The Shanghai Cooperation Organisation: Its role and place in the development of Eurasia

Abstract

This article analyses the role and place of the SCO in the development of interstate interaction in the Eurasian space, as well as the condition of and prospects for the main areas of multifaceted cooperation within the Organisation. The author further analyses the characteristics of the SCO partnership system as a model of interstate interaction that can provide an institutional platform for broad regional economic cooperation within the context of the new realities of Eurasian development, the implementation of member states’ national development strategies, the linking of efforts to align integration processes within the EAEU, and the implementation of China's One Belt, One Road initiative with the potential to form an overarching partnership between countries of Eurasia and the Asia-Pacific region.

The modern system of international relations remains in a state of imbalance as it passes through a stage of profound transformation and painful evolutionary development.

Globalisation has emerged in recent decades as the main trend in international relations and continues to deepen the intertwining of relations between countries and regions of the world. The rapid development of modern technologies in areas of transport, communications, and information delivery and transmission is contributing to the creation of a cohesive global community of states united by, among other things, common development challenges.

Along with the obvious benefits these processes bring, their negative features are also becoming more pronounced. Hotbeds of tension are no longer only local in nature, but carry influence far beyond their particular region. The deepening of trade and economic ties and the interdependence of capital markets exert reciprocal influence on the dynamics of economic processes in various regions of the world. Given the systemic nature of interdependence, shifts in development modalities in one part of the world inevitably cause repercussions in the others.

Regionalisation, the steady process of building qualitatively new forms of interaction between the states comprising the world's macro-regions, has emerged as another fundamental trend in the development of global order. Ever more countries are striving to form a system of stable ties with their neighbours, thereby enhancing their own potential while also facilitating the solution of pressing regional problems. Such regionalisation has taken increasingly diverse forms, including classic examples of regional integration that include the establishment of supranational regulatory systems, more flexible models of cooperation in a range of areas that proceed at different speeds and at different levels, and new mixed type models of partnership. The goals and objectives of such partnerships are determined primarily by the need to address pressing regional problems and by participants’ common desire for dialogue and a search for approaches to achieving mutually beneficial, sustainable development of the entire region (Leonova, 2013; Lukin, 2016).

In the Greater Eurasian macro-region, the Shanghai Cooperation Organisation is one of the most outstanding examples of this new hybrid or mixed model of interstate regional partnership. Established in 2001 to meet the objective of ensuring regional security and stability, the SCO has since continued along its own evolutionary path, gradually developing multifaceted multilateral cooperation. The dynamics of the SCO's development are driven primarily by vital necessity, and by multilateral agreements and the shared national interests of SCO member states. The SCO does not aspire to attain some specific target level of interaction, but rather moves systematically along a path of finding a common denominator in solving pressing regional problems. One thing is obvious – the SCO holds enormous potential in each of a number of unique parameters, and the ongoing search for new opportunities determines the direction of its further development. Still, the SCO is relatively young and, as the history of other international associations suggests, it exhibits the characteristic signs and problems of any young and growing organisation.

The expert community often expresses scepticism regarding the level of cooperation among SCO member states, most frequently claiming that the Organisation is nothing but a type of club for its various heads of state or a conference hosting their annual meetings that does not pursue any specific objectives (Aris, 2018). Experts also deprecate the SCO's model of decision-making through consensus, claiming that it is sluggish and ineffectual. Some sceptics believe that the countries comprising the SCO are too different, that their political systems, economies, belief systems, and civilisational approaches are too diverse (Imanaliev, 2017). This, they argue, greatly complicates dialogue, the search for common ground, and the ability to achieve mutually beneficial solutions to problems based on a shared vision – and that the level of internal disagreement is only increasing and leading to an accumulation of unresolved issues.

Nevertheless, while continuing to address shared political and security objectives, searching for optimal mechanisms for expanding economic ties, and deepening cultural and humanitarian contacts, the SCO continues to develop gradually – primarily as a partner-type organisation based on member states’ similar approaches to the development of such a partnership. Overall, the experience of the SCO is arguably the first in history of building an equal partnership among states of different sizes and with varying degrees of influence, different economic and political potentials, and diverse cultural and civilisational features.

1 Existential bases of the SCO model of cooperation

According to the classic ideas of political realists in the theory of international relations, international politics are a struggle for power between states based on compelling national interests (Snyder, 2004, p. 55). This theory often proves true in political practice, particularly as the most powerful countries have increasingly come to dominate transnational regional entities and groups. Although decisions engineered by the dominant state often run counter to the national interests of other member states, they are positioned before the public as collective decisions. More powerful states therefore employ mechanisms for compensating the weaker states as a way to maintain the internal balance and, essentially, the long-term stability of the organisation.

In this context, and despite criticisms from the ranks of the expert community, it is difficult not to agree that the SCO model of cooperation is an extremely important achievement in the practice of international relations. A fundamentally important feature of the SCO is that it is one of the few multipurpose international organisations built from the outset as a multilateral partnership. This universal partnership model is enshrined in the SCO Charter as one of the international association's fundamental features.

It is important to emphasize that partnership within the SCO differs from a traditional alliance. Military-political alliances involve a very high degree of political interdependence as well as some separateness because such alliances usually imply a readiness to mobilise in opposition to someone else.

The SCO is not a classic example of economic integration in which maximum unification is achieved by delegating a significant part of sovereign prerogatives to supranational bureaucratic institutions (Alimov, 2017).

Transparency and the lack of an identified opponent are inseparable features of the SCO partnership model. The SCO's consensus model of decision-making emphasises the absolute equality of all participants regardless of their potential or opportunities. Only when the views, opinions, and approaches of the member states crystallise and become unified does the SCO reach a decision. Thus, it is fair to consider the SCO an example of a consensus-based partnership organisation.

