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Iran’s Shanghai dream

by Kevjn Lim
Rouhani and Xi photo
The Iranian president, Hassan Rouhani, and Chinese president, Xi Jinping, at a 2014 summit in Shanghai

In late June, during the 15th annual summit of the Shanghai Cooperation Organisation (SCO), a China-led security bloc, the Russian president, Vladimir Putin, announced that the signing of the US-Iranian nuclear deal and the lifting of UN sanctions meant that there were ‘no obstacles left’ to Iran joining the SCO.

But only a day earlier, the SCO as a whole and Beijing, by implication, had refused to process Iran’s application, and a month before that, the Chinese foreign minister, Wang Yi, had recommended that the bloc focus first on India and Pakistan’s own slated accessions. During the same summit, Putin’s SCO representative, Bakhtiyor Khakimov, vaguely explained that ‘technical nuances’ were to blame for the varying positions. What is at play is a deep disagreement between the SCO’s two main powers – Beijing and Moscow – over Iran’s bid for membership.

Tehran, which applied for full accession in 2008, has repeatedly pressed its case, but has only enjoyed observer status from 2005 until now. Iran’s hopes have been buoyed in the interim by noncommittal promises to admit it sometime in the future. In a 2010 summit document, the SCO officially nixed the longstanding moratorium on new admissions imposed a little after the organisation’s rebranding from the erstwhile Shanghai Five in 2001, but at the same time legally ruled out states under UN sanctions. Although Iran is no longer under UN sanctions, internal disagreements have continued to draw out the process. So why does Iran want to join an organisation that is not ready to commit, and if it were to join, what would its membership betoken?

During Iran’s raucous years under Mahmoud Ahmadinejad, SCO observer status allowed Tehran to, in some ways, set its Look East policy, which was aimed at compensating for the country’s rapidly deteriorating relations with the West. Today, while Hassan Rouhani has made strides towards mending Iran’s ties with the West, SCO membership remains on the cards, front and centre. For one, joining the SCO would allow Iran to strengthen its bilateral ties, not only with China and Russia, but with India too.

In terms of broader international relations, Iran shares with the SCO the ambition to challenge US dominance and the Western-led order. Even though the SCO still lacks the clout to overturn the existing order, the SCO could eventually become an influential regional bulwark against encroaching NATO and US influence. The SCO gave the world a taste of its potential in 2005 when it issued a statement demanding a deadline for the evacuation of US troops and the removal of all non-SCO military bases from Central Asia. This was seen as the organisation’s first open challenge to the United States.

When it comes to security, Iran is of one mind with the SCO’s focus on combating the ‘three evils’ of terrorism, separatism, and extremism ‘in all their manifestations’. Although the SCO is more concerned about these problems in Eurasia, Iran, too, is plagued by these issues, in addition to shared transnational threats from the narcotics trade and war-ravaged Afghanistan. At the same time, since it is not strictly a military alliance, the SCO lacks a mutual defence clause comparable to NATO’s Article 5 or the Collective Security Treaty Organisation’s (CSTO) Article 7. At any rate, even if the SCO were to behave as a de facto security alliance, and intervene militarily on behalf of a member, it would still require consensus, a tall order considering the existing bilateral tensions among its various members, let alone its observer states and dialogue partners. This places a formal, and possibly even informal, defence pact quite beyond Iran’s reach. Although the SCO in theory could extend diplomatic if not military backing to Iran, it also risks being dragged into fights not of its own choosing. Still, for Iran, the SCO is the closest it has to an international defence bulwark, since it is not a member of any other regional security organisation.

