for 24.2% of global GDP (calculated based on the 2021 data of the 8 permanent members of the World Bank and Iran). Collectively, the SCO member states hold almost 20% of the world's oil reserves and 44% of the world's natural gas reserves (calculated based on 2021 data from the eight permanent members of BP and Iran). All member states are major food producers and have issued a joint statement on food security and reached an agreement on the development of a diversified supply chain.

On September 16, 2022, EU member states agree to expand trade in their currencies. The idea has been around for some time, with SCO member states already increasing transactions in their national currencies, such as Russia and China increasing trade in rubles and renminbi since Western sanctions were imposed on Russia in 2014. Clearly, trading in the domestic currency reduces the dependence on the US dollar in bilateral trade, but increases the dependence on the volatility of the domestic currency.

- Infrastructure Development

Another important area being considered is infrastructure development as a way to accelerate trade in the region. Infrastructure development will benefit countries by facilitating access to raw materials and reducing transportation costs. Given that the average poverty population in SCO member states is 14.2% (calculated based on the 8 permanent members of the World Bank and Iran in 2021), the potential for economic development and poverty alleviation through regional trade is huge.

The construction of the two railways will help strengthen economic ties. 

• The first, Termez-Mazar-i-Sharif-Kabul-Peshawar, at an estimated cost of $5 billion, will open Pakistani seaports in the Arabian Gulf to Uzbekistan. The project has brought economic benefits not only to Uzbekistan but to all countries of Central Asia. Thousands of jobs will be created in Afghanistan. Also, the cost of shipping a container from Tashkent to Karachi is around $1400-1600, which is significantly less than using the Tashkent-Bandah Abbas route. Uzbekistan previously announced that the project would be financed almost entirely with a $4.8 billion loan from the World Bank.
• The second is a new route from Torugat to Jalalabad, connecting the border between China and Kyrgyzstan. The project was discussed for 15 years and finally approved at the SCO meeting on September 15, 2022. The two parties agreed that Kyrgyzstan and Uzbekistan will share the cost of the feasibility study in the first half of 2023. and China. The estimated cost of the project is $4.1 billion. Given that these two routes will bring economic growth to the economies of Central Asia as a whole, and Uzbekistan and Kyrgyzstan in particular, the big question is the trade-off between the economic costs and potential benefits of these projects and how they will be financed. As we all know, Kyrgyzstan's foreign debt exceeds US$5.1 billion, of which US$1.8 billion is owed to the Export-Import Bank of China.

The SCO has brought many opportunities for economic and trade cooperation through infrastructure construction. However, economic connectivity often comes at the cost of heavy debt burdens, and it is important to analyze the costs and benefits of these opportunities, taking into account the difficulties faced by a growing number of developing countries today in repaying their debts.

- The SCO and The United Nations

The SCO has been an observer of the UN General Assembly since 2005. In April 2010, the United Nations and the SCO Secretariat signed the Joint Statement on Cooperation. The SCO Secretariat has also established partnerships with the United Nations Educational, Scientific and Cultural Organization (UNESCO), the World Tourism Organization (UNWTO) and the International Organization for Migration (IOM), as well as ongoing cooperation with the United Nations Office on Drugs and Crime. Crime (UNODC), United Nations Economic and Social Commission for Asia and the Pacific (ESCAP) and United Nations Office of Counter-Terrorism (UNOCT). 

The Department of Political and Peacebuilding Affairs (DPPA) and UNRCCA (United Nations Centre for Preventive Diplomacy in Central Asia) maintain regular contact with SCO officials. The cooperation activities focus on the development of regional security situation and key issues such as counter-terrorism and prevention of violent extremism.

[More to come ...]