Thanks to these features of interactions within the SCO, the Organisation provides an example not only of how states of different sizes, levels of influence, organisational paradigms, and cultural and national traditions can coexist, but also of how they create favourable conditions for combining considerations of both objectives and values, of the productive establishment and development of a dialogue between civilizations, and of establishing a culture of communication aimed at reaching a joint and mutually beneficial result (Alimov, 2017).

Given the multilateral nature of equal participation in decision-making, the search for mutually beneficial solutions will always be difficult and will require time and effort at the negotiating table. The resilience of the SCO model depends on the ability of member states to identify points or zones of converging interests. Of course, this takes time, and often, the inability to reach a decision acceptable to all is an indication that conditions are not yet ripe.

Despite this, there can be no doubt that Eurasia now has a system for regional interaction based on the principles and approaches formulated and enshrined in the joint documents of the SCO.

One of the most important results of the SCO summit in Astana in June 2017 was the accession of India and Pakistan as full-fledged SCO members. Both countries became unconditional signatories to all SCO documents and committed to making a constructive contribution to strengthening and developing cooperation within the framework of the Organisation. By bringing together four nuclear powers (India, China, Russia, and Pakistan) – half of the world's nuclear club – the SCO format has become an additional supporting element of the system for maintaining global strategic stability.

With eight member states, the SCO has become a cornerstone of the Eurasian continent. The Organisation is a powerful transcontinental structure stretching from the Arctic in the north to the Indian Ocean in the south, and from Lianyungang, China in the east to Kaliningrad, and Russia in the West.

2 Security and economics

The SCO was originally conceived as a multifaceted structure with three levels of cooperation serving as its primary pillars. These include cooperation (1) in politics and security, (2) in trade and economic activity, and (3) in the development of cultural and humanitarian ties. The SCO sets as its ultimate goal the development and prosperity of the peoples living on its territory.

In light of growing security threats – especially international terrorism, increasingly active extremist organisations, a rising number of transnational criminal structures, and an increase in drug production and trafficking – the SCO has made cooperation on regional security a top priority.

The high level of cooperation on security within the SCO and the stable overall situation in the Organisation's region of responsibility make it possible to concentrate on the secondary task of developing trade and economic cooperation. Admittedly, this remains more an area for possible future efforts than one of practical reality at present. At the same time, circumstances dictate a growing need to focus on this line of joint endeavour within the SCO framework. For a number of reasons, it is much more difficult and time-consuming to harmonise the economic interests of the SCO member states than it is their political and security interests. However, the search continues for the optimal forms, methods, and mechanisms of interaction, including on economic matters, and the economic agenda increasingly includes the question of launching integration processes within the SCO framework.

The latest SCO Summit was held on 9–10 July 2018 in Qingdao, China, opening a new page in the Organisation's development. The event underscored the SCO's growing role and importance in global affairs.

At the same time, with the world undergoing major reconfigurations and the global economy subject to growing instability and uncertainty, expectations are high that the SCO will take a more active role and produce tangible results. In this regard, critics often point to the lack of economic cooperation within the Organisation.

Indeed, the SCO member states collectively possess an enormous market, a significant portion of the world's mineral resources, and a powerful industrial base that are key to successfully implementing joint trade and economic projects. The relevant international documents that the Organisation has adopted play no small part in the close and stable economic ties it has formed since its founding.

The SCO legal framework includes 122 documents related to the economy. These facilitate interaction between the parties on trade, banking, financial and investment activities, manufacturing, agriculture, transport, telecommunications, customs, and the development of tourism. These documents, however, represent only 7% of the overall SCO contractual and legal framework. The Organisation must make substantial efforts to ensure that the Program of Multilateral Trade and Economic Cooperation of the SCO Member States adopted in 2003 and the List of Measures for further development of project activities within the SCO in 2017–2021 will, in practice, help member states to carry out measures supporting and developing their national economies, and to reduce the risk of the spread of global crises and their negative impact on socio-economic well-being.

The SCO member states have also signed a number of international agreements and approved program documents on banking and financial activities and the development of business, agriculture, and tourism. The Organisation is also considering the creation of an SCO Development Bank and a Special Account that would provide financial support for project activities.

With the accession to the SCO of India and Pakistan – two authoritative Asian states – the Organisation has become the world's largest trans-regional association in terms of the total area, population, and economic potential of its member states. Gloomy forecasts on the eve of the expansion predicted that the work of the SCO would become excessively complex. Now, exactly one year later, it is gratifying to see that the expansion of the SCO through the accession of India and Pakistan has not only consolidated the practical achievements of the Organisation, but also ensured the steady growth of its authority and influence in both the region and the world. The arrival of the new and powerful states opens the door wide to new opportunities for the SCO. And, given the continuing fragility of international relations, these opportunities provide additional support for the further development of the inexhaustible potential of the “Shanghai Eight” in all areas of its activities, including in the international arena.

At the same time, given the scale of cooperation within the SCO, the new partners must work very hard to integrate fully into the Organisation. The SCO has approximately 30 different mechanisms that have evolved over the years and the founding states have painstakingly structured their work as they have reached each relevant agreement. The SCO makes all of its decisions through consensus. Adapting to these previously established formats and working methods of interaction is not an easy task, one that often requires more than the usual effort and time. This applies both to coordinating a common position on the Organisation's international agenda, and to supporting the national projects of its member states.

This past year of joint work as the “Big Eurasian Eight” has shown that the Organisation is capable of evolving in response to the requirements of the time, to new developments, changing realities, and objective needs. The SCO has clearly been expanding the economic aspect of its work in recent years. The summit in Qingdao confirmed this trend. The Organisation is actively developing cooperation on trade and investment, transport, infrastructure, agriculture, and customs services.

