In duelling summit, China and Russia push to reorient SCO against the West

The timing says it all.

Two key summits were held around the world this week - one in Kazakhstan and the other in Washington, DC, as duelling powers closed ranks with allies and set their agendas for the months and years ahead.

At the first conference, the recently concluded Shanghai Cooperation Organization (SCO) leaders' summit in Astana, China and Russia vowed to strengthen their economic, political and security engagement with Eurasian allies.

Meanwhile at the second summit, members of the North Atlantic Treaty Organization (NATO) have been meeting in Washington this week to deepen security engagement with Asian partners, hoping to counter China and Russia's growing assertiveness on the world stage.

The SCO was initially founded in 2001 by China, Russia and Central Asian states to counter terrorism and promote shared security interests. Today, it includes India, Pakistan, Iran and Belarus. As China and Russia's relations with the West become increasingly strained, both allies are keen to reorient the SCO towards countering the West.

In his address to the SCO, Russian President Vladimir Putin called for a "new architecture of indivisible security and development" in Eurasia, and criticised the West for promoting Eurocentric and Euro-Atlantic models. Russia sees the SCO as an important forum to deflect Western criticism from its war in Ukraine, and has warned against future US military presence in the region.

China shares that sense of resistance. It is pitching the SCO as an alternative bloc that challenges Western dominance in the international system, and has baulked at US influence in the global economy.

Can Russia and China's bid for closer economic, political and security engagement with the SCO succeed?

Shared interests

There is considerable optimism on the economic front.

China and Russia are already stepping up negotiations to settle more SCO trade in local currencies. Alternative payments were among the top agenda items at this year's summit, and reflect a major push by China to establish an "SCO financing platform" that gives its currency precedence over the dollar.

Central Asian countries would back these negotiations because many of their companies have come under stringent US sanctions in recent times. Earlier in the year, the US Treasury placed Kyrgyzstan and Kazakhstan-based companies on the Russia sanctions list, making it imperative to limit adverse exposure to the dollar if they hope to bolster export competitiveness within the SCO.

Russia's burgeoning trade with SCO states is another trigger for increased de-dollarisation. Trade between Moscow and SCO countries reportedly surged to $333 billion last year, and over 90 percent of Russia-SCO payment settlements involved national currencies.

This is important because China and Russia are vying for economic influence in Central Asia, and see a move away from the US dollar as an important means to boost their developmental offerings under SCO.

For instance, China has responded to Russia's economic influence by investing billions in development projects across Central Asia through the Belt and Road Initiative (BRI). The goal is to expand the use of the Chinese currency through these mega projects and present China-Central Asia cooperation as a model for stronger BRI engagement under SCO.

Despite all the optimism, there are limits to China and Russia's growing economic ambitions. Consider India. While it agrees on expanding local currency trade to manage concerns over the US dollar, it sees China's BRI as a violation of its territorial sovereignty. These reservations have prevented the SCO from unanimously endorsing China's connectivity projects.

New Delhi is also wary of antagonising the West. It has shown limited enthusiasm for a Russia-backed independent financial payment mechanism within the SCO, and continues to walk a tightrope when it comes to alternative proposals. Prime Minister Narendra Modi's no-show at this year's summit made clear that India could distance itself from the SCO with few consequences (he bear-hugged Putin in Moscow during an official visit this week).

It also suggested that India had little to gain from Sino-Russian opposition to the West. New Delhi can continue to secure its core interests – access to oil, more local currency payments, limited sanctions exposure – without necessarily backing China and Russia against the West.

Diverging priorities

Both China and Russia have put a premium on security cooperation within the SCO, although diverging priorities remain a cause for concern.

Moscow's security interests are primarily tied to the war in Ukraine. Putin sees the SCO as an open forum to signal resistance to the West, and has demanded that the West accept its terms for peace talks. To project a sense of group unity, Russia even backed Belarus's admission to the SCO this year – bringing a key war ally into the centre.

But an outsized focus on Ukraine risks weakening group consensus on common security challenges. The summit's joint statement made no mention of the war in Ukraine, and countries such as Kazakhstan and India have signalled their discomfort over Russia's military campaign.

For a grouping that represents over 40 percent of the global population and about a quarter of the world economy, it is imperative to agree on security challenges that enjoy broad-based traction with member states.

Counterterrorism is a case in point. Rising terrorist attacks from Afghanistan pose a direct threat to Pakistan, Central Asian states and other regional countries. But the issue lacks unity as China and Russia instead prioritise pushing the SCO to counter US "hegemony."

As early as June last year, Tajikistan called for stronger measures to deal with new terrorist groups near its borders, while Pakistan renewed calls for "concrete and effective measures" to prevent the use of Afghan soil for attacks against other states.

But divergent threat perceptions once again challenge the SCO's ability to lead a common security response. Chinese President Xi Jinping avoided any direct criticism of the Taliban this month or its lack of cooperation on curbing cross-border attacks.

This is because China is pursuing a policy of active engagement with the Taliban rule in Afghanistan, offering to normalise ties in exchange for greater action against terror groups, such as the Tehrik-i-Taliban Pakistan (TTP). The move comes despite Beijing's chairmanship of the Regional Anti-Terrorist Structure – the SCO's principal organ for coordinating counterterrorism efforts across member states.

Thus understood, China and Russia's bid for stronger security, economic and political cooperation with the SCO carries mixed promise. Rising investments and currency settlements are a major boost to their collective economic ambitions in Eurasia, but divergent security priorities challenge long-term traction within the SCO.