SCO FOR INDIA, CHINA AND THE WORLD

The global order has to be more reasonable

As the leaders of China, Russia, and India, with the new member Iran, huddled together at the Shanghai Cooperation Organization (SCO) summit at Samarkand in Uzbekistan, the West waited on pins and needles to gauge and interpret the outcome.

Chinese President Xi Jinping, Russian President Vladimir Putin, Indian Prime Minister Narendra Modi, Pakistan Prime Minister Shehbaz Sharif and Iranian President Ebrahim Raisi were among the leaders of the 15 countries at the summit.

Both Xi’s and Modi’s presence were closely watched for the possibility of bilateral meetings on the sidelines of the summit. The last time Xi and Modi were face-to-face and in-person and had a bilateral meeting was in November 2019, during the BRICS summit in Brazil. Both met in an informal summit at Mahabalipuram, India, in October 2019, the second one after they met at Wuhan, in April 2018.

The SCO summits in the last two years were held in a virtual format due to COVID-19. This was the first in-person summit after June 2019 when the SCO summit was held in Bishkek, Kyrgyzstan. Last year, the summit was held in Dushanbe, Tajikistan, in a hybrid format.

Modi with Putin and Xi

This was Xi’s first official trip to a foreign nation since COVID-19. Xi’s last official trip to a foreign country was to Myanmar in January 2020. His last trip outside of mainland China was on June 30, 2022, to Hong Kong to mark the 25th anniversary of the city’s return to the motherland in 1997.

Xi’s trip to Samarkand underlined China’s strategic ties with Central Asian states at a time when relations with many Western nations have come under strain due to China’s neutral position on the Ukrainian issue.

Xi and Putin met on the sidelines of the summit, for the first time since the Ukraine crisis. Xi said China and Russia should expand pragmatic cooperation, while Putin thanked the Chinese leader for his “balanced” stance on Ukraine. Putin expressed Russia's support for the one-China principle, and denounced US provocations in the Taiwan Straits and its attempts to create a "unipolar world."

Samarkand summit saw agreements on connectivity and high-efficiency transport corridors and a roadmap for local currency settlement among member states. It deliberated on the geopolitical situation arising from Ukraine. Besides, the situation in Afghanistan under the Taliban regime was on the table as well since many SCO member countries are neighbours of Afghanistan.

After the signing of the Samarkand declaration, the heads of the SCO countries declared the inadmissibility of interference in the affairs of states under the pretext of countering terrorism. The SCO countries supported the non-proliferation of nuclear weapons and the continuation of nuclear disarmament.

The Samarkand declaration also termed unilateral use of economic sanctions, except those imposed by the UN Security Council, is incompatible with international law principles. The SCO countries emphasized the importance of the soonest inclusive reform of WTO with an emphasis on adaptation to current economic realities.

The declaration advocated a “commitment to peaceful settlement of differences and disputes between countries through dialogue and consultation.”

Uzbekistan and China signed agreements worth a total of US$15 billion in trade, investment and financial and technical cooperation. China, Kyrgyzstan and Uzbekistan also signed a trilateral MOU regarding cooperation on a railway connecting the three countries, while a trial run of the multimodal road-rail link from China to Afghanistan is also being planned.

To further promote the rich cultural and historical heritage of the people and the tourism potential of SCO member states, it was decided to declare Varanasi, Modi's constituency, as the SCO Tourism and Cultural Capital for 2022-2023, the Samarkand declaration said.

The Mission of SCO

Founded in Shanghai in June 2001, the Beijing-headquartered SCO is a nine-member economic and security bloc consisting of China, Russia, Kazakhstan, Kyrgyzstan, Tajikistan, Uzbekistan, India, Pakistan and now Iran. It has three Observer States interested in acceding to full membership (Afghanistan, Belarus, and Mongolia) and nine Dialogue Partners (Armenia, Azerbaijan, Cambodia, Nepal, Sri Lanka, Turkey, Saudi Arabia, Qatar and Egypt).