In addition, the SCO is home to cutting-edge manufacturing clusters, including high-tech and science-intensive centres, and its member states possess the full spectrum of mineral wealth, making it possible to organise any type of production cycle – from the extraction of raw materials to their processing with a high degree of added value. The Concept of cooperation of the SCO member states in the field of environmental protection, approved by the Council of Heads of State, is an important step in the development of cooperation in the field of environmental management.

The economies of the SCO member states influence one another due to their geographic proximity, and their regional economic agreements and joint programs within the Organisation's framework are the foundation of their progressive joint development.

In concrete economic terms, the SCO as a whole accounts for almost one-fourth of global GDP, and average GDP within the SCO rose by 4.84% in 2016, or almost twice the global average. The SCO member states are steadily increasing their gold and foreign exchange reserves that now amount to almost 4 trillion USD. This provides a sound economic foundation by guaranteeing the fulfilment of foreign debt obligations and providing support for national currencies. As much as 11% of all direct foreign investment in the world in 2016 took place in the “Shanghai Eight,” contributing to the creation of almost 600,000 new enterprises (excluding China, for which statistics were unavailable). These indicators appear rather modest, however, when considering that almost one-half of the world's population lives on the territory of the SCO. The SCO is also actively developing the tourism industry.

Time will show the extent to which results will meet expectations. The SCO is clearly a young organisation searching for its development path in a world brimming with challenges and threats. Yet, it has managed to make a worthy place for itself on the world's political map in what, by historical standards, is a short period. The SCO Summit in Qingdao has opened a new era in the development of the Organisation. The member states must preserve and strengthen their mutual trust and unity to continue to play a key role in international relations – no matter what changes they might undergo in the years ahead.

3 SCO and the idea of Greater Eurasia

Because the SCO member states comprise the core of the Eurasian continent, their mutual relations and interactions will define the nature of the further development of this vast territory for years to come. Given the format of communication established within the SCO, its joint experience, and existing agreements, the Organisation is the largest (in both territory and population) and therefore a key Eurasian platform for international cooperation. The SCO lies at the centre of large-scale economic initiatives that experts believe will be crucial to determining the path of Eurasia's future development. In this context, the academic community increasingly uses the term “Eurasian design” to mean the building of a new system of regional interaction based primarily on the goals, principles, and conceptual guidelines of the integration process within the framework of the Eurasian Economic Union, the implementation of the Chinese One Belt, One Road initiative, and the creation of a Greater Eurasian Partnership involving the ASEAN countries.

The idea of linking or coupling efforts to implement these large-scale undertakings is widely discussed. The main difficulty is that they are very different conceptually, and this greatly complicates efforts by the expert community to find optimal mechanisms for adapting and merging them. In addition, specialized research institutes would have to calculate and project the impact that specific steps to deepen regional economic interaction and integration would have on all involved.

Given the multilateral nature of cooperation in implementing these initiatives, the most important elements are political coordination, the harmonising of national interests based on multilateral discussions on a whole range of areas aimed at finding mutually acceptable solutions, and determining the strategy and concrete steps of joint activities.

The academic community has held a wide-ranging discussion since 2013 concerning prospects for building a new Eurasia. Active discussion of the proposed initiatives includes the question of ways to link and couple them. Various aspects of Eurasian cooperation are analysed, taking into account direct and indirect disagreements between countries of the region, the geopolitical plans of the region's major players, and challenges to development. Many articles by experts examine how the divergent political and economic interests of SCO member states create challenges to developing cooperation within the Organisation. Experts have identified the following main challenges that the SCO will face in building new forms of economic cooperation.

The first challenge is the competition between Russia and China in Central Asia and their competing initiatives within the EAEU for promoting strategic national interests on the one hand and the One Belt, One Road (OBOR) initiative on the other. Because the implementation of the OBOR strategy and the EAEU integration process are essentially designed to strengthen the regional influence of Beijing and Moscow respectively, some argue that the two countries’ economic interests are at odds with each other and that any linking or coupling of the two projects is therefore impossible (Daily FT, 2017; Marantidou & Cossa, 2014).

The second challenge is the possible loss of efficiency resulting from the expansion of the SCO, as developing common approaches to regional economic objectives would become significantly more complicated. The addition of new members could deepen differences and disagreements on regional issues of security and economic cooperation, including the forms or methods of providing support.

Third, bringing India and Pakistan, along with the deep tensions between them, into the SCO could significantly hamper its functioning.

Fourth, the competition between India and China could have a negative impact on interactions within the SCO and lead to the blocking of initiatives and the halting of negotiation on agreements.

Fifth, it is necessary to consider the interests of the smaller SCO countries in order to maintain a balance within the Organisation.

Sixth, the Afghan factor continues to exert a destabilizing influence on the region, preventing the creation of stable conditions for economic development (Kulintsev, 2016).

In this regard, the debate continues on the role and place of the SCO in the design of a Greater Eurasia. Key questions include the following: (1) Considering the challenges listed above, is it possible in practice to incorporate into the SCO agenda concrete work on promoting integration within the framework of the EAEU and combine it with measures for implementing the OBOR initiative? And (2) Can current SCO structures really be used for these purposes? In this context, it seems advisable to identify areas of true common interest or opportunities for linking SCO member states’ efforts at developing regional economic cooperation.

4 The SCO and prospects for forming a Greater Eurasian Partnership

Given the steady transformation of its economic landscape, the Eurasian continent is becoming the flagship of processes by which sub-regional integration efforts combine to form a regional “integration of integrations” – in this case, focused primarily on the interests of the countries of Greater Eurasia themselves. These processes are now becoming intertwined: often, they either run in parallel or else individual elements coincide. However, forming a single, harmonious, and interconnected system remains a goal for the future. The first priority is achieving broad-based political agreement, which requires participants in these processes to exercise political will.

