The Shanghai Cooperation Organization recently held its annual summit in Bishkek. Energy-security was reported to be the primary focus of the summit while the Sino-Russian military exercises Peace Mission 2007 held a few days later attracted much attention. Even if these recent events suggest that China-Russia relations may be at an all-time high, the strains between them in the energy sector will likely impede a further strengthening of bilateral ties. Only two days after the summit, China signed two important energy-deals with Turkmenistan and Kazakhstan challenging the Kremlin’s advantageous position in the region. Conceived as such, it is an irony that the Bishkek summit will make it into the history books as the summit in which energy-security made its entry.

BACKGROUND: The Shanghai Cooperation Organization (SCO) held its annual summit in Bishkek, Kyrgyzstan, on August 16.  The attendees included the six heads of state of the SCO full member states as well as observers, including the heads of state of Mongolia and Iran, while Pakistan was represented by its Foreign Minister and India by its Minister of Oil and Gas. More significantly, both Afghan President Hamid Karzai and Turkmen President Gurbanguly Berdimukhamedov also attended the summit while the UN was represented by Under-Secretary General Lynn Pascoe. This could indicate a more active role for these actors in SCO in the future.

Two key documents were signed: the Bishkek Declaration outlining SCO’s priorities and future challenges and a Long-term Treaty of Good-neighborliness, Friendship, and Cooperation which yet is to be made public. Considering the alliance-like nature of the previous Treaty on Good-neighborliness, Friendship, and Cooperation adopted in 2001, the new Treaty will certainly be worth reading. This is the case not least because the Treaty signed in 2001 was inked at a time when Russia-China relations were standing at a lower-mark than at present.

Although the summit in Bishkek dealt with all issues of SCO’s concern, including the struggle against “terrorism, extremism, and separatism” as well as military, cultural, and economic cooperation, a major focus was energy security and energy cooperation. The Bishkek Declaration also gave emphasis to energy cooperation in stressing that: “The heads of the SCO member states note the important role of the energy sector as a basis for steady economic growth and security, and attach special significance to strengthening interaction in this direction”. Although no major progress was reported to have been achieved in forming the SCO energy club/hub, it is clear that energy is set to be an important component in the SCO member states’ interaction.

A day after, on August 17, Russian President Vladimir Putin, Chinese President Hu Jintao and the leaders of Kazakhstan, Kyrgyzstan, Tajikistan and Uzbekistan attended the Peace Mission 2007 military exercise in Russia's Chelyabinsk region. The exercise involved mostly Russian and Chinese troops, but also troops from Kazakhstan, Kyrgyzstan, Tajikistan and Uzbekistan. About 4,000 troops, 80 aircraft, and 500 combat vehicles participated in the joint exercises. China and Russia supplied the 500 combat vehicles together with 1,600 and 2,000 troops respectively. Not limited to this, China’s armed police (PAP) and Russia’s interior forces carried out a joint counterterrorism exercise dubbed “Cooperation 2007” in September.

IMPLICATIONS: The significance of the Bishkek summit should not be underestimated. Despite the absence of any sensational or provocative statements along the lines of the Astana Declaration in 200, calling for a US departure from SCO member states’ territory, the Bishkek Summit, Peace Mission 2007, and other events occurring just after the summit give tentative indications as to the SCO’s current dynamics. These revolve partly around pragmatic interests of counter-terrorism and economic development, but more importantly around internal conflicts on issues of vital national security to both Russia and China, and especially in the energy sector. These are issues in which China and Russia to some extent share interests, although the competitive component in this relationship appears to have taken precedence.

Spectacularly, only two days after the SCO summit, on August 19, China signed two vital energy agreements with Kazakhstan and Turkmenistan – both directly confronting Russia’s interests. The first deal specified the final phase of the Chinese plan for an oil pipeline stretching all the way to the Caspian Sea. Two-thirds of this link has already been completed through the Atasu-Alashankou pipeline and a pipeline stretching from Atyrau to Kenkiyak, while the phase in question consists of a connection between Kenkiyak and Kumkol. Most significant was however the second deal involving the construction of a natural gas pipeline from Turkmenistan to China which, if completed, essentially would break Russia’s long-held monopoly on Turkmen gas. Although the deal in itself was no news since it has been circulating for some time, it now seems as if both Turkmenistan and China are intent on finalizing it. The capacity of the pipeline will be around 30 billion cubic meters (bcm) of gas annually and it is set for completion by 2009.

Considering that Turkmenistan’s total extraction only reaches 70 bcm per/year, of which 8 bcm goes to Iran and the bulk of the remaining 62 bcm transits through Gazprom’s network controlled by the Kremlin, the deal is unlikely to go through smoothly without Russian interference. Access to cheap Turkmen gas is critical for Russia’s domestic consumption, and the ability to free up Russian domestic production for the European market largely depend on Turkmen imports. Even though Turkmen projected exports to China are scheduled to come from new sources of gas, Russia’s massive export incomes to Europe are directly threatened by the deal. This is the case since Russia’s export commitments to Europe are growing, while Russia’s own gas production is not, making Russian future exports increasingly dependent on access to Central Asian gas. Although Turkmenistan also has made pledges of constructing a pipeline to Russia, it is clear that a Turkmen-China pipeline, which today appears very likely, would be built at Russia’s expense. Since energy is Russia’s strongest lever over both Europe and China and the primary means through which it projects it power, not even the SCO is likely to be able to bridge these conflicting interests.

This is not to say that the strong ties that do bind China and Russia – as witnessed with Peace Mission 2007, the accompanying arms-transfers between the two, and large Russian oil exports – should be discarded. But it is to say that China is looking for diversification and to unlock Russia’s strategic advantage over Turkmenistan’s strategic gas reserves, thereby, in effect, threatening one of the most vital components in Russia’s foreign policy.

The driving forces of the SCO may be conceived as evolving around two axes: an internal one and an external one. The internal drivers trace to bilateral relations between China and Russia and their respective relations to Central Asia – primarily so in the arms, security assistance, economic and energy spheres of interaction. The external driver is first and foremost the United States, but the European Union is also currently aspiring to become a significant player in Central Asia, especially in the energy sector. These two actors’ direct interests in the region inadvertently push China and Russia closer and could arguably be one of the few common interests that China and Russia shares. 

CONCLUSIONS: In the wake of the Bishkek summit, it is clear that the SCO and its rapid institutionalization fills an important component in regulating the relations among SCO members and their interests vis-à-vis other actors. It is equally clear, however, that the organization suffers from strains, frictions, and paradoxes. One frequent argument heard is that SCO’s primary purpose is for Russia to monitor, and partially regulate, China’s engagement with Central Asia whereas China benefits from a forum where this engagement could be legitimized. 

That analysis still seems plausible, even though the main conclusion from the Bishkek summit should be that China is asserting its interests, fearing little in way of Russian reprisals. Turkmen President Berdimukhamedov’s presence at the SCO summit, the first of a Turkmen president, and the agreements signed with China a few days later sums up the complexity within SCO well. Moreover, it remains to be seen how far-reaching the Treaty on Good-neighborliness, Friendship, and Cooperation will be. Obvious, however, is that there are various pull and push factors in place that ultimately decide the content of this document, some of which have been mentioned here. Energy could arguably be singled as one of the most important sources of friction.

AUTHORS’ BIO: Nicklas Norling is Project Coordinator and Niklas Swanström Co-Director at the Institute for Security and Development Policy (ISDP), Stockholm, The ISDP’s Silk Road Studies Program constitutes a Joint Center with the Central Asia-Caucasus Institute, Johns Hopkins University-SAIS.