Shanghai Cooperation Organization Foreign Ministers Meet In Moscow : What To Expect

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Op/Ed by Chris Devonshire-Ellis 

Foreign ministers from Shanghai Cooperation Organisation (SCO) member states are convening today and tomorrow (September 9/10) in Moscow to  review preparations for the forthcoming SCO Summit in Delhi in November, and to exchange views on international and regional issues. Typically such gatherings are generally low key affairs and deal with preparatory issues for the larger annual meeting. This year the preparatory meetings takes on much greater significance due to Covid-19, pressing regional security issues, economic turmoil and global political instability.

The Shanghai Cooperation Organisation (SCO) is a Eurasian political, economic and security alliance and includes China, India, Kazakhstan, Kyrgyzstan, Pakistan, Russia, Tajikistan and Uzbekistan. Afghanistan, Belarus, Iran and Mongolia are observer members, while Armenia, Azerbaijan, Cambodia, Nepal, Sri Lanka and Turkey are dialogue partners. Guest attendees from ASEAN, the CIS, Turkmenistan and the United Nations also participate. The SCO is the largest regional organisation in the world in terms of geographical coverage and population, covering three-fifths of the Eurasian continent, includes just under half of the world’s total population and accounts for about 25% of global GDP.

Here are some of the pressing issues we can expect to be discussed at the Moscow meetings:

Covid-19: Healthcare

The most pressing issue is the Covid-19 pandemic and stopping its progress. India is the second-most affected country in the world (after the United States) while most attending nations have experienced serious outbreaks. Focus will be on organizing future potential border closures without having to compromise trade and cross-border supplies, as well as medical communications and data sharing, the movements of citizens, air connectivity and medical aid. Also on the agenda will be intelligence and cooperation concerning vaccine sharing and implementation, and in particular the Russian Sputnik V vaccine which is already being trialed in Russia, Belarus, India and some of the ASEAN nations.

China has also just announced Phase Three trials of its vaccine. Successful trials, mass vaccinations and how to get these into the SCO population at large – about 3.4 billion people.

The main issue concerning the vaccine is the sheer volume that is required. Both Russia and China have stated they can ramp up production to about 1 billion doses per annum, however this will take time. The implication of this is that while population clusters in major cities and among the general working population may be reached during 2021, only about 50% of the total SCO population can be reached in the short-medium term. As the so-called ‘herd immunity’ only kicks in after about 70% of the population is immune, this indicates that Covid-19 will be around in pockets for several years and quite possibly in rural areas.

Covid-19: Economy

Bilateral trade between all SCO members is down and economies have been battered. Foreign Ministers will want to balance healthcare concerns and measures against viable methods of developing and boosting trade. This will have a particular impact on the Eurasian Economic Union, which comprises SCO members Belarus, Kazakhstan, Kyrgyzstan and Russia, as well as the SCO dialogue partner Armenia. The EAEU has Free Trade Agreements with ASEAN members Singapore and Vietnam, while China has also signed off an EAEU FTA but is working on tariff reductions. India and several other ASEAN nations are also in negotiations with the EAEU over Free Trade. In order to reboot SCO economies and get trade flows restarted, trade incentives need to be introduced. Phased-in Free Trade Agreements via the Eurasian Economic Union are a distinct possibility, and only enhanced as SCO members seek to limit exposure to the United States.

Regional Security: China & India

The recent and still simmering flare up between China and India in Ladakh has a chance to be resolved as Indian Foreign minister S Jaishankar and his Chinese counterpart Wang Yi are set for the first time since the troubles began in May.

Moscow has adopted an approach of “non-interference” in the bilateral issues between the two countries. While encouraging the two sides to engage, Roman Babushkin, Deputy Chief of Mission at the Russian Embassy in New Delhi has stated that “We are not interfering unless both sides are requesting us to do so. India and China should decide whether they would accept such kind of interference or moderation. Currently, we are not participating in the resolution of disputes between the two countries. We are focusing on creating a positive atmosphere. We enjoy special but independent relations with India and China. It is encouraging and we have no doubt that the Chinese and Indian friends would find a mutually acceptable solution through dialogue.”

SCO Membership: Iran

Russia is looking towards observer state Iran as a key actor in establishing greater unification within the SCO. With the US exiting Afghanistan and the intra-Afghan dialogue promising to give the militant Islamist Taliban significant control over Kabul, strong counterterror cooperation has become a priority for SCO members. Tehran, which holds cultural and linguistic influence in Afghanistan, would provide significant support to this end. Furthermore, questions over India’s position within the SCO, the US ‘maximum pressure campaign’ against Tehran and growing Arab-Israeli ties have thrust Iran towards China and Russia.  It is likely Iran will rise to become a full member of the SCO within the next two years as the US presence in Afghanistan draws down. With Tehran’s admission, the SCO will likely begin conducting counterterror operations around Afghanistan with the aid of Iranian intelligence services and the use of blue helmets. Likewise, Iran’s participation would position Tehran alongside Moscow and Beijing, likely giving Tehran access to purchase security equipment from both.

Financial Security: De-Dollarisation

Further calls for technological advancements and improved financial integration are likely to actioned to counter the threat of United States sanctions. Russia, China, India and Iran are all well on the way to offering digital currencies and there will undoubtedly be moves made to resolve bilateral trade in non-US dollar denominated transactions between SCO members. Targets to limit US dollar use will probably be set and timeframes given to allow technologies and financial infrastructures to be put in place to bypass the US global banking and financial systems. This mechanism is already underway; China and Russia have decreased their use of the US dollar in bilateral trade from 97% to 46% in the past five years; this trend can be expected to continue and expand among SCO members.

Although the SCO meeting will not be covered in any great depth in Western or US media outlets, its growing influence is apparent to see. While it remains a dialogue and discussion forum, in today’s fracturing world the SCO elements of security and economic development are now starting to have a real potential impact on the future of both regional and global trade and should not be underestimated. Businesses investing in the Asian and Eurasian regions must pay attention to what is happening within blocs such as the SCO in order to plan for business strategies and upcoming trade and security developments.

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Russia Briefing is written by Dezan Shira & Associates. The firm has 28 offices throughout Eurasia, including China, Russia, India, and the ASEAN nations, assisting foreign investors into the Eurasian region. Please contact Maria Kotova at russia@dezshira.com for Russian investment advisory or assistance with market intelligence, legal, tax and compliance issues throughout Asia.

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