At the same time, the Eurasian Economic Union (EAEU) and the system of economic cooperation within the framework of the One Belt, One Road concept continue to develop, ASEAN countries are putting forward proposals in Southeast Asia, and India is promoting its own program for cooperation in South Asia.

The principal development challenge is achieving not competition, but synergy between the various Eurasian projects, as this best serves the interests of all the powers on the continent. Russian President Vladimir Putin's proposal for a Greater Eurasian Partnership calls for developing cooperation within the framework of flexible integration structures (TASS Russian News Agency, 2016). At the same time, such cooperation can be built effectively within the framework of flexible and open integration structures that encourage competition in scientific pursuits and a variety of technical approaches, and that allows participating countries to fully realise their competencies and potential (TASS Russian News Agency, 2016).

Eurasian partnership is envisioned as not merely establishing new ties between states and economies. It calls for changing the political and economic landscape of the continent and bring peace, stability, prosperity, and a fundamentally new quality of life to Eurasia (Putin, 2017).

Thus, the Greater Eurasian Partnership calls primarily for building a macro-regional system of stable political and economic cooperation, and for cultural and civilisational interaction based on the deepening of ties between different parts of the Eurasian continent. At the same time, it apparently does not insist on the signing of some sort of single collective agreement. Rather, at the initial stage, the partnership should be based on building a system of cooperation between states and partner regional organisations and associations, a search for areas of shared interests, and the development of substantive areas of mutually beneficial joint undertakings.

The presidents of the EAEU member countries decided to support the proposal to hold talks with China on partnership and cooperation. That could eventually serve as the basis for forming a new, large-scale trade and economic partnership with the participation of the EAEU, China, the SCO countries, and ASEAN. At the same time, the project to link the EAEU and the SREB could become a unifying factor of trade and economic integration throughout the Eurasian continent, including South and Southeast Asia.

At present, the process of linking the integration processes within the framework of the EAEU and SREB is the most important and substantive component of the process of forming a Greater Eurasian Partnership – a process that has, essentially, already begun. The first step is the conclusion of a comprehensive agreement on trade and economic cooperation between the EAEU and China. In October 2017 the EEC Trade Minister Veronika Nikishina and China's Minister of Commerce Zhong Shan announced in Beijing that the text of the agreement was ready for signing (Eurasian Economic Commission, 2017).

In this context, it seems worthwhile to begin consultations between the EAEU, SCO, and ASEAN on forming new approaches to the network of cooperation between regional organisations that would take the interests of all of the region's states into account on an equal basis and make it possible to avoid counterproductive competition between different integration initiatives in Eurasia.

In addition, it is of fundamental importance that the conceptual paradigm of the Greater Eurasian Partnership be further developed and improved. Obviously, it should be based on cooperation on politics and security, and on economic and humanitarian aspects. Both ASEAN and the SCO have established political coordination, the documents of the two organisations invariably reflect consolidated positions on important regional and global themes, and the approaches and vision for solving political problems are spelled out. At the same time, both ASEAN and the SCO employ a consensus model of decision-making, creating a certain ideological similarity in the functioning of both organisations and suggesting a favourable outlook for the development of a political dialogue.

The problem of security, although more complex, remains open for discussion. Maintaining regional stability is made more complex by the smouldering conflicts in Eurasia and the Asia-Pacific region. The situation demands, if not the resolution of long-standing conflicts, then at least a continuation of the status quo. This primarily concerns problem zones and disputed territories, the presence of which impedes the full-scale implementation of the region's economic potential, the emergence of new agreements for joint development, and the general promotion of megaprojects. Such zones could become areas of joint development, not only by the two countries immediately involved, but by all the states in the vast region that show an interest.

It is also important to coordinate efforts in the fight against the terrorist threat. The countries of the SCO and ASEAN have an interest in solving this vital challenge because they experience the grave consequences of terrorist activity first-hand. This area, with the involvement of the CSTO, could become one of the pillars of the Greater Eurasian Partnership and contribute to the formation of a broad international anti-terrorism coalition.

Joining efforts to create a transit corridor linking South and Southeast Asia with Central Asia – with branches to EU and Middle Eastern borders – is the economic undertaking holding the most promise for reaching agreement. All states have an interest in this, and concrete work along these lines has already begun within the framework of the SCO and in the context of the implementation of the One Belt, One Road initiative. The SCO Agreement on the Creation of Favourable Conditions for International Road Transport is open to third countries and a number of them have already expressed interest.

Increased cooperation on the basis of the Memorandum of Understanding between the SCO and ASEAN Secretariats will also contribute to rapprochement between the two organisations. That document gives priority to, among other things, interaction in the areas of counterterrorism, drugs and narcotics control, arms smuggling, money laundering, and trafficking in persons (Association of Southeast Asian Nations, 2005). It also provides for cooperation in the areas of economics and finance, tourism, environment and natural resources management, social development, and energy.

5 The compatibility of SCO member states’ initiatives and development strategies

Economic integration in the EAEU is aimed at comprehensive modernisation and cooperation, and at increasing the competitiveness of national economies and creating conditions for stable development with the goal of improving living standards for the populations of member states. However, the EAEU is foremost an international organisation of regional economic integration that has international legal standing and is established by the Treaty on the Eurasian Economic Union. The EAEU ensures freedom for the movement of goods, services, capital, and labour, and pursues a coordinated or unified policy in individual economic sectors. It is important to note that the EAEU member states are Armenia, Belarus, Kazakhstan, Kyrgyzstan, and the Russian Federation (Eurasian Economic Union), and that all EAEU countries are part of the so-called “SCO family,” enabling them to use SCO mechanisms in the common interest. This obviously makes it necessary to start discussion within the SCO on the subject of launching integration processes in one form or another, as it is the determining factor in the work of the EAEU. The dialogue could be based on the provision of the SCO Charter stating the intention of member states to create favourable conditions for the gradual realisation of the free movement of goods, capital, services, and technologies. This intention was reaffirmed in the Declaration of the SCO Heads of State in Astana on 9 June 2017.

