Ufa SCO-BRICS summits’ results herald new world order in the making Analytic

22 July 2015. PenzaNews. The leaders of Asian, African and Latin American countries took part in the 14th summit of the Shanghai Cooperation Organization (SCO) and the 7th BRICS summit that took place in the Russian city of Ufa on July 8-10, 2015.

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The BRICS summit, most importantly, resulted in the decision to launch its two new financial institutions, the New Development Bank (NDB) and the reserve currency pool, with a capital of $200 billion combined; and the signing of the joint Economic Cooperation Strategy that will be carried out until 2020 and includes plans to expand mutual business ties in energy, mining, agriculture and infrastructure.

At the same time, the leaders of the SCO agreed to begin the process of making India and Pakistan new full members of the organization, granted Belarus the status of observer-state, and named Armenia, Azerbaijan, Kambodia and Nepal new dialogue partners.

Moreover, the participants of the SCO summit expressed their support of the Chinese “Silk Road” economic belt project and agreed on a joint development strategy up until 2025. This document includes such points as the motion for a reform of the UN Security Council, as well as the plans to develop a Convention on Fighting Extremism and create new transportation corridors.

The summits held in Russia were also marked by the talks of the Indian PM Narendra Modi and his colleague from Pakistan Nawaz Sharif, where the parties expressed their intentions to cooperate in battle against terrorism in South Asia and establish cooperation in many areas.

Moreover, Hassan Rouhani, the President of Iran, attended the events and gave a speech to the guests of the event, in which he expressed his belief that the success of the Iranian Nuclear Program talks will soon open new potential for multilateral partnership in Asia.

The international leaders and high-ranking officials praised the results of their three-day work session in Ufa. In particular, the Nawaz Sharif stated that the full SCO membership of Pakistan will contribute to finding peace for Afghanistan, while Zhang Jun, director general of International Economic Cooperation Department for the Chinese Foreign Affairs Ministry, pointed out that the meetings resulted in several important investment, trade and industry agreements.

The July summits also attracted genuine interest of journalists both in Asia and Europe, who placed particular emphasis on their unique character and importance. One of them, correspondent Frank Sieren for Deutsche Welle, suggested that Brazil, Russia, India, China and South Africa may surpass G8 in their economic capacity by the end of the 21st century.

“Never has a global summit taken place in this region. In the West, we are going to have to get used to the fact that other regions are important for BRICS than those which are important to us,” he stressed.

Meanwhile, Pepe Escobar, Brazilian roving correspondent for several news agencies, pointed out in an interview to PenzaNews agency that the American media sources predictably ignored the Ufa summits without any actual reason to do so, despite their importance for both Asian and international policy and economy scene.

“At Ufa, India and Pakistan finalized the process of becoming de facto members [of the Shanghai Cooperation Organization]. The SCO is now a G8, and with Iran being admitted after the end of sanctions in early 2016, it will be a G9,” the speaker said.

In his opinion, the list of the more important statements made on July 8-10 also includes the agreement between Narendra Modi and the Chinese leader Xi Jingping to resolve their current border disputes, as well as a plethora more arrangements aimed at better mutual cooperation in such areas as energy and infrastructure.

“The New Great Game in Eurasia, on the ground level, is all about trade and commerce integration via a complex network of superhighways, high-speed rail, ports, airports, pipelines and fiber optics,” the correspondent explained.

However, he stressed that the Ufa summits were held in the midst of the growing geopolitical tensions coming from the US. The journalist also recalled that the recently published 2015 National Military Strategy of the United States lists Russia, China and Iran as the countries that pose the biggest threat to American security.

“[They] are depicted as ‘revisionist states’ – as in openly defying what the Pentagon qualifies as ‘international security and stability,’ that is, the un-level playing field for globalized, exclusionary, unproductive, turbo-charged casino capitalism,” Pepe Escobar said.

From his point of view, this background allows one to see the SCO and BRICS summits held in Russia as a strong blow against the US planning that shows the strategic depth of steps undertaken by Moscow and Beijing.

“At Ufa, [the Russian President Vladimir] Putin told [the Chinese President] Xi Jinping, on the record: ‘Combining efforts, no doubt we (Russia and China) will overcome all the problems before us.’ Read ‘efforts’ as new Silk Roads, Eurasian Economic Union, BRICS, SCO, AIIB, NDB, currency swaps, bypassing the US dollar, and beyond. No Mackinder disciple can reverse that,” Pepe Escobar concluded.

He also suggested that the Asian states will soon begin active negotiations with Iran on various projects that involve access to sea shipping lanes and construction of economically important infrastructure.

