Iran has joined the SCO, now it needs to turbo-boost its economy • THE CRADLE

Source: https://thecradle.co/Article/analysis/2019

With Iran’s full accession to the Shanghai Cooperation Organization (SCO) complete, Tehran now needs to wrangle big trade deals with its new regional friends to offset US sanctions against its beleaguered economy.

“Today, we will launch procedures to admit Iran as a full member of the SCO (Shanghai Cooperation Organization),” Chinese President Xi Jinping announced on Friday, putting to rest the rampant speculation that Iran will officially accede to Asia’s most coveted security organization.

Iranian President Ebrahim Raisi is in Dushanbe, Tajikistan with a high level diplomatic and economic delegation to attend the annual two-day SCO summit. The visit, marking Raisi’s first foreign trip, is already a dazzling success for the new head of state. The Islamic Republic had, until today, only enjoyed SCO observer status (since 2005), and had undergone two previous failed attempts to gain full membership.

The announcement of Iran’s accession to the SCO comes as little surprise to experts who predicted that Tehran’s comprehensive strategic partnership agreement with China last March and its subsequent announcement of a similar agreement with Moscow, would pave the way for Iran’s upgraded SCO status. Recent developments in Afghanistan have only confirmed for Beijing and Moscow – the organization’s main stakeholders – the value of Iran within the regional security organization.

Founded in 2001, the SCO brings together regional powers, such as Russia and China, along with India, Kyrgyzstan, Kazakhstan, Pakistan, Tajikistan, and Uzbekistan. The organization represents a geographical region of 60 million square kilometers (23 million square miles) and a population of over 3 billion.

Economy of the SCO

During its first 20 years, the SCO was largely viewed as a political and security grouping of countries that sought to cooperate against “terrorism, separatism, and extremism.” However, it has recently also sought to bolster economic cooperation among members and is expected to further develop these ambitions in the coming years.

In 2018, at the Qingdao summit in China, the SCO adopted an agreement consisting of 17 documents, which included action plans for economic cooperation between the SCO member states and the need “to examine the prospects of expanding the use of national currency in trade and investment.”

The SCO’s eight member states, four observer states, and six dialogue partners boast a total economic volume of close to $20 trillion and a total foreign trade volume of $6.6 trillion, 100 times larger than the values of 20 years ago.

For Iran and its ailing, US-sanctioned economy, joining the SCO provides access to significantly larger markets and the world’s fastest-growing international corridors. It also further consolidates Tehran’s unofficial alliance with major powers Moscow and Beijing against the West on issues such as Iran’s nuclear program.

Iran’s trade with SCO members

According to the latest data announced by Iran’s Customs Administration (IRICA), the value of trade between Iran and the members of the SCO (including observer states) reached $28 billion during the last Iranian calendar year (ending 21 March, 2021). That makes China Iran’s single largest trade partner with a trade value of $18.9 billion, almost two thirds of Iran’s total trade with SCO members.

Despite being one of the pivotal members of the organization, Russia ranks fourth in terms of trade volume with Iran, after India ($3.4b) and Afghanistan ($2.3b), recording only $1.6 billion in total trade with the Islamic Republic. According to the Iranian data, Pakistan stands fifth in terms of trade value with Iran within the bloc, while the remaining six countries have a combined trade value of just $569 million.

IRSN

Considering Iran’s total trade volume of $73.89 billion during the last Iranian (1339) calendar year – $11.2 billion lower than the previous year – Tehran’s trade with the SCO countries has already approached nearly 38 percent of its total trade, 26 percent of which was with China alone.

Iran’s other top trade partners are Iraq, UAE, and Turkey respectively, followed by Afghanistan in the same period.

US sanctions

While Iran’s accession to full membership status in the SCO can theoretically boost the country’s trade with other member states, there are significant obstacles which are unlikely to allow Tehran to reap an economic windfall, at least in the short run.

Among Iran’s most difficult obstacles is a series of US-led sanctions against the country’s financial and transportation institutions, in addition to being blacklisted by the Financial Action Task Force (FATF), a global intergovernmental organization tasked with devising standards on combating money laundering and ‘terrorism financing.’ Given the exposure of most countries to US markets and financial networks, and due to the risk of heavy penalties or loss of access to US and European markets, major companies are reluctant to do business with Iran.

The former head of Iran’s Trade Promotion Organization (TPO), Mohammad-Reza Modudi, was quoted by local media earlier this week as saying that many countries, including Iran’s neighbors such as Iraq, “are not willing to do business with Iran out of fear of being sanctioned by American banks or the US Treasury.”

He added that despite Iran’s good production capability, exporting many of the Iranian-made products will not be easy. “We [Iran] have not prepared the needed capacity for these products to be competitive in international markets,” Modudi explained.

Compounding Iran’s lack of focus on the economic benefits of the SCO, is the fact that other Iranian officials view the SCO through a purely political and security lens. Hossein Malaek, Iran’s former ambassador to China, believes that Tehran’s membership in the SCO “has nothing to do with economic issues.”

In an interview with ILNA news agency last month, Malaek was quoted as saying that “Iran’s presence in the Shanghai Agreement will not have any economic aspect, and this cooperation only has security aspects,” and emphasized that “no economic agreement will be signed between Iran and the SCO.”

The political and security benefits of becoming a member state of the Shanghai Cooperation Organization might outweigh other benefits for Iran in the short run. However, if Tehran helps secure the SCO’s energy needs by increasing oil and gas output to its new partners, and facilitates much-needed land access to other markets in West Asia and Europe in the long term, Iran’s economy stands to benefit substantially from its new eastward alignment.

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Strategic Culture Foundation – The US will continue to confront China; chances of explosion are rising

Brian Cloughley

August 3, 2021

U.S. provocations in the East are likely to continue and only Beijing knows how much more it will take before there is an explosion.

