Current State of Integration Processes within the Framework of the SCO

Results of the Dushanbe Summit of 11-12 September 2014

Text of statement delivered at meeting with Pakistani delegation, 14 October 2014

On 11-12 September 2014 Dushanbe hosted a summit of the Heads of State of the Shanghai Cooperation Organisation (SCO). This is an important event for the Russian Federation, particularly as, in accordance with the SCO Charter, the chairmanship of the Organization for the coming period will go to our country. A regular meeting of the council of the Heads of State will take place in 2015 in Ufa and Russia as chair will have to implement the decisions adopted in Dushanbe. 

Within the framework of the SCO the possibility of wider economic integration has been actively discussed. Member countries have issued a number of important documents in the field of economic integration. In particular, the Declaration of the SCO Beijing Summit in June 2012 highlights that the members of the Organisation will implement multilateral investment projects in the areas of transport, communications, agriculture, energy security, alternative energy resources and advanced energy technologies. 

Subdivisions of the SCO such as the Business Council and the Interbank Association have been created to implement economic decisions. The ministers responsible for foreign economic relations and foreign trade meet regularly. 

A number of documents were also adopted at the conclusion of the 2014 Summit. In the economic sphere, it is worth noting the agreement signed between the governments of SCO member states on the creation of favourable conditions for international road transport. 

However, if we analyse the SCO's activities in terms of the implementation of documents adopted in recent years, it is clear that multilateral economic integration develops very slowly, and many of the decisions taken in this sphere are not met. Major joint projects exist mainly on paper and the implementation of pilot projects is faltering. Significantly, Vladimir Putin, speaking at a meeting of the Council of the Heads of State of the SCO in Dushanbe, reminded participants of the need to actualise the SCO’s 2003 Programme of Trade and Economic Cooperation of the SCO and the corresponding implementation plan that was updated in 2008. 

At the outset, it is important to understand the complexity of integrating the economies of SCO countries because an analysis of "absolute numbers" demonstrates the enormous combined capacity of the Organisation’s member states. The GDP of member countries reaches ¼ of the world’s GDP ($ 12.4 trillion). In terms of the earth’s resources, about 25% of oil, more than 50% of natural gas, 35% of coal and about 50% of coal reserves are concentrated in member state territories. Conditions for multilateral, deep economic integration, including the implementation of joint investment projects, create a positive dynamic for bilateral trade relations between the SCO’s member states. 

All member states agree on the great potential of common public transport projects in the SCO area. “Quite promising, in our opinion,” said President Vladimir Putin, “is the idea to form an SCO common transport system, including the transport potential of TransSib (Trans-Siberian Railway) and BAM (Baikal-Amur Railway), connected with China’s plans to develop the Silk Route.” 

However, despite these positive conditions, the development of economic integration within the framework of the SCO is impeded by a number of factors. 

An acute issue in the Central Asian region (CAR) is water use. This is a constant source of conflict between Uzbekistan and Tajikistan. 

The position of Uzbekistan, which seeks to play a dominant role in the region and follows a policy of “equidistance” from the centres of power, inhibits economic integration. Uzbekistan withdrew from the CSTO and is more actively cooperating with NATO. 

The SCO now faces the difficult task of dealing with the impending withdrawal from Afghanistan of the International Security Assistance Force (ISAF). The completion of the prolonged occupation of Afghanistan could destabilize the situation both in Afghanistan and the Central Asian Region. One cannot ignore the coming to power of the Taliban, the infiltration of Islamic militants from Afghanistan into neighbouring Central Asian States, the intensification of local religious extremists in the CAR and their attempts to seize power. Across Central Asia, Islamic extremism and drugs will penetrate into Russia and China, in particular, into those regions with a predominantly Muslim population - the North Caucasus, the Volga region and the Xinjiang Uygur Autonomous Region. 

In these circumstances, it is understandable why economic cooperation within the SCO is marked by low dynamism. In view of the above, in order to give specific content to the SCO’s economic agenda there needs to be a move away from realising large-scale, "general Eurasian” or "continental" economic projects and an attempt to tie the SCO’s economic integration strategy to ensuring the political and military stability in the region in new conditions. 

Start with small but mutually important projects for all the countries in the region.  The SCO’s joint economic projects should, in line with the strategic interests of all member countries, be linked to the fight against terrorism, separatism, religious extremism and drug trafficking. For example, in would be useful for the SCO’s economic agenda to focus on developing programmes of accelerated economic development of the border areas of Uzbekistan and Tajikistan in order to create a “security belt” on the border with Afghanistan. 

A perspective line of SCO member activity could be the economic development of northern Afghanistan through projects in agriculture, industry and transport, which were planned for implementation in those areas until 1991 with the assistance of the Soviet Union. For example, the reconstruction, in the interests of agricultural development, of the destroyed irrigation system in the plains to the north of the Hindu Kush.

In the agricultural sector, it is important to stimulate Afghan farmers to transition from cultivating opium poppies to other crops such as cotton and grain. In general, it is important to raise the level of Afghanistan’s social development and economic well-being of Afghanistan, to bring about the return of refugees to depopulated areas of the country so as to gradually deprive extremists, terrorists and drug traffickers of favourable conditions for their destructive activities.

One of the main directions of economic integration should also be the issue of water and hydropower, which remains a source of violent conflict that could destabilize the military and political situation in Central Asia. 

To implement such economic projects it is necessary to attract the financial and logistical resources of SCO observer countries, notably India, interested in a stable secular Afghanistan. In this regard, the question of creating an SCO Development Fund to provide a common funding mechanism for such projects arises once again.

The SCO is an international organisation with distinct regional characteristics. It was established as a regional project and has become a collective response to the challenges that threaten all countries in the region – primarily terrorism, separatism, drug trafficking and security issues. The SCO continues to be primarily a political organisation. However, its members have many opportunities for convergence and mutually beneficial cooperation in the economic sphere.

Dushanbe SCO economics