“So this perfectly ties in with Iran as an SCO member – which in itself is the logical extension of various geopolitical and geoeconomic factors,” the journalist explained, adding that the Tehran officials see the potential for peace and security in the region only through cooperation with Moscow and Beijing.

In his turn, Quinn Martin, managing partner of Frontier financial communications agency, noted that the Ufa summit participants will have many objectives ahead of them before their proclamations lead to success.

“The New Development Bank has huge potential because it’s backed by states that generate 20% of global GDP. But the devil will be in the details – how is power shared among the founding members, what additional countries will join and, most importantly, what projects will it fund. These are tough questions, and it may be a couple more years before the bank is fully up and running,” the expert explained.

At the same time, he highly praised the timing chosen by the Kremlin for the joint summits in Ufa.

“The timing is perfect to strengthen ties with the BRICS and SCO countries. Russia’s leadership is perturbed by the US and European sanctions and is keen to demonstrate to the West that it has friends elsewhere,” said the managing partner of Frontier.

Meanwhile, Marcos Troyjo, co-director of BRICLab at the Columbia University, founder of the Center for Business Diplomacy, stressed that the results of the Ufa summits make it possible to speak of an evolution of BRICS and the SCO as international organizations.

“The SCO started out with an emphasis on security and now expands to a number of different areas, including infrastructure financing. But the trend is even more visible in BRICS. Today, BRICS stands for an increasingly important tool, which is helping to enhance global governance and, consequently, to further consolidate a multipolar world. We should therefore talk about BRICS 2.0,” the expert pointed out.

In his opinion, Brazil, Russia, India, China and South Africa must concentrate on shaping global economy and promoting the New Development Bank as an alternative to the World Bank for the developing countries, while the SCO members must focus on security issues.

“That should be pursued via a two-track approach. The first definitely has to do with using the relative political weight of these major powers to modernize the United Nations system and equip it so that it is able to face up to challenges in peace and security where the enemy is not a traditional nation-state. The second is about furthering cooperation among the intelligence and security communities of both BRICS and the SCO,” said the founder of the Center for Business Diplomacy.

“Where the interests of the group definitely coincide – such as development financing, improving global economic governance, and building a more equitable world order – they should coexist pragmatically with their differences in economic clout, political agenda, and worldview. If that is the case, then both BRICS and SCO will live a long life,” Marcos Troyjo continued.

At the same time, Christian Deseglise, the second co-director of BRICLab at the Columbia University, managing director at HSBC Global Asset Management, pointed out that the internal trade volumes between Brazil, Russia, India, China and South Africa have been decreasing for the last four years.

“It is very important that the barriers to trade within BRICS be reduced. There are many bilateral and regional trade agreements, but there are still many of barriers that prevent trade,” the expert stressed.

He also noted that the opening of the New Development Bank and the reserve currency pool with a joint capital of $200 billion is good news not just for the BRICS countries on their own, but for a large number of other countries as well.

“Those institutions, I think, are the beginning of a new nature of BRICS. […] They are a possible alternative to the World Bank, the Asian Development Bank, the African Development Bank, and the Inter-American Development Bank,” Christian Deseglise explained, noting that the emergence of the BRICS NDB was directly caused by stagnation of the Western financial institutes.

The new investment banks in Asia and the Chinese Silk Road fund must unite – not over competition with the West, but over positive contribution to the underfinanced areas and zones of economy, he suggested.

“The needs just for infrastructure financing, just for Asia, are at the range of $80 billion every year for the foreseeable future. So I think this will make a difference,” said the managing director of HSBC Global Asset Management.

Seylbek Musataev, political analyst, professor of Al-Farabi Kazakh National University, also argued that the emergence of the AIIB, the NDB and the Chinese Silk Road was largely caused by the lack of positive contribution from the International Monetary Fund and other Western international financial institutions.

He also pointed out that the Shanghai Cooperation Organization successfully approached new continents during the Ufa summits.

“The boundaries of the SCO are expanding. India and Pakistan, who had been observer-nations, have joined the full-fledged members. Such countries as Armenia and Azerbaijan are the new observer-nations. The SCO has become a large geopolitical grouping where the former opponents can resolve their disputes within the organization,” the political analyst stressed.

Discussing the large-scale projects voiced during the July summits, Seylbek Musataev stressed the importance of the “Silk Road” economic belt – a project, he argues, which will foster infrastructure development in all states involved.

“Earlier, several countries – in particular, the US and the European Union – had concerns that this project would lend to growing strength of China in the Central Asia – in Kazakhstan, Tajikistan and so forth. But the members of the SCO have disproved these claims and stated that the joint partnership complies with all the internal needs of the countries within the Shanghai Cooperation Organization,” the professor of Al-Farabi Kazakh National University explained.

