One might think there are no more myths in 21st-century world politics as a plethora of facts are made public by global information flows. However, a thorough analysis of the condition and dynamics of international relations challenges the veracity of such claims. Myth-making remains an integral part of both the lives of ordinary citizens and the sphere of activity of politicians and diplomats. The founding and development of probably the youngest of the major regional associations – the Shanghai Cooperation Organization (SCO) – supports this truth.

The leaders of SCO member-states never tire of praising the successful development of the organization, a view supported by a majority of experts from these states. Interestingly, the most pathetic remarks come not from the Russians or Chinese, but from specialists from Central Asia, in particular Kyrgyzstan and Tajikistan.

It should be noted that remarks alleging a successful development of the SCO are common in other parts of the globe, but the opinions regarding this progress are mostly negative. For example, U.S. and European mass media keep presenting the strengthening of the SCO as a threat to efforts to promote “Western values” and an obstacle to the “correct” rearrangement of the world. The most alarmist commentators detect in the SCO a “second edition” of the Warsaw Pact reanimated by the will of Moscow and Beijing.

Most of these interpretations are a far cry from an adequate description of what is happening inside the Shanghai Cooperation Organization. But such is the reality of global competition which, among other things, has an ideological dimension. As a result, the SCO already has its own established mythology, while its geopolitical opponents have invented their own fantastic interpretation of this organization.

The Shanghai Cooperation Organization officially appeared in the summer of 2001, but its origin dates five years earlier to 1996, when the so-called ‘Shanghai Five’ was set up. Still earlier, a group of countries was set up to settle territorial issues between China and former Soviet republics – the Russian Federation, Kazakhstan, Kyrgyzstan and Tajikistan. Since 1992 the four designated members of the Commonwealth of Independent States had been trying to resolve the old demarcation dispute with China.

At the time of the SCO’s inception, all the new states that appeared after the breakup of the Soviet Union were in a deep crisis, whereas China was posting impressive growth rates. This factor, as well as the fear of the “yellow danger” inherited from the Soviet era, was a major concern to the political elites of Russia and Central Asian countries who believed Beijing could take advantage of the situation and make territorial claims.

But China acted otherwise – in the spirit of its foreign policy tradition. Beijing preferred gentle and ingenious moves, achieving two significant victories.

First, it succeeded in transforming a single multi-party negotiating process into separate bilateral formats.

Second, Chinese diplomats managed to introduce such a negotiating term as ‘disputed territories,’ meaning territories formally belonging to the Russian Empire and, successively, to the Soviet Union, but claimed by China.

As a result, a compromise was hammered out: the border problem was resolved by partial concessions to China on the part of Russia, Kazakhstan, Kyrgyzstan and Tajikistan. Now, SCO members have reasonable grounds to assert – unlike many modern states – that they have settled an old dispute in a civilized way. But, on the other hand, the result clearly indicates who really plays first fiddle in the organization.

The SCO documents formally proclaim the equality of all the members, but China undoubtedly plays the leading role. The Chinese economic potential, which is growing year after year, by far exceeds the economic indicators of its other partners. Moreover, an indisputable economic leader is always tempted to exploit cooperation to its advantage while promoting its own national interests. This is not to say that the other participants are destined to play an auxiliary role. The SCO can also be regarded as an organization with a mission to ensure security and development of the Central Asian region with the participation of two most significant neighbors – China and Russia.

Except for rare and short periods (such as the era of Tamerlane’s empire), Central Asia hardly ever played a significant independent role in Eurasia’s international relations. The region has always been an object of outsiders’ regard and territorial ambitions. The greater part of the history of Central Asia is made up of contacts with the mostly Islamic world and pressure from China. In the past, Chinese warriors sometimes advanced as far as the Caspian Sea, but more often they had indirect influence upon the region – through nomadic peoples dependent on the Celestial Empire who lived in the territory of modern Mongolia and western Chinese provinces.