Iran’s membership, of course, would also be beneficial for the SCO in a number of ways, particularly in strengthening China’s ambitious One Belt One Road project, which currently drives the SCO’s economic agenda. In this regard, Iran could serve as a bridge to the Middle East and especially to Europe – one that bypasses Russia altogether. This would be particularly useful for keeping this project on track even if serious tensions were to arise between Beijing and Moscow. Iran and China are already linked by railways, which are cheaper than aviation and swifter than shipping, that traverse Kazakhstan and Turkmenistan. In February 2016, the first freight train linking China’s eastern province of Zhejiang to Tehran went into service and took a mere two weeks to complete its journey, which is one-third less time than by sea.

Furthermore, as a full member, Iran would raise the SCO’s combined gas reserves from 30% to nearly 50%, and its combined oil reserves from 8% to 18% of available reserves around the world. For the SCO, Iran’s inclusion would bridge the Caspian and the Persian Gulf and improve the organisation’s ability to dictate prices, particularly since Iran is also an OPEC member. Furthermore, China is Iran’s largest buyer of oil. To satisfy its voracious energy needs, China has financed and built an oil pipeline from Kazakhstan to Alashankou and a gas pipeline from Turkmenistan to Khorgos. Iran is already tapped into both of these networks, through the Caspian to Kazakhstan and through Kordkuy-Korpeje to Turkmenistan. More overland exports from Iran to China would benefit both countries by diminishing their reliance on the high seas, which are heavily policed by the US Navy.

However, it is far less clear where Iran fits within a geostrategic milieu anchored by two uneasy poles of power – or three if we consider the prospective India. China, and possibly Russia, view the SCO as a mechanism to constrain the grand strategic ambitions of the other. The group’s mid-sized powers – such as Kazakhstan, Uzbekistan and, potentially, Iran – could get entangled in this power struggle. On the other hand, whereas the SCO may be Iran’s best insurance policy in a world dominated by the United States, its relationship with China and Russia is highly asymmetric and by that measure, exploitative. During the past decade, China took advantage of the sanctions against Iran to obtain cheap oil and to flood Persian bazaars with even cheaper goods. Russia downplayed its relations with Iran whenever its own ties with Washington improved. This hardly speaks to a particularly empowering future in the SCO for Tehran. Iran’s relations with the Central Asian members are cordial but mostly lukewarm. Even its warmest relationship with the impoverished Tajikistan is more of a liability than an asset, and mistrust towards Iran persists among secular Tajik elites. Despite the SCO’s implicit anti-Western bent, most of its members have more robust relations with the United States and the European Union than with Iran. Last year, US-Chinese bilateral trade, at $600 billion, was 20 times greater than that between Iran and China. Even Russia’s trade with the United States during the Ukraine crisis was, at $23 billion, easily 18 times more than Iranian-Russian trade.

The reason why Iran has remained in limbo is that the benefits it might bring to the SCO are outweighed by the potential pitfalls. SCO members have occasionally declined to defend Iran’s membership if that meant confrontation with Washington, despite the organisation’s own implicit orientation. Under the powder keg that was Ahmadinejad’s government, for instance, the then SCO secretary general, Bolat Nurgaliyev, commented that new admissions ‘should strengthen the organisation…not cause new problems.’ Even if nuclear sanctions are now lifted, close relations with Iran are still a high-stakes gamble. Iran’s open support for groups considered terrorists contradicts the SCO’s primary security objective and risks putting its credibility on the line, even if Iran has helped fight against Sunni extremism, such as Islamic State. Finally, any future improvements in Russia’s relations with the West could easily temper Putin’s current zeal for Iranian membership.

In the long run, however, Iran most likely views full membership in the SCO as its best bet to join an institutional alliance that might even birth a new regional, if not world, order that diminishes Western influence. Although the SCO is no NATO or CSTO – in either form or substance – neither is it an ornament. How the SCO positions itself in future depends on how major Western governments interact with its leading powers, China and Russia, as well as how the two powers interact with each other. This, in turn, will also determine if Iran’s undying Shanghai dream finally becomes reality.

A version of this article by Open Briefing senior analyst Kevjn Lim was first published by Foreign Affairs on 25 July 2016.