Why The Shanghai Cooperation Organization Summit In Uzbekistan This Week Should Matter For The West

Despite China’s “zero Covid” policy blunder and continued barking dog rumors of decoupling coming from the U.S. and – most recently – Germany, China is marching ahead in conquering the Central Asia as one of its main investment outposts.

Meanwhile, Europe can barely pay its electrical bills.

By comparison, the U.S. is doing fine, barring its 40-year high inflation rate. But China, which purports to have just around 3% inflation, is not going quiet into the night in year four of the trade war.

Recall that Washington’s plans to paint Beijing as some sort of Moscow-enabler failed miserably. Even Brazil’s former president Luiz Inacio Lula da Silva (and plausible next president, for the third time), didn’t pick the West’s side when it came to Russia or Ukraine. Just as importantly, India, arguably the most important ally the U.S. has in the region, has not turned its back on Russia, nor China, despite being as aggressive (and in some cases more aggressive) towards China than we are. Remember, India banned China’s TikTok in 2020.

And now the whole bunch of them are meeting up in Samarkand, Uzbekistan on Thursday and Friday for the Shanghai Cooperation Organization (SCO) summit. The focus will be on Central Asian development, funded, in large part, by China — with mountains of dirt and earth moved by Chinese mining equipment, computer hardware to power the new tech economies made in China, and funding for railroads and highways and bridges mostly all from China.

What is this summit all about?

The SCO summit includes China, India, Russia, Iran, Pakistan and all the ‘Stan countries, including event host, Uzbekistan. These countries account for half of the world’s population and at least 25% of world GDP. The war in Ukraine is unlikely to come up, though Uzbekistan president Shavkat Mirziyoyev mentioned that, and other impacts on the commodities trade in an op-ed published in numerous SCO member countries’ newspapers, like The Times of India, on September 12.

“The ongoing armed conflicts in different parts of the world destabilize trade and investment flows and have exacerbated the problems of food and energy security,” he wrote, without singling out Ukraine, the biggest armed conflict in the world at the moment. “We are undergoing a deep crisis of trust globally. Mutual alienation complicates the return of the world economy to its former course of development and restoration of global supply chains,” he wrote, alluding to the West’s isolation of Russia and ongoing great power rivalry with China.

Mirziyoyev also mentioned climate change concerns, and the pandemic, admitting that all of these things can be headwinds to growth. This is especially true in countries like his own, which is still developing.

The SCO is the largest economic cooperation institution in Eurasia. Think of it as the Organization for Economic Cooperation and Development of Europe. It promotes trade and economic cooperation for its members, as well as linking them to the bigger markets – the U.S. and Europe.

To whit, some of the bigger development projects are railroads. These are often seen as a way to get Chinese and – eventually – Central Asian goods to Europe. But, even more likely, these logistic investments are geared towards building up the region itself, opposed to just maintaining status as a resource and manufacturing center for Western consumers.

For its part, China wants to sell its manufactured goods to other markets, too. Right now, China is almost fully dependent on the U.S. and European markets for exports.

Some of the big projects include the Trans-Afghan railroad, linking Uzbekistan to Pakistan through Afghanistan. The railroad is supposed to create alternative transportation routes for trading between Asia and Europe.

Other SCO projects include the China-Central Asia natural gas pipeline; the China-Kazakhstan-Uzbekistan railroad; a China-Kyrgyzstan Railroad; and the China-Kyrgyzstan-Uzbekistan highway.

“Whether we talk about the International North-South Corridor, the Chennai- Vladivostok Maritime Corridor or the Northern Sea Route, connectivity will play an important role in the development of our relations in future,” Indian Prime Minister Modi said in his remarks on September 7.

The Economic Times reported on September 14 that Modi and Putin will meet on the sidelines of the SCO meeting in Samarkand to discuss multilateral engagements including the G20, SCO and United Nations. This is particularly important because India will preside over the UN Security Council in December, and, in 2023, India will lead the SCO and chair the G20.

With the U.S. and Europe leaving Russia, Indian retail chains are increasing their footprints there instead.

Russian companies are also eyeing Indian markets to make up for commercial ties being severed due to sanctions.

For its part, host country Uzbekistan is seeing an influx of Russian IT specialists who were basically forced out of Belarus and Russia due to sanctions, and a general bad look for Western companies to be tied to Russian back offices, even if the work is generally deemed innocent software engineer outsourcing.

“Uzbekistan is already seeing a big increase in Russian tourists this year and has also attracted thousands of skilled Russians, many of whom may stay and help develop the technology sector,” Chris Weafer, CEO of Macro Advisory wrote in a note to clients in late June.

Uzbekistan has been on the fast track to modernization ever since its leader Islam Karimov died in 2016. Karimov was a leftover from the Soviet days.

“An eyebrow-raising 620 state-owned enterprises will be put up for sale in whole or in part over the next three years or so. Of these, about 15 are widely regarded as world-class companies, from Navoi Mining, owner of the world’s largest gold mine, to Uzbekneftegaz, the nation’s oil and gas flag carrier and contributor of 15 percent of Uzbekistan’s GDP,” says Fred Harrison, managing director of communications consultancy Belgrave Europe.

The U.S. is trying to court Asia, still, in light of China’s ever-expanding influence sphere. Their Indo-Pacific Economic Framework is supposed to set ground rules for trade, but is not a trade agreement with tariffs and open markets, something India’s not all that interested in, let alone most Americans.

However, the SCO is moving on. It’s not some free trade show, nor is it a sign that Central Asia is picking sides. It’s not.

But as the West embarrassingly struggles with astronomical energy costs and shifting political power, Central Asia, largely led by China, is growing. It’s growing in a region that doesn’t want to fight, really, despite its own warring factions among themselves. Every country seems to be carving its own path. Uzbekistan and Kazakhstan both want, and have, good relations with the U.S. (Mirziyoyev met President Trump in 2018 in Washington.)

“It is exactly at the time of crisis when all the countries – whether they be large, medium, or small – must put aside their narrow interests and focus on mutual interaction, unite, and increase the common efforts”, SCO host Mirziyoyev wrote in his op-ed last week.

His own country is growing, with 3.4% GDP expected this year, roughly on par with what the IMF has forecast for China, and greater than its neighbor Kazakhstan. Within the group, India is the one growing the most and Russia is the one in the biggest trouble due to sanctions and the war in Ukraine.