Nevertheless, Chinese policy had a tremendous role in the fate of Central Asia. For example, the Dzungar onslaught on Kazakh tribes was by no means arrested by the heroic feats of Kazakh strongmen, as so beautifully depicted in the movie “Nomad,” but as a result of China’s policy.

Central Asian political elites have been well aware of these circumstances. Several hundred years ago, the Russian Empire was able to engulf the region fast and bloodlessly, just because the other alternative meant control by the Celestial Empire. Russia was more attractive from the point of view of ensuring security and economic development.

Today, many assign this role to Beijing rather than Moscow. But the two powers are interested in keeping Central Asia free from the influence of the geopolitical forces located thousands of kilometers from it. Suffice it to recall that many assumed in the 1990s that the United States and West-European states were clearly outplaying both Russia and China here.

This is not the first time that Central Asian political elites have to choose between their patrons. The pragmatism of their foreign policy is strongly attached to the possibility of deriving maximum profit from cooperation with any large partners. By and large, the region has remained an object of outsiders’ attention. Only smooth-tongued apologists of local political leaders, following the established tradition, continue to present the region as an important independent element of world politics. But how does the so-called ‘multi-vector foreign policy’ of Kazakhstan or Kyrgyzstan look in practice? It is a course toward deriving profit from trade in natural resources and political predilections with all foreign players interested in them.

It is China, not the United States, or, alas, Russia, that appears to be the most promising player at present. It is not by accident that Beijing brought forward the initiative to set up the SCO. It is its brainchild, the first international organization China fostered and is now holding in tremulous care.

Of course, China would have strengthened its presence in Central Asia without the SCO, but this organization lends the necessary legitimacy to Chinese foreign policy in the region. Beijing dresses it in beautiful garments, in full conformity with modern civilized principles of assistance to development, which are the guidelines – at least formally – of its rivals: the U.S. and the European Union.
Beijing has learned the skill of being on good terms with the leaders of Central Asian countries. Furthermore, Chinese strategists selected an extremely propitious moment for expanding contacts with Central Asian partners. The beginning of the 21st century saw marked changes in Russia. Amid an economic upturn, Moscow made it clear it would not continue Boris Yeltsin’s course with respect to former Soviet republics based on open and unsubstantiated subsidizing of countries in the so-called ‘Near Abroad.’ It therefore began to implement a new approach in its relations with Ukraine, Transcaucasia and even Belarus.

Of course, the political elites of Central Asia realized that this would dash their hopes for further generous financial assistance, such as loans, for which payments could be deferred or rescheduled all the time.

As a result, local leaders began to look for fresh sources of compassionate benefits and new partners. In this sense, the United States and the European Union were not the best choice because their political regimes sharply contrasted with the authoritarian practice established in the region. Moreover, the United States quite openly used its presence in the region to put pressure on local governments, or, to use a diplomatic term, to “interfere in internal affairs.” Beijing not only did not seek to “democratize” the region, but, on the contrary, was looking for allies to rebuff such attempts on the part of Washington.

On the other hand, Central Asian political elites assumed that China, in tandem with Russia, was capable of ensuring their security. Membership in an organization together with China reduces the risk of encroachment on the part of China. In addition, China has, as does Russia, nuclear weapons and a powerful army. It is a member of the UN Security Council – i.e. it can provide real diplomatic or political assistance. Incidentally, this factor had an important psychological significance for Central Asia. Kazakhstan, Uzbekistan, Kyrgyzstan and Tajikistan gained the opportunity to position themselves as equal partners (in their eyes) of the leading powers. This was a flattering assumption for regional leaders, which helped them play on this fact for propaganda purposes before their peoples.

Lastly, cooperation with China let them hope for generous financial injections because the Western states, which secured unhindered access to the riches of the region in the 1990s, were reluctant to make concessions to local governments. The conflict between Kazakhstan and a consortium of Western companies over the project to develop the Kashagan oil field was a striking demonstration of this trend. Moscow, as has been mentioned above, was also adjusting its economic policy. China emerged as not only an entirely new, but formally a quite advantageous financial partner.

