At the Shanghai Cooperation Organization’s (SCO) upcoming summit of heads of state in Samarkand, Uzbekistan, on September 15-16, 2022, Saudi Arabia, Qatar and Egypt are set to join it as dialogue partners. Bahrain will start this process. The UAE, Syria and Iraq also aspire for SCO partnership. Why has the SCO become so important for the Arab world, and why now?
Established in 2001 as a successor to the Shanghai Five, the SCO is the largest regional grouping in Eurasia, covering around 40 percent of the world’s population and 30 percent of global economic output. It currently comprises eight member states — China, India, Kazakhstan, Kyrgyzstan, Pakistan, Russia, Tajikistan and Uzbekistan), four observer states — Afghanistan, Belarus, Iran and Mongolia, and six dialogue partners — Armenia, Azerbaijan, Cambodia, Nepal, Sri Lanka and Turkey.
Owing to its impressive track record of security and economic cooperation, the SCO has expanded its regional profile in a relatively short span of time. India and Pakistan gained full membership in 2017. Iran will acquire the member’s status at the Samarkand summit. A memorandum of understanding between the SCO Secretariat and the General Secretariat of the League of Arab States was also concluded during last year’s SCO summit in Dushanbe, Tajikistan.
The SCO’s value for the Arab world arises from the fact that it is led by China, the global economic powerhouse, and includes Russia and India as major international players, as well as the states of Central Asia and the Caucuses, which have largely untapped resources of oil and natural gas. Although the SCO has yet to establish a free trade zone, it has made significant gains in expanding intraregional trade and investment.
China is the main spirit behind the SCO and, therefore, has the largest share in the organisation’s trade and investment portfolio. Its trade with other SCO member states has reportedly expanded 20 times since 2001, reaching $245 billion in 2020, up from $12 billion in 2001. During this time, China has also invested $85 billion and contracted additional development projects worth $280 billion in other member states.
Owing to its impressive track record of security and economic cooperation, the SCO has expanded its regional profile in a relatively short span of time. India and Pakistan gained full membership in 2017. Iran will acquire the member’s status at the Samarkand summit.
The SCO’s current traction in the Arab world owes largely to China’s growing economic footprint in the region. China is not only its largest trading partner but also a leading investor, thanks to the Belt and Road Initiative.
In the past decade, President Xi Jinping and Foreign Minister Wang Yi have travelled to the region and concluded “comprehensive strategic partnerships” with Saudi Arabia, the UAE, Egypt and Morocco. China has also hosted prominent leaders and officials from the Gulf region, including Saudi King Salman bin Abdul Aziz and Crown Prince Mohammed bin Salman, as well as Sheikh Mohammed bin Zayed, President of the UAE. In January, the foreign ministers of Saudi Arabia, Kuwait, Oman and Bahrain visited Beijing to expedite the process for a free trade agreement between China and the Gulf Cooperation Council.
Last year, China’s bilateral trade with the Arab states was worth $330 billion (a year-on-year increase of nearly 37 percent). A third of China’s energy imports come from the GCC countries, including the largest portion from Saudi Arabia. China’s bilateral trade volume with the Kingdom was worth $87.31 billion at the end of 2021, an almost 209-fold increase from $418 million when diplomatic relations were established in 1990. A key driver of China’s interest in the Gulf region is to secure access to its critical energy resources and maritime trade routes, as well as seaports like Dubai, through which 60 percent of its trade bound for Europe and East Africa passes.
The BRI has enabled China to increase its investments portfolio in the Arab world, which currently amount to $140 billion in the GCC countries alone. These investments are operational in diverse areas such as the development of seaport and transportation facilities, industrial complexes, 5G networks, artificial intelligence, emerging technologies and renewable energy.
As the Gulf nations transform their economies away from oil, they look up to China to develop critical infrastructure. Saudi Arabia is the largest recipient of Chinese investment worth $43.5 billion between 2005 and 2021. In turn, Saudi Arabia has invested or is planning to invest about $35 billion in China-based projects. These investments reflect the growing synergy between China’s BRI and Saudi Vision 2030.
Similarities between the GCC and the SCO are also conducive for transregional connectivity. Security and economic integration have been the founding goals for both organisations. They are inter-governmental organisations, with similar structures. The GCC is the Arab world’s most successful regional body, with a Customs Union and a Common Market.
China has been able to develop strong relations with both Saudi Arabia and Iran, despite their continued hostility. It will therefore continue to play a moderating role, as the Gulf nations gradually make their way into the SCO.
There are other reasons also for the GCC countries’ current drive to join the SCO. While pivoting towards Asia, they have sought bilateral free trade agreements with China, India and Pakistan, but with limited success. Their relations with the states of Central Asia and the Caucasus, despite the commonality of hydrocarbon riches, are still minimal.
That Saudi Arabia and Qatar are set to become dialogue partners of the SCO is, therefore, an encouraging development. They are the world’s largest suppliers of oil and natural gas, respectively. Bahrain will enter the club in over a year. It would be great if the UAE, another oil-rich nation, also joined the accession process. Together with Egypt, Turkey and other Middle Eastern aspirants of SCO partnership, the oil-rich Gulf nations have the wherewithal to act as a catalyst in Eurasian regionalism, along with China, Russia and resourceful Central Asian and Caucuses members.
As China’s largest partner in trade and investment, Saudi Arabia will be crucial to SCO’s economic prowess. As part of the Vision 2030, the Kingdom has developed a viable discourse on global transition to renewable energy, the use of carbon capture technology and hydrogen as an alternative energy source, in particular. The climate change has also become a key priority for the SCO. Finally, Saudi Arabia and the rest of the GCC countries need not worry about Iran, as it gets ready to join the SCO as a member. After all, the membership of arch-rivals India and Pakistan has not caused any trouble in its institutional efficacy in the past half decade. China has been able to develop strong relations with both Saudi Arabia and Iran, despite their continued hostility. It will therefore continue to play a moderating role, as the Gulf nations gradually make their way into the SCO.(The Friday Times)