It is a unique plurilateral grouping that holds two summits a year, one at the Heads of State and the other at the Heads of Government level. It is seen by the West as an eastern counterbalance to NATO. The presence of India and China, the world’s most populous countries, makes SCO the organization with the largest population coverage. The SCO accounts for about one-third of the world’s land and exports trillions of dollars annually.

The SCO, which grew from the “Shanghai Five” pact of the mid-1990s, is governed by consensus. It also functions more as a venue for discussion and engagement where high-level dignitaries from across the region can gather to confer, rather than an alliance like the EU, whose members have a common currency, or NATO. Since its inception, the SCO has mainly focused on regional security issues, and its fight is against regional terrorism, ethnic separatism and religious extremism. The SCO’s priorities also include regional development.

The Dushanbe Declaration on the 20th anniversary of the founding of the SCO last year expressed support for Afghanistan as an independent, neutral, united, democratic and peaceful state, free of terrorism, war and drugs. It is critical to have an inclusive government in Afghanistan, with representatives from all ethnic, religious and political groups of Afghan society.

Summit

The declaration also condemned terrorism in all its forms and manifestations. Member States reaffirmed the need to step up joint efforts to prevent terrorism and its financing, including by implementing existing global standards on combating money laundering and the financing of terrorism and by suppressing the spread of terrorist, separatist and extremist ideologies that feed it.

The declaration emphasized the importance of sharing experiences on the design and implementation of national development strategies, digital economy plans and the adoption of innovative technologies. It stressed the need to increase mutually beneficial cooperation in the energy sector, including the wide use of renewable and alternative energy sources.

The Entry of Iran

The SCO Samarkand Summit also assumed significance as Iran, for the first time, attended as a full member. The decision to admit Iran was made at last year’s Dushanbe Summit and Belarus has submitted its membership application. This was the first expansion of the SCO after India and Pakistan were admitted to the grouping in 2017.

This marks the first time Iran has become a full member of a major regional bloc since its 1979 revolution. Iran’s bid to become a full member of SCO was approved after almost 15 years. The country had been an “observer member” since 2005. Full membership means linking Iran to the economic infrastructures of Asia and its vast resources.

Iran is eyeing political and economic gains, especially with China, with which it signed a 25-year comprehensive cooperation agreement in March 2021, and Russia, with which Iran is looking to expand a pre-existing cooperation agreement. Iran could gain significant access to the Central Asian region, which can be regarded as a market for exports of Iranian goods.

U.S. sanctions could prove to be roadblocks on the way to achieving those potentials should they persist, but will not halt Iran’s economic progress. Iran and world powers have conducted six rounds of talks in Vienna to restore the country’s 2015 nuclear deal, which, if successful, would see U.S. sanctions lifted.

Iran’s previous bids for SCO membership were blocked because it was under United Nations sanctions, and some members, including Tajikistan, were against it due to Tehran’s perceived support for the Islamic Movement of Tajikistan.

Article in China-India Dialogue

But at the Dushanbe Summit last year, Iran also signed eight agreements with Tajikistan’s President Emomali Rahmon. The two set a target of US$500 million for annual bilateral trade. During a speech at Dushanbe, Iranian President Ebrahim Raisi denounced “unilateralism” by the U.S. and called for a concerted effort to fight sanctions.

SCO members are reluctant to entangle themselves in Iran’s rivalries and at Dushanbe, they also admitted Saudi Arabia, Qatar and Egypt as “dialogue partners” in a balancing act.

The volume of trade with the national currencies of Iran, Russia and China has been modest even as they have discussed de-dollarization for decades, and efforts are on to launch an alternative financial messaging service to the Society for Worldwide Interbank Financial Telecommunication (SWIFT) global financial network.

This round of expansion shows SCO’s rising international influence and the principles of the SCO charter are widely accepted. The SCO expansion is not akin to that of NATO, which is being expanded in the shadows of the Ukrainian crisis. The expansion of NATO is different as the SCO is a cooperative organization based on non-alignment and not targeting a third party, while NATO is based on a Cold War mindset.

The SCO believes one should not build its security at the expense of other countries while NATO is creating new enemies to sustain its existence. The SCO members are contemplating how to adapt to the profound changes in the global milieu, to make the global order more reasonable.