The Chinese One Belt, One Road initiative to create a global transport and investment infrastructure actually combines two projects – the Silk Road Economic Belt and the 21st-century Maritime Silk Road.

The Silk Road Economic Belt (SREB) is a project to create a single Eurasian economic and trade space and a transcontinental transport corridor. The SREB sets out to achieve five main tasks: strengthening regional economic integration, building a single trans-Asian transport infrastructure, eliminating investment and trade barriers, increasing the role of national currencies, and deepening cooperation in the humanitarian sphere. According to Chinese representatives, 67 states representing 63% of the world's population could participate in the SREB over the planned 30 years of its implementation (TASS Russian News Agency, 2017a).

The implementation of the SREB program actually specifies three levels of work in the area of regional security, the development of trade and economic relations, and the deepening of cultural and humanitarian ties between the project's participants. Thus, the levels at which the SREB will be implemented clearly coincide with the three levels of multifaceted cooperation within the framework of the SCO.

The response to criticism from experts regarding the apparent rivalry between the EAEU and the OBOR was signing in May 2014 of an agreement between the Russian and Chinese heads of states formally linking the EAEU and OBOR. That agreement also designates the Shanghai Cooperation Organisation as the platform for all discussions of that linkage.

In an interview with TASS, Chinese President Xi Jinping reiterated that Russia and China are not competitors in forming a new system of regional economic relations. In particular, he noted:

“The two countries are cooperating intensively on linking One Belt, One Road and the EAEU, negotiations are underway to conclude an agreement on trade and economic cooperation between China and the EAEU, and a list is being drawn up of joint projects that will open up broad horizons for developing bilateral trade and economic cooperation, greatly facilitate mutual trade and investment, present unique opportunities for the two countries’ business communities to interact to achieve an efficient movement of production, technology, capital, and markets, and bring the benefits of economic globalization and regional integration to all the countries of Eurasia” (TASS Russian News Agency, 2017b).

The Chinese leadership has also reached an agreement on linking the EAEU with the infrastructure projects of other countries. In particular, these include the Mongolian Steppe Road project for modernizing the trans-Mongolian section of the Chinese-Russian railway, the South Korean Eurasian Initiative for unifying the railways of North and South Korea and connecting them to the Trans-Siberian Railway, and the Kazakh Bright Path program (TASS Russian News Agency, 2017a).

6 Transport routes of the One Belt, One Road concept

The Roadmap for implementing OBOR emphasises that “political coordination” provides an “important guarantee” of the project's ultimate prospects. Second, along with the task of joining with the countries of the region to build a Eurasian Land Bridge, the Roadmap sets the “priority” and “vital” goal of ensuring not just transportation lines, but also a systemic “interconnected infrastructure” and calls for participants to coordinate “their plans for building infrastructure facilities and technical systems standards.” It also introduces the concept of “network communications” for integrating not only railways, highways, and waterways – including the associated road and port infrastructure – but also the pipeline network for the transportation of energy resources, as well as the cross-border network of fibre-optic lines.

Trade and investment are the foundation of the whole project. In particular, participants declare their intention to liberalise trade regimes across the board. To this end, plans are in place to hold discussions with the countries of the One Belt, One Road project on the creation of free trade zones and the joint promotion of such measures as the elimination or reduction of tariff restrictions, and the unification of customs and other regulatory trade procedures. The same applies to investment, which the Roadmap's authors are proposing to make the “engine of trade,” extending industrial and agricultural production as widely as possible.

The Roadmap calls for moving beyond cooperation in finance and monetary policy to full-format “financial integration.” The goal is to create a system of “currency and investment stability,” provide access to “credit information,” and expand currency swaps.

Humanitarian cooperation will expand in the fields of education, culture and art, tourism, healthcare, youth policy, science and technology, as well as in interaction through party and parliamentary structures and nongovernmental organisations (Uyanayev, 2015).

Thus, the Roadmap for the joint construction of the One Belt, One Road project implies the coordination of political efforts, the development of cooperation on infrastructure, free trade, and commercial integration, and the deepening of ties between people. In terms of possibilities for practical implementation, the SCO platform possesses optimal mechanisms for launching a broad negotiation process, and the fact that a number of countries participate in both the SCO and EAEU makes prospects for such a dialogue more favourable. First, the SCO has well-established mechanisms of political coordination that can ensure negotiations are held at the senior and uppermost levels. Second, the Organisation has its own mechanisms and institutions for ensuring regional security. China is incorporated into those structures, as are India and Pakistan due to the expansion of the SCO. Third, the status of observer country and that of SCO dialogue partner make it possible for those states to participate in developing joint measures in the fields of trade, finance, investment, customs, banking, and transport.

According to some experts, the convergence of efforts for building a new paradigm of economic cooperation in Eurasia could substantially facilitate the implementation of India's International North–South Transport Corridor (INSTC) (Hillman, 2017). Far from conflicting with other projects, the INSTC dovetails nicely with China's OBOR megaproject and Russia's integration project in the region, and also contributes to economic cooperation between the countries of the “SCO family” which at the moment apart from member states also four observer states (Afghanistan, Belarus, Iran, and Mongolia), and six dialogue partners (Azerbaijan, Armenia, Cambodia, Nepal, Turkey, and Sri Lanka).

The INSTC envisions a multimodal transport corridor stretching 7200 km from India to Russia and linking the Indian Ocean, Persian Gulf, and Caspian Sea. Goods will be transported from the Jawaharlal Nehru and Kandla ports in Western India to the Bandar Abbas port in Iran, and then by road and rail through Baku to Moscow, St. Petersburg, and beyond. In the future, a second route could run along the western coast of the Caspian Sea and utilise the new railway connecting Kazakhstan, Turkmenistan, and Iran, integrating it into the transnational corridor system (Geo-Politica, 2017).