Moreover, according to him, another important point on the agenda of the summits was the issue of fighting terrorism – a traditional topic for the SCO summits that also featured in the BRICS agenda.

“The current measures and means showed to be ineffective, and therefore the members of the Shanghai Cooperation Organization seek to offer new measures and ways to fight terrorism, extremism and separatism to the UN Security Council,” Seylbek Musataev said.

At the same time, Amitendu Palit, economist, research lead in Trade and Economic Policy at the Institute of South Asian Studies in the National University of Singapore, stressed that terrorism is a particularly urgent issue for the Shanghai Cooperation Organization.

“Given the geographical composition of the SCO members – it is very close to the areas where you see the radical group of Islamic terrorism and other kinds of terrorism coming up – we would expect the SCO to be more proactive when it comes to fighting terrorism and also illegal drugs and arms trade – that is actually a very, very important program,” the expert stated.

From his point of view, India and Pakistan, long-time observer-nations in the organization, are greatly interested in countering those threats and thus will offer big assistance in the task of establishing peace and order in the Asian continent.

Moreover, the economist also praised the visit of Iranian President to Ufa and pointed out that Tehran is set to soon become a vital partner for many Asian powers and will likely join the ranks of the Shanghai Coperation Organization.

However, the potential of the SCO and BRICS had not been fully realized yet, he suggested.

“I agree with the view that BRICS and SCO summits do point to their beginning as the new international order, but I think that in order to make that beginning a full term, long term program of development and cooperation, [members of] both of summits will need to put in a lot of work,” Amitendu Palit said.

According to him, the SCO, an organization that mostly cooperated over defense issues, must expand their agenda, while the BRICS countries must sign a multilateral trade and investment treaty to improve and expand their economic ties.

“I am much more positive about BRICS. I think BRICS has already made a good beginning,” the expert noted.

He also stressed that the New Development Bank will be able to achieve great results in a combination with the Asian Infrastructure Investment Bank and the Chinese Silk Road fund, but only if the three institutions work together without overlapping and within the scope of a joint coordinated economic strategy instead of competing with each other.

Amitendu Palit also expressed his opinion that the SCO and BRICS summits currently act as the platforms for the Asian states to resolve their own interregional issues without any interference from the Western world.

“There are several areas of cooperation where the SCO and BRICS actually emerge as alternatives to the Western world order by identifying issues where they can help each other. If this process is taken forward, it will be of major benefit to all the countries as far as the development potentials within BRICS and SCO are concerned,” concluded the researcher for the National University of Singapore.

BRICS is a group that unites China, Russia, Brazil, India, and South Africa – the five major emerging national economies.

The group received its first title, BRIC, in November 2001 as an acronym after the first letters of the four initial states – Brazil, Russia, India and China. After South Africa joined the group in 2011, it was renamed BRICS.

The first brief meeting of the leaders in the grouping was held in July 2008 in Toyako Onsen, Japan, and the first full-scale annual summit took place in Ekaternburg, Russia, on June 16, 2009, right next to the SCO meetings.

Among the notable achievements of BRICS is the creation of the New Development Bank and the reserve currency pool, the group’s own financial institutions that were founded during the 6th summit of the group held in Fortaleza, Brazil, on July 15-17, 2014.

The New Development Bank officially opened its headquarters in Shanghai on July 21, 2015.

The Shanghai Cooperation Organization was formed in 2001 by the leaders of Russia, China, Kazakhstan, Kyrgyzstan, Tajikistan and Uzbekistan.

Before its formation, the aforementioned countries, except for Uzbekistan, had been members of the Shanghai Five, a political union found in 1996 and formed through the Agreement on Enhancing Trust in the Military Area on the Border (Shanghai, 1996) and the Agreement on Mutual Reduction of Armed Forces in the Border Area (Moscow, 1997). After Uzbekistan joined the grouping in 2001, the Five turned into the Six and subsequently took its current name.

Currently, Afghanistan, Iran, Mongolia and Belarus have the observer-nation status, while Turkey, Sri Lanka, Armenia, Azerbaijan, Kambodia and Nepal have dialogue partner status. India and Pakistan, long-time observer-nations of the SCO, are currently in the process of becoming full-fledged members.

Among the major goals of SCO are improving mutual trust between its members; assisting their effective cooperation in politics, trade, economy, science and development, culture and other areas of cooperation; making joint efforts to maintain and ensure peace; and moving towards a new democratic, just and rational political and economic international order.