In July there were senior representatives of the Washington Administration bouncing about the globe like a bunch of ping-pong balls, lecturing in one place, suborning in another and announcing everywhere that the U.S. wants a “Rules-Based International Order”, as Secretary of State Blinken told China last March.

Defence Secretary Lloyd Austin was one of the bouncing balls, and before arriving in Vietnam stopped off in Singapore where on July 27 he declared “We will not flinch when our interests are threatened. Yet we do not seek confrontation.” On the same day, the British aircraft carrier HMS Queen Elizabeth (18 U.S.-supplied problem-ridden F-35 strike aircraft, 8 of them British, 10 U.S. Marine Corps), arrived at Singapore en route for the South China Sea to confront any Chinese forces it might meet. (Certainly, the UK carrier group is a joke that could not fight its way out of a paper bag, but it’s the presence that is intended to send the message.) Next day, when Austin arrived in Vietnam, the guided-missile destroyer USS Benfold trailed its coat in the Taiwan Strait in what the U.S. Navy called a “routine” transit that “demonstrates the U.S. commitment to a free and open Indo-Pacific.”

As can be seen on the site Marine Traffic, the Taiwan Strait is packed all day and night with transiting commercial ships from countless countries, and the right of passage is guaranteed. There is no need whatever for any U.S. guided missile destroyer to “demonstrate freedom and openness.” It was obvious that the Benfold — the seventh U.S. warship to transit the Strait so far this year — had been sent to attempt to provoke China to take action.

Washington has been open about its aggressive China policy, and the State Department’s official notification is that “Strategic competition is the frame through which the United States views its relationship with the People’s Republic of China (PRC). The United States will address its relationship with the PRC from a position of strength in which we work closely with our allies and partners to defend our interests and values.” The embrace of challenge could not be clearer, and the Defence Department fully agrees, declaring that U.S. National Defence Strategy is “To restore America’s competitive edge by blocking global rivals Russia and China from challenging the U.S. and our allies” and “To keep those rivals from throwing the current international order out of balance.” In other words, so far as Washington is concerned, U.S. global hegemony is here to stay because it is regarded as beneficial for the world — and above all for America.

But there are some countries that would disagree, including, quite understandably, the People’s Republic of China which objects to such condescending policy statements as “When it is in our interest, the United States will conduct results-oriented diplomacy with China on shared challenges such as climate change and global public health crises.” The world needs diplomacy, not tub-thumping policies that confine international negotiations to national interests, and it was regrettable that one of the bouncing balls visited China to deliver yet another lecture on how that country’s government should behave.

It had been hoped that the visit to China by Deputy Secretary of State Wendy Sherman might open some doors to constructive dialogue, but such was not to be. On July 25-26, as the State Department later announced, “the Deputy Secretary and State Councillor Wang had a frank and open discussion about a range of issues, demonstrating the importance of maintaining open lines of communication between our two countries.” Ms Sherman, according to the State Department, “underscored that the United States welcomes the stiff competition between our countries . . .” but this sort of platitude is entirely at variance with the overall tenor of her presentation to State Councillor Wang and Vice Foreign Minister Xie Feng.

As reported by the New York Times, she was mega-critical of China on counts of alleged human rights abuses and “also raised China’s demands over Taiwan, its military operations in the South China Sea, and the accusations last week by the United States and other nations that China’s Ministry of State Security was behind the hacking of Microsoft email systems and possibly other cyberattacks.” She declared that “This is very serious — that the Ministry of State Security would assist criminals to hack Microsoft and potentially others,” adding that “many” countries had joined the United States in saying that “such behaviour is absolutely irresponsible, reckless and has no place in our world.”

Ms Sherman had of course been told what to say at the meeting, presumably approved at the highest level, and it is apparent that Washington had no intention whatever of engaging in meaningful dialogue but was intent on showering China with insults.

It is yet to be understood in Washington that insults, sanctions and aggressive military manoeuvres do not have positive effects on the nations against whom they are directed. They invariably result in anger, resentment and retaliation of some sort. It is as yet unknown for retaliation to take the form of direct military action, because Washington’s targets are generally so weak as to be incapable of such riposte, but in the case of modern China, U.S. pressure and Chinese strength are rising to the extent that this is now a distinct possibility.

On July 28 the newly-appointed Chinese ambassador to the U.S., Qin Gang, said he believes “the door of China-U.S. relations, which is already open, cannot be closed” but no matter Beijing’s good intentions there are many in Washington who want to slam that door because they are confident that the national policy of “blocking global rivals Russia and China from challenging the U.S. and our allies” will succeed.

But it won’t.

During the disastrous visit by Deputy Secretary Sherman to China, Vice Foreign Minister Xie Feng said bluntly that the Biden administration’s policies are nothing but a “thinly veiled attempt to contain and suppress China,” which was an extension of Foreign Minister Wang Yi’s cautionary statement that “The United States always wants to exert pressure on other countries by virtue of its own strength, thinking that it is superior to others. However, I would like to tell the U.S. side clearly that there has never been a country in this world that is superior to others, nor should there be, and China will not accept any country claiming to be superior to others. If the United States has not learned how to get along with other countries on an equal footing by now, then it is our responsibility, together with the international community, to give the U.S. a good tutorial in this regard.”

And if the U.S. does not moderate its policy of outright and usually arrogant confrontation in every sphere it is likely that the tutorial will begin very soon. Washington forgets that no matter how much some segments of the Chinese population may disagree with aspects of their government’s policies and performance, they are a proud people who strongly object to their country being insulted and treated as a maverick obstacle to world development. It seems that U.S. provocations in the East will continue and only Beijing knows how much more it will take before there is an explosion.