According to the developers, the transnational corridor – to be built with international participation – will reduce the cost and time required to transport cargo between such cities as Mumbai, Bandar Abbas, Tehran, Baku, Aktau, Moscow, and St. Petersburg. The assumption is that this route will become an engine of trade in a region experiencing rapid integration and development.

7 The International North–South Transport Corridor

India is also proposing an agreement to build a road linking Bangladesh, Bhutan, India, and Nepal, and is discussing the possibility of concluding a partnership agreement with the EAEU.

In 2015, Kazakhstan embarked on the implementation of its Nurly Zhol (Bright Path) economic development strategy, and Astana and Beijing have already reached agreement on linking their efforts (Legal Information System of Regulatory Legal Acts of the Republic of Kazakhstan, 2016).

That project seeks to stimulate the country's economy by allocating resources from the National Fund for preferential business lending, invigorating the banking sector, attracting new investment, organizing and conducting EXPO 2017, building rental housing, developing the transport infrastructure of Astana, and constructing a new terminal at the Astana airport. Plans are also in place to develop the transport infrastructure of Kazakhstan, the industrial infrastructure of special economic zones, and the tourism infrastructure, as well as to build high-voltage lines along the routes Ekibastuz–Semey–Ust-Kamengorsk and Semey–Aktogay–Taldykorgan–Almaty.

The main transport projects are roads along the following routes: Western China–Western Europe, Astana–Almaty, Astana–Ust-Kamengorsk, Astana–Aktobe–Atyrau, Almaty–Ust-Kamengorsk, Karaganda–Jezkazgan–Kyzylorda, and Atyrau-Astrakhan.

There are also plans to create industrial and tourism zones, develop the energy and utilities infrastructures, and build socially significant facilities.

Kyrgyzstan is methodically implementing its National Development Strategy for 2013–2017, devoting particular attention to developing the mining, energy, tourism, agricultural, transport, and financial sectors, and to businesses based on new and environmentally friendly technologies. The strategy contains specific infrastructural measures to enable Kyrgyzstan to overcome its “transport deadlock” and join the ranks of the transit countries. The country plans to build railways to spur economic development in the regions and to provide access to mineral deposits on Kyrgyz territory.

The National Development Strategy through 2030 of the Republic of Tajikistan envisages developing the agricultural sector, industry, and energy and infrastructure, as well as diversifying exports, improving the quality of and access to social services such as water supply, sanitation, healthcare, social welfare, and environmental protection, increasing the country's energy potential – including ending the current electricity shortage and increasing electricity exports, boosting agricultural productivity, and restoring and developing irrigation systems. The Strategy prioritises energy security and the efficient use of electricity, overcoming the current communication impasse and transforming Tajikistan into a transit country, food security, providing citizens with access to quality food, and expanding employment (Ministry of Economic Development and Trade of the Republic of Tajikistan, 2016).

Uzbekistan is successfully implementing its Action Strategy for 2017–2021 aimed at achieving the economy's further reform, structural transformation, and diversification. Measures are being taken to accelerate the launch of the modern high-tech production of competitive products based on the advanced processing of raw materials and semi-finished products (Shanghai Cooperation Organisation Secretariat, 2017).

The Program for the Development and Modernization of Engineering, Communication, and Road Transport Infrastructure for 2015–2019 is implementing measures to refurbish some sections of the railway and also build new ones, construct new, electrified railway lines, build train stations, and introduce high-speed passenger trains. The Program for the Development of Telecommunication Technologies for 2013–2020 has begun the construction of modern, fibre-optic broadband access networks.

All of these demonstrate that the goals of the various national economic development strategies dovetail in many areas with the EAEU integration process, the implementation of the OBOR and approaches that SCO member states are taking to regional economic development.

This is first because they emphasise cooperation on transport and the development of each country's transit potential, implying the formation of an interconnected regional infrastructure. The need for such an integrative component will increase as cooperation in this area deepens, and the intensification of trade flows across the territory of the SCO will require that conditions for their unimpeded movement across customs borders be created to lower the cost of producers delivering those goods to consumers.

Although, as mentioned earlier, the subject of internal SCO integration is raised with increasing frequency at various SCO venues, no focused consideration of the issue has yet begun. It is obviously a very complex subject requiring careful study. Rather than taking the classic approach, these integration processes will more likely follow models worked out through in-depth analysis and that allow for integration at different speeds and to different degrees, depending on the particular features of the national economies of the member states.

8 Prospects for integration within the SCO

As mentioned above, the SCO is not a classic example of integration. At the same time, the Organisation's statutory documents contain provisions by which the SCO could follow this path.

The classic integration scenario suggests a gradual movement from the simplest form – a free trade area (FTA) to the highest form of economic integration – a common market. World Trade Organisation experts have pointed out a modern trend towards an increase in regional trade agreements, with the number growing by 60% over the last 5–8 years. These agreements include both provisions for standard FTA's and the so-called “FTA+” format – that is, supplementary economic integration agreements. The number of such FTA+ agreements increased fivefold during the first decade of the 21st century (Likhachev & Spartak, 2013).

A free trade area is a form of economic integration by which countries agree to remove restrictions on mutual trade. Those states freely exchange goods and services, but independently establish customs tariffs on trade with third countries.

According to the President of Kazakhstan, N. Nazarbayev, “The growth of mutual trade could contribute in the future to the creation of an SCO free trade area.” “Here, our countries can move forward step by step,” he said, “starting with the study of projects of interest to them in areas of economic cooperation” (TASS Russian News Agency, 2017c). At the SCO summit in Astana, Chinese President Xi Jinping called for moving “step by step to form institutions for regional economic cooperation” and proposed signing an agreement on facilitating trade within the SCO (TASS Russian News Agency, 2017c).

