China and Russia looking to expand Shanghai Cooperation Organisation as alternative to Western order, analysts say

The Eurasian bloc is seeking to appeal to countries under Western sanctions with Iran joining this year and Belarus on course for membership
Members are also looking to expand its economic role, with China pushing for national currencies to be used as an alternative to the US dollar

China-Russia relations

Hayley Wong

Published: 2:00pm, 9 Jul 2023

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China and Russia are looking to expand the Shanghai Cooperation Organisation by reaching out to countries sanctioned by the West and offering “alternative options” to the established order, analysts have said.

Although the bloc initially focused on security, the current climate and impact of Russia’s invasion of Ukraine have also driven efforts to boost its economic role.

By including Iran and putting Belarus on track for membership it had “sent a signal” to the world that there were options for greater Eurasian integration and to counter the Western liberal order, said Ilayda Nijhar, a global risk analyst at ODI, a global affairs think tank.

“We are seeing the SCO increasing in popularity across ‘non-aligned’ parts of the world … Geopolitically, China and Russia are looking to play the long game here,” she said.

China and Russia founded the security bloc in 2001 with the Central Asian republics of Kazakhstan, Kyrgyzstan, Tajikistan and Uzbekistan. India and Pakistan joined in 2017. Iran joined this year and Belarus, another country under Western sanctions, is expected to join next year.

Member states are also able to invite “dialogue partners” to take part in specialised discussions. More than a dozen countries have been given this status so far, with the latest being Bahrain, Kuwait, the United Arab Emirates, the Maldives and Myanmar.

Raffaello Pantucci, a senior fellow at the S Rajaratnam School of International Studies in Singapore, said Russia’s call last week for deeper cooperation among the bloc was “demonstrating to the world once again, that they have alternative options and that the West can close it out of whatever structures it wants”.

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He added: “What’s interesting is the [countries] that aren’t usually hostile to the West but are still involved, India being the most obvious one, and increasingly, actually the central Asians as well.”

Zoon Ahmed Khan, a research fellow at the Belt and Road Strategy Institute at Tsinghua University in Beijing, said: “[Member countries] all have this common understanding that SCO countries, or the Global South at large even, have been affected by many coercive policies by developed countries. So they see common ground to work together.”

Khan added: “I think [since] the Russia-Ukraine crisis [began], many countries in the SCO have felt that they were quite vulnerable to the global economic challenges. Energy security and food security are major challenges.”

Members are looking to deepen the bloc’s economic role, with Uzbekistan calling for a “unified transport connectivity map” while Kazakhstan called for a joint investment fund and more energy cooperation.

Vladimir Putin is turning to the SCO following his invasion of Ukraine after being frozen out of Western-led institutions. Photo: EPA-EFE

The members also backed a call by Chinese President Xi Jinping and Putin to increase the use of national currencies, rather than the US dollar, in trade and showed “strong support” for digital integration.

Xi also renewed calls for the establishment of the SCO Development Bank, a long-standing policy of Beijing’s which has made little progress so far.

Pantucci said China had wanted the SCO to focus on the economy at the time of its establishment, but the development bank proposal had won little support from other members.

“The fact that he’s raising it again suggests that they think there is still an opportune moment for this,” he said.

Russia, in particular, has shifted its attitude significantly. Speaking to its neighbouring countries, Putin called on the SCO to set up “necessary payment infrastructures” to strengthen regional economic integration and build an “independent financial structure”.

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Pantucci said Russia “basically dismissed” the group in the early days but joined because of concerns about Chinese influence in its “backyard”.

But now it increasingly sees the SCO as a bulwark to the West as it steps up security cooperation through mechanisms such as the Regional Anti-Terrorist Structure.

Nijhar, from ODI, said Xi and Putin were pushing to reduce dependency on the US dollar in line with their “ambitions to position their currencies as reliable and sustainable alternatives to the dollar”.

She said the move had taken on even more significance after Russia’s invasion of Ukraine because numerous markets that were exposed to sanctions were now looking for new banking and investment opportunities.