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    Central Asia
     Jun 13, 2009
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Sino-Russian baby comes of age
By M K Bhadrakumar

By the yardstick of Jacques, the melancholy philosopher-clown in William Shakespeare's play As You Like It, the Shanghai Cooperation Organization (SCO) has indisputably passed the stage of "Mewling and puking in the nurse's arms".

Nor is SCO anymore the "whining schoolboy, with his satchel/And shining morning face, creeping like snail/Unwillingly to school". The SCO more and more resembles Jacques' lover, "Sighing like a furnace, with a woeful ballad/Made to his mistress' brow." Indeed, if all the world's a stage and the regional organizations are players who make their exits and entrances, the SCO is doing remarkably well playing many parts. That it has finally reached adulthood is beyond dispute.

But growing up is never easy, especially adolescence, and the


past year since the SCO summit in Dushanbe, Tajikistan, has been particularly transformational. What stands out when the SCO's ninth summit meeting begins in the Urals city of Yekaterinburg in Russia on Monday is that the setting in which the regional organization - comprising China, Kazakhstan, Kyrgyzstan, Russia, Tajikistan and Uzbekistan - is called on to perform has itself unrecognizably shifted since last August's gathering of leaders in Dushanbe. First, the big picture.

The locus shifts east
The world economic crisis has descended on the SCO space like a Siberian blast that brings frost and ice and leaves behind a white winter, sparking mild hysteria. The landscape seems uniformly attired, but that can be a highly deceptive appearance. Russia and China, which make up the sum total of the SCO experience, are responding to the economic crisis in vastly different terms.

For Russia, as former prime minister and well-known scholar academician Yevgeniy Primakov observed ruefully in a recent Izvestia interview, "Russia will not come out of the crisis anytime soon ... Russia will most likely come out of the recession in the second echelon - after the developed countries ... The trap of the present crisis is that it is not localized but is worldwide. Russia is dependent on other countries. That lessens the opportunity to get out of the recession in a short period of time." [1]

Primakov should know. It was he as president Boris Yeltsin's prime minister who steered Russia out of its near-terminal financial crisis 10 years ago that brought the whole post-Soviet edifice in Moscow all but tumbling down.

Russia's economic structure is such that 40% of its gross domestic product (GDP) is created through raw material exports, which engenders a highly vulnerable threshold when the world economy as a whole gets caught up in the grip of recession. But what about China?

This was how Primakov compared the Chinese and Russian economic scenario:
In China too, as in Russia, exports make up a significant part of the GDP. The crisis smacked them and us. The difference is that China exports ready-made products, while on our country [Russia] a strong raw material flow was traditional. What are the Chinese doing?

They are moving a large part of the ready-made goods to the domestic market. At the same time, they are trying to raise the population's solvent demand. On this basis, the plants and factories will continue to operate and the economy will work.

We [Russia] cannot do that. If raw materials are moved to the domestic market, consumers of such vast volumes will not be found. Raise the population's solvent demand? That merely steps up imports.
This is only one part of a complex story, but the short point concerns the vastly different prospects of economic stabilization in the current crisis that China and Russia face. To be sure, its impact on the geopolitics of the SCO space cannot be overlooked. Simply put, China's profile as the "donor" country in the SCO space is shining brighter than ever before. China has given US$25 billion as a loan to Russia and $15 billion as a loan to Kazakhstan, the two big-time players in the SCO, during the April-May period.

Last week, in yet another breathtaking move, China offered a loan of $3 billion to Turkmenistan. The loan for Russia is a vital lifeline for its number one oil major Rosneft and its monopoly pipeline builder Transneft. The loan for Kazakhstan, which goes partly towards acquiring a 50% stake in MangistauMunaiGaz, increases China's share of oil production in Kazakhstan to 22%. Again, the loan for Turkmenistan ensures that China has the inside track on the fabulous Yolotan-Osman, which is reputed to be one of the biggest gas fields in the world.

No heartburn in Moscow
In short, if the law of nature is such that gravitation in life is inevitably towards where the money comes from, the locus of the SCO has shifted to Beijing more than ever before. In any other context, this would have straightaway introduced a high state of disequilibrium within the SCO. It took decades for France and Germany to figure out cohabitation within the European Economic Community. The China-Russia equilibrium within the SCO has always been delicate, but it may have prima facie become more so than ever before. But in actuality, it isn't so.

It goes to the credit of the leaderships in Moscow and Beijing that they have steered their relationship in a positive direction by rationally analyzing the imperatives of their strategic partnership in the overall international situation rather than in a limited sphere of who gains access to which gas fields first in the Caspian or who is a lender and who is a borrower in these extraordinary times.

Thus, the frequent tempo of Russia-China high-level exchanges has been kept up. Both sides are sensitive to each other's core concerns and vital interests. Russia's conflict in the Caucasus last August was a litmus test and Beijing passed the test. The Russia-China mutual understanding survived intact without bruises.

Despite China's highly principled position on the issue of political separatism and secessionism, and despite all efforts by Western propaganda, China kept a watchful position on Georgia's breakaway republics of Abkhazia and South Ossetia and silently took note of Moscow's recognition of their unilateral declaration of independence, but on balance remained broadly sympathetic to Russia's concerns and predicaments, which Moscow duly appreciated.