The creation of a network of free trade agreements with third countries is a key trade policy priority of the EAEU. Such agreements are an effective tool for obtaining preferential conditions for access to foreign markets, expanding exports, and attracting investments – which is necessary for integrating enterprises of the EAEU states into the global production chain and thereby increasing their competitiveness. In addition, this network of preferential agreements reduces the risks to international trade associated with political factors (Eurasian Economic Commission, 2015).

Such agreements involve the harmonisation of customs administration, technical regulation, and sanitary norms, the reaching of agreement on the liberalisation of trade in services, procedures for establishing companies and protecting investments, and regulating the movement of labour. Approximately 40 states and international organisations have already expressed an interest in cooperating with the EAEU (RIA Novosti, 2016).

China is also pursuing an active policy of liberalising trade relations with countries in the region. The Central Asia Regional Economic Cooperation Program (CAREC) is being implemented and involves, in addition to China and the Central Asian countries, Mongolia, Afghanistan, Pakistan, and Azerbaijan (all of which are part of the “SCO family”). Plans call for accelerating the implementation of CAREC strategy in such areas of cooperation as trade policy, energy, and the formation of an “economic corridor” in Central Asia based on the project for a China–Kyrgyzstan–Uzbekistan railway. All of this is part of the SREB format.

Ultimately, from such interregional initiatives emerge the prerequisites for the formation of international regions as a new nexus in the global system of trade, one based not only on competition, but also on cooperation with other centres of international economic relations.

It is important to bear in mind that all SCO countries – that is, member states, observer states, and SCO dialogue partners – are involved in these projects at different levels and in different formats.

At the same time, given the varying degrees to which production is developed in the various SCO countries, concerns about the creation of an FTA are justified. A number of countries openly fear that the appearance of an FTA could lead to an uncontrolled influx of inexpensive Chinese goods, and that is fraught with the undermining of national economies. For example, the entire combined market of the EAEU contains approximately 180 million people – fewer than an average Chinese province or administrative region and roughly comparable to the population of Pakistan.

As Eurasian Economic Commission Trade Minister V. Nikishina points out, the economies of the EAEU countries are clearly not yet ready for a free trade regime with China – at least in the short term. At this stage, therefore, the plan under consideration involves establishing a comprehensive trade and economic partnership with China, an agreement having a broad agenda and providing for the option of concluding more in-depth agreements on non-tariff and simplified mutual trade activities in the future. A long-term plan calls for additional discussion of duties and tariffs (Eurasian Economic Commission, 2016).

Moreover, the SCO has not reached a consensus on when to start cooperating and negotiating with the EAEU, and countries such as Uzbekistan and Tajikistan have thus far refrained from participating in integration processes. On the other hand, seven of the eight SCO member states are either members of the EAEU, have free trade agreements with EAEU countries, or are negotiating such agreements.

Thus, it is clear that a steady process of building new types of trade relations has taken shape in the region. Obviously, as this process progresses, a system of trade agreements will link all SCO countries in one way or another, requiring a harmonisation of those arrangements and inevitably compelling the Organisation to create an integration structure of some form or another.

The situation might develop in any one of a number of different ways. In the short term, as negotiations with China on linkage shift to the supranational level under the auspices of the Eurasian Economic Commission (EEC), the EAEU member countries have an opportunity to formulate a unified position on participation in the SREB, as well as a common framework for trade relations with China. That will make the EAEU attractive to other Central Asian states such as Tajikistan and Uzbekistan who have admittedly weak positions in their bilateral dialogue with China.

It is also important to bear in mind that the EEC currently has authority concerning only the trade and technical regulations aspects of the SREB. Thus, that dialogue does not address two important elements of the project: investment and transport. The parties also plan to create “institutions for comprehensive interaction.” “Common formats for projects of common interest” should appear in the fields of agriculture, industry, energy, transport and communications, and infrastructure (Edovina & Korostikov, 2016).

The SCO framework already includes mechanisms for cooperation on transport and investment that could be used to develop common approaches, as well as to involve Tajikistan, Uzbekistan, India, and Pakistan in the collaborative effort.

Another option is to formulate a “mixed” agreement between “SCO family” countries with the participation of the EAEU (the EEC voicing the united position of its members) and China on the linkage of broad issues of regional economic cooperation. In this case, the EAEU would retain the status of the main negotiator with China and other non-EAEU member states of Central Asia on issues of trade and technical regulations, while the SCO could address other cooperative efforts on investment, transport, and security.

Certain questions remain undecided: the limits of integration, the extent of the authority of national and supranational regulatory bodies, strategies for expanding EAEU membership, interaction between the EAEU and the SCO and other state and integration blocs. All of this necessitates the development of a sound model for the development of Eurasian economic integration and the systematization of its key principles and priorities.

9 Transport as a factor in deepening centripetal regional trends

To build a new economic reality in Eurasia, it is essential that the SCO achieve progress in the field of transport. This area of SCO cooperation dovetails with the OBOR set of initiatives, helps strengthen EAEU integration initiatives, and is consistent with the priorities of the national economic development strategies of the SCO member states, observer states, and dialogue partners. Because vehicular transportation is an inherent part of all branches of the national economy, interaction in this field drives the development of multilateral transport cooperation between all SCO countries.

The high rate of urbanisation in SCO countries coupled with the vast geographic area they cover make it necessary for them to have a fairly extensive and ramified network of roads. The eight SCO countries have an estimated 12.5 million km of roads, or 18% of the total length of all roads in the world. That system of roads enables SCO countries to increase their annual volume of overland freight shipments. For example, the six SCO member states alone shipped approximately 42 billion tons of goods overland in 2016 (calculated by the author based on data of the relevant agencies of the SCO member states). Obviously, the statistics from India and Pakistan will increase this figure manifold.