The process of Belarus's accession to the SCO has been made at Samarkand Summit. It has had a dialogue partner status since 2010 and an observer status since 2015. The new decision does not mean an automatic change in the status of the country. According to the provision on SCO accession of 11 June 2010, an applying country should join around 40 international treaties and make respective changes in the national legislation. It took around two years for India and Pakistan to carry out these procedures.

Negotiations will be held on granting UAE, Kuwait, Bahrain, Maldives and Myanmar the status of dialogue partners.

SCO for India and China

As a prelude to the Samarkand Summit, the disengagement between India and China in the Gogra-Hot Springs region opened a window of opportunity for the two sides to engage at the highest level.

India assumed the rotational presidency of the SCO at the end of the Samarkand Summit. Delhi will hold the presidency of the grouping for a year until September 2023. So, next year, India will host the SCO summit.

Modi, speaking at the Samarkand summit said he wants to transform India into a manufacturing hub. He pointed out that there are more than 70,000 start-ups and over 100 unicorns in India, and that the country is one of the fastest-growing economies in the world.

The SCO’s significance for India mainly lies in economics and geopolitics with the Eurasian states. It is a potential platform to advance India’s Central Asia policy. The SCO member states are India’s extended neighbourhood where India has both economic and security interests.

The SCO-Afghanistan Contact Group to stabilize Afghanistan provides India with a vital counter to some other groupings it is a part of. The SCO provides the only multilateral platform for India to deal with Pakistan and Afghanistan.

Leaders at Samarkand

Acknowledging the strategic importance of the region and SCO, Modi has articulated the foundational dimension of Eurasia as being “secure.” India needs to improve connectivity with Central Asia through the Chabahar port in Southeastern Iran and it wishes to utilize the Ashgabat Agreement for a stronger presence in Eurasia along with a focus on the International North-South Corridor (INSTC).

The Ashgabat Agreement is a multimodal transport agreement between the governments of Kazakhstan, Uzbekistan, Turkmenistan, Iran, India, Pakistan, and Oman for creating an international transport and transit corridor facilitating the transportation of goods between Central Asia and the Persian Gulf. The agreement came into force in April 2016. Ashgabat in Turkmenistan is the depository state for the agreement.

The SCO has also been involved in building the Vladivostok-Chennai sea route. This sea route covers approximately 5,600 nautical miles or about 10,300 km. A large container ship travelling at the average cruising speed of 20-25 knots, or 37-46 km/hour, should be able to cover the distance in 10-12 days. India is building nuclear power plants with Russia’s collaboration in Kudankulam on the sea coast in Tamil Nadu’s Tirunelveli district. The opening of a sea route is likely to help in the project.

India also wishes to use SCO’s goal of promoting economic cooperation, trade, energy, and regional connectivity to improve relations with Pakistan and persuade it to unblock India’s access to Eurasia.

The increasing terrorist activities in the region make it imperative for SCO countries to develop a cooperative and sustainable security framework and make the Regional Anti-Terrorist Structure more effective.

A major thorn in India’s engagement with Eurasia remains the denial of direct land connectivity to Afghanistan and beyond by Pakistan. The lack of connectivity has dampened the development of energy ties between the hydrocarbon-rich region and India.

But China is clearly in the strongest position. Kazakhstan, Kyrgyzstan, Tajikistan, and Uzbekistan have signed on to its Belt and Road Initiative (BRI), and those like Kyrgyzstan and Tajikistan are dependent on Chinese investments. China accounts for 45.3 per cent of Kyrgyzstan's external debt, and China has built a military base there recently. It is to be owned by Tajikistan’s Rapid Reaction Group (Special Forces) with the US$10 million costs financed by China. It will be located in the eastern Gorno-Badakhshan autonomous province near the Pamir mountains. Chinese troops will not be stationed there.  

Loans from China account for 16 -17 per cent of the GDP of Turkmenistan and Uzbekistan.

And Kazakhstan, which borders China’s northwestern Xinjiang Uyghur Autonomous Region, traditionally leaned towards Russia – in January it called on Moscow for assistance to quell mass protests – it is also interested in China and its “deep pockets.” Its support, as a Muslim country, is important for China.