Again, belying all Western expectations that Russian and Chinese priorities in energy security diverge, the two countries have finally begun taking big strides on the ground in energy cooperation. A variety of factors went into it - the fall in demand for energy in the recession-struck European markets; strains in Russia-European Union energy relations; Russia's own search for diversification of its Asian market; Russia's energy rivalries with the European Union and the United States in the Caspian and so on - but the fact remains that Moscow is increasingly overcoming its hesitancy that it might get hooked to the massive Chinese energy market as an "appendage", as a mere provider of raw materials for China's economy.

The 25-year $25 billion China-Russia "loan-for-oil" deal signed in April alone amounts to Russian oil supplies equivalent of 4% of China's current daily needs. Not bad at all. But it is in the sphere of natural gas that we may expect big news in the coming period. This is virgin soil. Russia at present does not figure as a gas exporter to the Chinese market. And natural gas is where the world's - and especially China's - focus is turning in the coming decades.

Powerful Kremlin politician Deputy Prime Minister Igor Sechin is on record that the Russian leadership will be making some major proposals to Chinese President Hu Jintao during his visit to Russia to attend the SCO summit. ("Whatever amount they [China] ask for, we [Russia] have the gas," Sechin reportedly said.) It cannot be lost on observers that the Kremlin has earmarked the SCO summit event for taking such a strategic step in energy cooperation with China.

Thus, it has become a moot point whether Moscow has or has not yet realized the then president Vladimir Putin's four-year-old idea of forming an "energy club" within the SCO framework. Effectively, a matrix is developing among the SCO countries (involving member countries as well as "observers") in the field of energy cooperation. It has several templates - China on the one hand and Kazakhstan, Uzbekistan and Turkmenistan on the other; Russia-China; China-Iran; Russia-Iran; Iran-Pakistan; and, of course Russia's traditional ties with the Central Asian states. (If the current Iranian plan for an oil pipeline linking the Caspian Sea and the Gulf of Oman materializes soon, yet another template may be formed involving Iran, Russia, Kazakhstan and Turkmenistan.)

Arguably, so far these vectors have not collided with each other, despite the prognosis of Western experts that Russian and Chinese interests in the Central Asian and the Caspian region will inevitably collide [2]. Moscow seems to be quite comfortable with the idea that the Chinese are accessing the region's surplus energy reserves rather than the US or EU countries. As a commentator put it, "Russia is also doing its damnedest to keep Europe out of Central Asia ... In Central Asia, it's starting to look as if Moscow and, to a lesser extent, Beijing ... may have already outmaneuvered Europe." [3]

SCO gatecrashes the Hindu Kush
Less than three years ago, a leading American expert on the Central Asian region, Dr Martha Brill Olcott of the Carnegie Endowment for International Peace, described the SCO as "little more than a discussion forum". Olcott said, "Today, the Shanghai Cooperation Organization does not pose any direct threat to US interests in Central Asia or in the region more generally." [4]

That was a debatable point even three years ago, more so now. What seems to have happened is that the US simply has had no choice but to learn to live with a unique regional organization that insists on keeping it excluded. Any regional body that includes Russia and China cannot but be of interest to Washington. No doubt, SCO has been an object of intense curiosity for US regional policies through the past decade. American diplomats did all they could to debunk it in its formative years. Finally, Washington reconciled. This was evident from the fact that eventually the US began making efforts of its own, vainly though, to gain observer status in the SCO.

The list of participants at the SCO summit in Yekaterinburg testifies to the SCO's steady evolution as an influential regional and international body. Curiously, the list of participants includes Mahinda Rajapaksa, president of Sri Lanka, as a "dialogue partner". In terms of realpolitik, SCO has broadened its reach to the Indian Ocean region. Clearly, it is a matter of time before Nepal, Myanmar Bangladesh and Sri Lanka are associated with the SCO processes one way or another. The SCO already has institutionalized links with the 10-member Association of Southeast Asian Nations.

A stage has come when the SCO's common stances on regional and international issues are widely noted by the international community and discussed threadbare by regional experts. Quite likely, this year's statement will reflect a common SCO position strongly endorsing the Sri Lankan government's policy of rebuffing the Western intrusive approach in terms of humanitarian intervention in the island's current problem affecting displaced Tamils.

For Colombo, the SCO support will come as a much-needed shot in the arm in warding off Western pressure in the period ahead. Already in the United Nations Security Council, Colombo depends on the robust support of Russia and China, both veto-holding powers from the SCO.

Again, the SCO's formulations this year on the North Korean and Iran nuclear problems will be read with interest. Last year's statement on the conflict in the Caucasus was widely discussed by regional experts.

During the past year, the SCO has virtually gatecrashed into the Afghanistan problem, so much so that it is going to be counter-productive for Washington to shut out the regional body altogether from the Hindu Kush. The SCO has rapidly built on its nascent 

Continued 1 2

Russia, China on comradely terms
(May 2,'09)

Nuclear war is Kim Jong-il's game plan

2. Economic hell

3. Pakistan fights for its tribal soul

4. You just have to laugh

5. China's rise stirs Vietnam's anxiety

6. Poetic justice of a green revolution

7. India blasts rivals' role in Sri Lanka

8. What China shouldn't learn from the US

9. China's copper deal back in the melt

10. The race for cheerleader-in-chief

(24 hours to 11:59pm ET, June 11, 2009)


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