The Agreement between the Governments of the SCO Member States on the Creation of Favourable Conditions for International Road Transport serves as the international legal framework within the SCO for the development of transport infrastructure and improvement of freight transport. The agreement entered into force on 20 January 2017.

It creates a legal basis for parity conditions for road haulers and lays a uniform foundation for their professional activities within the territory of the SCO.

Various types of multilateral licensing systems for road transport are in use around the world. However, the new multilateral road transport licensing system for moving goods by road from the Pacific Ocean (Lianyungang, China) to the Baltic Sea (St. Petersburg, Russia) based on the SCO Agreement is unique in its own way. It opens significant opportunities for the construction of new and the reconstruction of existing international roads, thereby contributing to the expansion of the entire range of trade and economic relations, the increase of investment and the formation of a modern and ramified system of transport routes throughout the SCO.

The Agreement will also stimulate the further facilitation of formalities and procedures in the issuance of visas as well as border, customs, transport, phytosanitary, and veterinary control in carrying out international road transport. According to the Agreement, the parties grant carriers the right to carry out international road transport on their respective territories using vehicles registered on the territory of any one of the parties.

The right to carry out international road transport is granted by a single-entry permit – issued by the relevant authorities of that carrier's country – that is valid in all the territories of the signatories to the Agreement. This exempts the carrier from fees and charges related to owning or using vehicles and to the use or maintenance of roads in those states.

International road transport will be carried out along six routes passing through the territory of SCO countries. Four such corridors pass through the territory of Kazakhstan, five through China, two through Kyrgyzstan, three through Russia, and one each through Tajikistan and Uzbekistan.

It is important to note that these routes closely match the main routes of the historical Silk Road: the northern route through Kazakhstan and Russia; the central route through Central Asia; and the southern route through India, Afghanistan, Pakistan, Iran, and Turkey. All of the countries hold the corresponding status in the SCO. In essence, this underscores the concrete contribution the Agreement makes to the development and implementation of the Silk Road Economic Belt project.

To ensure the effective, harmonious, and consistent application of the provisions of the Agreement, the transport ministries of the SCO member states established the Joint Commission for the Creation of Favourable Conditions for International Road Transport.

In accordance with Article 23 of the Agreement, after its entry into force, any state wishing to join may do so by transferring an instrument of accession to the depositary.

This openness, whereby states outside the geographic area of the SCO can accede to the Agreement, has generated a great deal of practical interest from a number of Asian and Eastern European countries such as Belarus, Mongolia, and Turkmenistan.

It is our opinion that this openness towards participation in the Agreement creates major opportunities for the countries of the “SCO family” as well as for states that have no official status with the Organisation. The benefits and advantages derive primarily from the establishment of stable transport and communication links and expanded trade and economic relations with the significant natural and human resources of the combined SCO countries, in addition to enormous transit potential. Countries planning to join the Agreement gain the opportunity to be one of the first to participate in the large-scale process of forming a modern regional system of transport connections.

The intergovernmental Agreement on Cooperation in and Mutual Assistance in Customs Matters signed in Tashkent in 2007 will facilitate the implementation of the Agreement on Road Transport. In accordance with that document, the parties are currently taking measures to simplify customs procedures for goods and the movement of vehicles through the territory of SCO member states, and to recognize the types of identification, forms, and other documents used by the customs agencies of the signatory countries to this Agreement.

Along with these agreements, the SCO has also adopted other political and legal documents aimed at developing road transport and increasing the transit potential of the member states of the Organisation. Two such policy documents are the SCO Development Strategy until 2025 adopted at the Ufa summit in 2015 and the Action Plan for its implementation that was signed at the jubilee summit in Tashkent in 2016.

These documents provide for the expansion of the network of international logistics centres and the formation of a network of industrial clusters along transport arteries, the improvement of international road routes, including the acceleration of the construction and reconstruction of sections of roads within international transport routes, as well as the introduction of innovations and intelligent transport systems on the territory of the SCO.

A number of important documents concerning the economy and transport were adopted on 3 November 2016 at a meeting in Bishkek of the Council of Heads of Governments (Prime Ministers) of the SCO member states. The most important document was the List of Events for Further Development of Project Activities in the Framework of the SCO for 2017–2021. Section 7 of the List is devoted entirely to cooperation in the field of transport. In particular, it spells out the obligations of the SCO countries for improving international road routes, including by implementing and monitoring the realisation of selected projects. These include the construction and reconstruction of sections of road in international transport routes, as well as the creation of new multilateral and mutually beneficial cooperation projects in the SCO framework with the goal of advancing the development of transport infrastructure.

With a view to developing the network of roads, the heads of government also decided to expedite the preparation of a draft SCO Road Development Program – on which experts of the member states are currently working. The program should be a logical continuation of the intergovernmental Agreement on Road Transport and serve as a powerful tool for increasing the competitiveness of the SCO countries in the transport services market and the subsequent development of trade and economic relations between the states of the region and with the countries of Eastern Europe, South Asia, and the Asia-Pacific region.

10 Conclusions

Deep transformative processes are obviously unfolding in this historic Eurasian region. Asia's strengthening position as a driver of the global economy will only reinforce the trend towards the building of a regional system of economic interrelations aimed primarily at increasing the competitiveness of industries in the region and reducing the costs of delivering their final products to markets.

Countries’ intertwining participation in trade agreements, the further crystallisation of integration efforts, and the involvement of yet more countries in integration processes will strengthen current centripetal trends and the formation of a common Eurasian space. The necessary institutional basis for this will gradually mature as the form and mechanism of cooperation develop and improve within the frameworks of both the SCO and EAEU, ultimately contributing to a further deepening of interaction with the countries of Southeast Asia.

Of course, this process will require time and effort, but the overall trend in this direction has clearly begun.

Conflict of interest

None.