On 25 January 2022,  Xi Jinping hosted the five leaders of Central Asia to commemorate the 30th anniversary of diplomatic relations between China and Central Asian countries. In this Summit, China announced to increase in the trade target between China and the region to USD 70 billion by 2030. A provision of USD 500 million was made to assist Central Asian countries over the next three years in their implementation of “socially significant” projects.  The Central Asian region is rich in natural resources: gas in Turkmenistan; oil, gas and uranium in Kazakhstan; uranium and gas in Uzbekistan; hydropower in Tajikistan and Kyrgyzstan.

On its part, keeping its independent diplomacy, India had stayed away from the trade pillar of the U.S.-led Indo-Pacific Economic Framework (IPEF) meeting in Los Angeles on September 8-9. India’s Union Commerce Minister Piyush Goyal cited concerns over possible discrimination against developing economies. India was the only one of the 14 IPEF countries, which include Southeast Asian countries, Australia, New Zealand, South Korea and Japan, not to join the declaration on trade. It means New Delhi will not be cheated by Washington easily.

Hence, SCO, like BRICS, is a vehicle for India and China to co-exist peacefully for the current era to be viewed as the Asian century. Towards that goal, the Samarkand Summit is a new milestone.

This article was published in China Pictorial: http://china-pictorial.com.cn/scos-growing-influence-in-a-multipolar-world

China-IndiaDialogue: http://chinaindiadialogue.com/scos-growing-influence-in-a-multipolar-world

© Ramachandran 

The G7 Summit and India Buying Oil From Russia

 

The G7 is perplexed and confused by the Ukraine crisis

Scarred by reliance on Russian energy that has hampered several European nations from going all out to punish Russia, the just-concluded G7 summit was also warily looking at its systemic rival, China.  The summit in Germany was dominated by manoeuvers to tighten the noose around Vladimir Putin without leading to disastrous spillovers- a backlash among Western consumers, starvation in a rain grain-starved global South and a breakdown in the global order are imminent unless the West shows wisdom.

The summit devised a $600 billion plan for the developing world, as a counter to China's Belt and Road Initiative (BRI). It is called the Partnership for Global Infrastructure and Investment (PGII) and is a relaunch of an unclear scheme unveiled at last year's G7 meet in Britain. 

The plan calls on G7 leaders to raise the fund over five years to launch infrastructure projects in middle and low-income countries. The U.S. has promised to raise $200bn of the total through grants, federal funds and private investment, while the EU has announced a further 300bn euros.

Unlike BRI, the one proposed by the G7 would provide funding largely from private investors. The G7 fund will focus on climate initiatives, among other projects, including a $2 billion solar farm investment in Angola, $320 million for hospital construction in the Ivory Coast, a vaccine manufacturing facility in Senegal, a 1,609 km submarine telecommunications cable connecting Singapore to France via Egypt and the Horn of Africa, and $40 million to promote regional energy trade in Southeast Asia.

Ban on Russian Gold and Cap on Oil

Ahead of the summit, London announced that the U.K., along with the U.S., Japan and Canada, would ban new imports of Russian gold to tighten the sanctions. The U.K. said that Russian gold exports reached around $15.5 billion in 2021 and that this figure has gone up since sanctions were imposed as a means of getting around them. Russia accounted for about five percent of all gold exports in 2020 and 90 percent of Russia's output went to G7 countries -- mostly to Britain.

The new sanction would have only a limited impact; similar to energy products, Russia could contain the damage by turning to emerging markets.

Twin caps on the price of Russian oil and pipeline gas to slash the Kremlin’s revenues also gathered support at the summit. The gas cap would operate simply by European countries refusing to pay above an as-yet-unspecified fixed price for Russian gas. But the idea of putting a cap on Russian oil would be unfeasible in reality, and these absurd measures reflect the unfathomable dilemma of the West.

Moreover, Germany is queasy about price caps. It fears a bust-up inside the EU over the proposal and that Putin may simply turn off the supplies of gas to Europe. A cut-off now would leave Europe struggling to build up the gas reserves it needs to survive a fraught winter. EU countries have been directed to fill their gas reserves to a minimum of 80% but they are well short of that.