The last circumstance needs to be underscored. Neither Russia nor even the United States or Western European organizations are capable of competing with China’s financial practice in world politics. China, which is formally a market economy country, de facto has preserved the phenomenon of state paternalism. Chinese companies and banks that provide loans are backed by the entire power of the state. Chinese officials closely watch business in Central Asia and they are doing so better than Russia’s bureaucracy.

Not only do the Chinese open credit lines worth hundreds of millions of dollars at very advantageous interest rates – 1 or 2 percent a year, but their officials do everything to make sure that the adopted decisions on investments are not shelved in offices, but get implemented. One can cite many examples when Russia-conceived projects in Central Asia got bogged down in bureaucratic coordination and were never implemented. But the Chinese, once a decision has been made, immediately allocate huge resources for putting it into practice. Their words match their deeds. It is not surprising therefore that it is China that is boosting its presence in the region. At the same time, one should note that multi-party cooperation is not what China is seeking within the scope of the SCO.
The multi-billion amounts of trade and investments within the organization are misleading figures. In actual fact, Beijing mostly focuses on bilateral trade and projects. In this sense, China acts as it did in the issue of state borders.

This factor has an explanation. It is no secret to experts that the growth of the Chinese economy often causes serious harm to its poorer neighbors. The various goods of Chinese origin, sold at dumping prices, flood markets not only in the United States and the European Union, but China’s closest neighbors as well. The production boom of Chinese enterprises therefore actually blocks the development of a number of branches of industry in Central Asian countries, thwarting their intentions to export their own goods and services. They cannot enter world markets with their goods because those are already crammed with cheaper Chinese products.

None of China’s neighbors, not even Russia, was able to gain a more or less firm foothold on Chinese markets. The thing is that China is only interested in imports of raw materials, financial and bank capital and hi-tech products, such as modern weapons. Thus, China’s western neighbors – Central Asian states that are SCO members – do not have the practical opportunity to make use of China’s rapid economic development to their long-term advantage. In a certain sense, this group is facing an increasing risk of a slowdown in their development in the most competitive spheres of a modern economy. Simultaneously, they are under the threat of lapsing into the permanent role of raw-materials appendages of the Chinese economy.

At present, only two Central Asian countries – Kazakhstan and Uzbekistan – are intent on preserving and augmenting their processing industry, whereas Kyrgyzstan and Tajikistan seem quite content with their function as suppliers of raw materials.

The entry of Chinese products into world markets, in particular the markets of its SCO partners, increasingly affects their economic prospects. Undoubtedly, partnership with China stimulates raw materials exports, but not the exports of industrial goods. This situation only strengthens the role of Russia and Central Asian states as suppliers of primary fuels, metals and timber. Indeed, for these sectors, the growth of demand on the part of China is an important factor of economic development. But aside from trade in raw materials, relations with China hardly ever contribute to a dramatic increase in the competitiveness of SCO economies. In Kyrgyzstan, for example, Chinese mutton is freely available on many markets across the country, and this imported food is already edging out local produce.

It is not accidental that China sought to lobby an advantageous configuration of economic cooperation within the SCO. At the session of the SCO Council of Prime Ministers on September 23, 2003, Chinese Prime Minister Wen Jiabao proposed setting up a free trade zone on a long-term basis, in order to boost the flow of goods in the region, and ease trade restrictions, such as tariffs. A special emphasis was placed on energy projects, including surveys of new hydrocarbon deposits, joint use of hydroelectric power engineering resources and development of water industry facilities.

It should not be forgotten that Beijing boasts a range of considerable advantages over its SCO partners and is set to strengthen them. By purchasing power parity per GDP unit, SCO members’ consumption of energy resources exceeds China’s by 1.5 to 6 times. Per capita use of energy in Russia, Kazakhstan and Uzbekistan exceeds China’s by 4.5 times, 3.6 times and 2.1 times, respectively.

