In addition to Russia and China, SCO includes Kazakhstan, Kyrgyzstan, Tajikistan and Uzbekistan. Iran, Mongolia, India and Pakistan have observer status.
Until this year, Moscow and Beijing were major rivals over the former Soviet republics of Central Asia and their resources. At present Moscow controls the region’s gas exports through Gazprom, but Beijing has challenged its dominance with a deal in June to buy 40 billion cubic metres of gas annually from Turkmenistan starting next year. Work on a 7,000-kilometre pipeline from Turkmenistan to China is slated for completion later this year.
Yet what could have led to confrontation has become the basis for cooperation.
Chinese Prime Minister Wen Jiabao yesterday reached a deal with his Russian counterpart. Russia's state-run natural gas monopoly Gazprom and China National Petroleum Corporation reached a framework agreement for the supply of about 70 billion cubic metres of gas a year.
No price has been set yet and no contract signed, said Gazprom's chief executive Alexei Miller, but the value of the agreement should be close to US$ 5 billion, analysts said.
Yesterday, Wen Jiabao also oversaw the signing of US$ 3.5 billion worth of business deals, including an order for ballistic missiles and two loans of US$ 500 million each from China’s from Development Bank and Agricultural Bank to Russia’s VTB and VEB. For Wen, deals with friendly markets like Russia’s are preferable.
The two countries have been brought together by the world’s financial crisis explains, and a shared desire to limit US influence in Central Asia.
Moscow urgently needs to sell its gas to markets outside of Europe, whilst Beijing needs energy, a situation that has instilled caution in Chinese leaders when it comes to dealing with the Kremlin.
Improving Sino-Russian relations have led Russia to change its mind on tougher Western sanctions against Iran and side with China.
US Secretary of State Hillary Rodham Clinton, who was in Moscow this week, pressed for Russian support on the issue, but Russia's Foreign Minister Sergey Lavrov dimmed US hopes, saying that even a threat of sanctions would be “counterproductive,” thus changing the position Russia took at the UN General Assembly last month. Now Moscow’s top diplomat backs China’s insistence on mediation as the better option.
Taliban leaders in Afghanistan and Pakistan have also praised Sino-Russian rapprochement, and called on neighbours to oppose the occupation of Afghanistan by foreign forces, pledging, “Once back in power we would establish good relations with all of Afghanistan’s neighbours”.