By Assad Bhuglah

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India and Pakistan were officially admitted as members of the Shanghai Cooperation Organization (SCO) during its 17th Summit held on 8-9 June 2017 in Astana, capital of Kazakhstan. After accepting India and Pakistan, the SCO has expanded its geographical coverage to South Asia and has thus become one of the biggest regional organizations, accounting for three-fifths of the area of the Eurasia continent, nearly 20 per cent of global GDP and half of the world's population. Both countries are expected to follow Tashkent-based Regional Anti-Terrorism Structure (RATS) to conduct joint military exercises along with other SCO members- China, Kyrgyzstan, Kazakhstan, Russia, Uzbekistan and Tajikistan.  

In 1996, China founded a little-known international alliance known as the "Shanghai Five". It consisted of China, Russia, and three Central Asian States once part of the Soviet empire, Kazakhstan, Kyrgyzstan, and Tajikistan. The group specifically focused on battling the terrorist threats emanating from Afghanistan and ensuring regional stability along the borders. Uzbekistan joined in the group in 2001. India and Pakistan, who have been observers since 2005, have now been confirmed as permanent members of the body. Cooperation has been established with the observer states - Afghanistan, Belarus, Iran, Mongolia and the SCO dialogue partners - Armenia, Azerbaijan, Cambodia, Nepal, Turkey and Sri Lanka. Partner relations are established and maintained with the UN and its specialized institutions. The secretariat of SCO is located in Beijing. Representing a group of the largest Central Asian nations, the SCO, which was originally formed to maintain regional security and political stability, has evolved in its role which has been extended in recent years to encompass economic benefits for member countries. Meanwhile, many Western observers have also attributed the formation of SCO to counterbalance the impact of NATO and the United States in the region.

Twenty years ago most of the SCO countries were considered “poor” and were labelled as “third world country”. Today, their wealth is growing and are becoming economic powerhouses. These inauspicious beginnings emerged an economic, cultural and military alliance which is now threatening to become a serious contender for control over one of the most geostrategically important areas of the globe. This region encompasses portions of Southeastern Europe, Central Asia, South Asia, the Persian Gulf and the Middle East. It has become infinitely more important as a potential economic prize: an enormous concentration of natural gas and oil reserves is located in the region, in addition to important minerals, including gold. Significantly it is this very region which is a geostrategically vital location providing all of the key access points to the increasingly important Caspian gas pipelines–where one can find four of the SCO’s founding members, Kazakhstan, Kyrgyzstan, Tajikistan and Uzbekistan, and one of its guest attendees, Turkmenistan.

Now with the creation of the SCO and its increasing role in the formation of economic, political and even military cooperation in the region, the world is witnessing the formation of a new power bloc, one that is not within the purview of the NATO powers and threatens western sovereignty over this vastly important region. In the coming years, this tension is only likely to increase, as both sides become more entrenched, and more desperate to attain control over the area before the major pipelines from the Caspian basin come online and start hardwiring the political landscape for the benefit of certain players.

The US dollar hegemony is under threat. China and Russia have both opened their form of the SWIFT system. The SWIFT system is a currency clearing system that allows countries to conduct business with one another. Prior to January 2015 all currencies, the world over, were forced to use the US SWIFT. The US abused this privilege in 2012 when Iran was shut out and could not conduct business on a global scale. Their currency immediately experienced a 40% devaluation and Iran went into hyperinflation. Russia stepped in and began trading gold for oil. China also followed the suit.The Renminbi is rising in prominence and being used in trade all over the world. There are Renminbi/Yuan currency hubs in Vancouver, Los Angeles and The City of London, just to name some of the larger cities where one can easily conduct business, including everyday transactions, in Chinese Renminbi/Yuan. Times are changing and changing very rapidly. The Renminbi (RMB) is rising quickly on the global stage. Since the Chinese government announced the establishment of its pilot Shanghai free-trade zone (FTZ) in September 2013, the renminbi has gone from being a largely unusable currency to nudging its way into the top-10 most used around the world.

SCO Member States have reaffirmed the support for the initiative of China on the creation of the Silk Road Economic Belt. This initiative is the largest and most ambitious undertaking yet proposed by Beijing. With financing and the value of resources across Eurasia running into hundreds of billions of dollars, the fundamentals of China’s plans are, amongst others, the construction of the overland route from China through Central Asia, Russia and to Europe, and the maritime and overland routes through South Asia and beyond. In this regard, Member States have agreed to promote multilateral cooperation in transport sector and facilitate the formation of international transport corridors, which must become a connecting link between Asia and Europe, implement joint infrastructure projects providing for the expansion of economically justified transport and communication opportunities and fulfil the transit potential of the region. 

Since its inception, the SCO has concluded several wide-ranging agreements on security, trade and investment, connectivity, energy, and culture. Now that India and Pakistan have joined the SCO, there is a window of opportunity to restart stalled projects. For many years, projects like IPI (Iran-Pakistan-India) and TAPI (Turkmenistan-Afghanistan-Pakistan-India) pipelines were halted due to security reasons. With India and Pakistan now joining the organization, it is highly possible that the projects may finally take off.

When the Shanghai Five held its first presidential summit in China in 1996, this innocuous group was hardly noticed as a spot on the geopolitical radar. Very rapidly, this loose-knit cooperative organization started attracting the attention of the world as a potential opponent to Western imperial hegemony. Its collaborative structure and policy of non-interference fosters collaboration among states that possess vastly different levels of power. But its effectiveness will depend upon its ability to maintain cohesion among heterogeneous member states with different interests and diversified cultural background. But most importantly, the credibility of SCO will be judged from its clout to cool down the flame of regional rivalries among member states.