09.08.2008
Victory Without Confrontation
№3 2008 July/September

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.