India's Presence

The G7 is an informal forum bringing together the leaders of the world’s leading industrial nations – the U.S., the U.K., Canada, France, Germany, Italy, and Japan. It was formed in 1975, as the world suffered from the first oil shock and financial crisis. Canada joined in 1976 and Russia in 1998. Following the annexation of Crimea, Russia was suspended in March 2014.

Apart from India, other nations which got invited to the current summit were Argentina, Indonesia, Senegal, and South Africa.

At the summit, referring to the Ukraine war, which has pushed up energy prices across the globe, Indian Prime Minister Narendra Modi said that “energy access should not be the privilege of only the rich. A poor family also has the same rights on energy. And today, when energy costs are sky-high due to geopolitical tensions, it is more important to remember this.” Obviously, it was a dig at the West, and he was justifying India's decision not to denounce Russia, and to buy discounted oil from Russia.

Modi has frustrated the West, also by imposing a ban on wheat exports. India will continue to buy oil from Russia, possibly with the Chinese Yuan as the reserve currency, in future. India’s top cement maker UltraTech did pay for Russian coal in Yuan, in June, for the first time, in history.

A Weak Summit

The summit was weakened by the fact that only 90 minutes were set aside to discuss food,  climate and health. Discussion of debt or the injection of new Special Drawing Rights funds, two cardinal issues of Africa, were ignored. A weariness exists in Africa about the G7’s failure to deliver on pledges made in G7 communiques. In 2015, G7 leaders pledged “to lift 500 million people in developing countries out of hunger and malnutrition by 2030”. But according to Oxfam, “In 2015, there were 630 million in hunger. As of 2021, this figure is thought to be 950 million.”

None of the visiting leaders was enthusiastic about the Ukraine war. The President of Senegal, Macky Sall, as chair of the Africa Union, has warned that the poorest countries are “caught between the hammer of war and the anvil of sanctions”.

Alberto Angel Fernández, the President of Argentina, the world’s sixth-largest wheat exporter facing 60% inflation, has increased levies on food exports. 

The Fissures Within

Embittered by the food crisis, fissures have developed in the G7 camp. The vexatious parleys on reaching an agreement on safe passage for grain convoys, overseen by Turkey and the U.N., have lasted a month, and some countries are on the brink of penury.

The plan to ban imports of Russian gold trailed by the US and the U.K. does not yet have the full support of the EU.

The G7 fears the BRICS willingness to expand, and hence the G7 is unlikely to create a vacuum for China to fill by boycotting the upcoming November meeting of the G20.

Those who attended the G7 summit and the subsequent 2022 NATO summit in Spain tried to present a gait of bonhomie, though they are facing internal squabbles. Though officials from Germany and Britain were reported to push for temporary waivers on biofuels mandates to mitigate soaring food prices, Germany had to drop the idea during the summit due to resistance from the U. S. and Canada.

There is also a dispute over climate actions. A communique, released in May, said the G7 agreed to achieve "predominantly decarbonized electricity sectors" by 2035. However, the ministers failed to set a date for phasing out coal-powered energy due to objections from the U.S. and Japan. They continue to clash on coal.

The squabbles won't end in Madrid for NATO, as Turkey's concerns have added hindrance to Finland's and Sweden's pursuit of NATO membership.

False Narrative

Showcasing the PGII, the G7 blamed China for pushing the developing countries into a debt trap, through BRI. Hitting back, China has asserted that the days when global decisions were dictated by a "small group" of countries are long gone. 

The Chinese foreign ministry has clarified that calling the BRI a debt trap is a false narrative. According to the World Bank forecast, if all BRI transport infrastructure projects are carried out, by 2030, the BRI will generate $1.6 trillion of revenues for the world each year, or 1.3% of global GDP. Up to 90% of the revenues will go to partner countries. The BRI could contribute to lifting 7.6 million people from extreme poverty and 32 million from moderate poverty from 2015 to 2030. 

The competition between China G7  will enable some developing countries to have more choices. But if the crude U.S. political agenda forces these countries to take sides, they will be in a quandary. Herding all developing countries into a US-led global economic order is a weird illusion.