Beyond the raw materials sectors, even such leaders of the Commonwealth of Independent States as Russia and Kazakhstan are absolutely uncompetitive, as compared with China, because of the higher cost of labor. A fledging social sphere, unencumbered by retirement benefits for all, also gives China an edge. Another competitive advantage is that it often ignores the environmental requirements on emissions. Therefore, the success of the Chinese economy, in certain sense, objectively works against all the economies of its SCO partners in the processing branches, and sometimes in agriculture.

The problems of productive development of the Shanghai Cooperation Organization, securing a stable political situation in Central Asia and guarantees of Russian interests in the region have both concurrent and conflicting aspects. A stable Central Asia is advantageous to all SCO members. But this objective cannot always be achieved with a system that would be fair to all the participants. There always exist obvious or hidden advantages for one country, or several, but never for all.

At present, an overwhelming majority of economic projects developed and implemented within the SCO is geographically attached to the Central Asian region. At first glance, this approach is not devoid of logic, as it would embrace the maximum number of SCO members. But this creates an infrastructure that meets more Chinese interests than Russian. For example, a large portion of projects in the transport and energy sectors envisions investments in facilities in Kyrgyzstan, Tajikistan, Uzbekistan and Kazakhstan, for the most part in areas close to the Chinese border. There are far fewer projects expanding communication ties between Central Asia and Russia.

On the one hand, it certainly implies progress toward the stability of the region. But on the other, in the event of possible future changes in foreign policy by the leaders of Central Asian countries, it will be China – not Russia – that will get the opportunity to use the additional levers – created under the SCO auspices – for economic influence on the situation.

There is no doubt that China – using multi-party cooperation within the SCO and its bilateral ties with countries of the region – is gradually asserting the advantageous and dominating idea: Central Asia should serve as energy donor for the Chinese economy. To attain this goal, China views its SCO partners – Russia, Kazakhstan and Uzbekistan, as well as Turkmenistan – as potential sources of energy resources. Kazakhstan became the first candidate for a supplier – a country that practiced trade in its hydrocarbon resources at low prices due to a number of reasons in the mid-1990s.

Beijing has already joined the active struggle for Central Asian oil and natural gas. It has been acting in several fields, and this activity has adversely affected Russian interests. Traditionally, Central Asian oil and gas were supplied to Russia through trunk pipelines. Moscow has already had to agree to plans to dramatically increase by several times the price of Central Asian gas. The move was made in the face of a threat to divert supplies from the northern (to Russia) to the eastern direction (to China). In this sense, China is interested in encouraging competition between the exporters of hydrocarbons, following the example of the West, which also influences Russia with projects to supply Central Asian gas either to Europe bypassing Russia (the Nabucco project) or to southern Asia (the Trans-Afghan pipeline).

Of course, China’s oil and gas expansion into Central Asia is still encountering a range of restrictions, which keep it from coming full force, like Western companies. For example, the pricing policy remains a vulnerable spot. Despite a noticeable growth in prices for primary fuels within China, they remain lower than the average European price. A considerable increase in gas consumption in China is possible if the central government undertakes to compensate the difference between purchase and domestic prices. However, there is an option under which Central Asian gas suppliers might agree to fix special low prices for China, due to this or that reason. In that event, it would be a value-added energy cooperation for Beijing because it gives an opportunity to use it as a lever of pressure on Russia.

The development of economic interaction between China and Central Asian countries could result in a situation where China, which is gradually strengthening its presence in the region, will objectively build a system of domination in foreign economic interests of local political elites. It cannot be ruled out that it might create prerequisites for re-orienting military and military-technical cooperation from Russia to China. In a certain sense, the first moves in this direction have already been made: China gratuitously offers some countries military uniforms and auxiliary equipment (cross-country vehicles), and holds joint exercises of law-enforcement forces on a bilateral basis – for example maneuvers-2006 with Kazakhstan and Tajikistan.

China, in its foreign policy, has always preferred to act cautiously, gradually creating the proper conditions for fulfilling the tasks set by its leadership. An ancient Chinese strategist wrote that the true commander should achieve victory without directly engaging the enemy. The incumbent Beijing leaders have learned this maxim well.