Asia Eur J

DOI 10.1007/s10308-017-0483-4
O R I G I N A L PA P E R

Implementing the Silk Road Economic Belt:

from the Shanghai Cooperation Organisation to the Silk
Road Union?

Zhenis Kembayev 1

Received: 29 December 2016 / Revised: 16 April 2017 / Accepted: 3 September 2017

# Springer-Verlag GmbH Germany 2017

Abstract The concept of the Silk Road Economic Belt put forward by the Chinese
President Xi Jinping in September 2013 has two major dimensions: Bthe Road^ and
Bthe Belt^. This article examines the background, the legal status, values, institutional
framework and major areas of cooperation of the Shanghai Cooperation Organisation
(SCO). In doing so, it argues that building Bthe Road^ may lead to the following: (a)
the transformation of the SCO from hitherto primarily security-oriented alliance into
Bthe Belt^, i.e. an organisation pursuing also deep economic cooperation, and (b) the
establishment of a Silk Road Union based on partnership between SCO and the
Eurasian alliance, constituted by two most important regional integration groupings
created in the post-Soviet area, the Collective Security Treaty Organization and the
Eurasian Economic Union.

Introduction

During his visit to Kazakhstan in September 2013, Chinese President Xi Jinping

unveiled his idea of building a BSilk Road Economic Belt^ (SREB) that along with
another Beijing’s initiative, the BTwenty-First Century Maritime Silk Road^, constitutes
a part of an ambitious Chinese development strategy collectively known as the BOne
Belt and One Road^. The SREB has obviously two major dimensions: Bthe Road^ and
Bthe Belt^ and, accordingly, pursues the following two main objectives. First, it aims to
revive the Silk Road, the ancient trade route that, linking Asia and Europe, led to the
mutual exchange of ideas, goods and technology. Second, it aspires to create an
BEconomic Belt^, i.e. a transcontinental association of countries along the Silk Road

* Zhenis Kembayev
kembayev@kimep.kz

1
School of Law, KIMEP University, Almaty, Kazakhstan
 Z. Kembayev

in order to forge closer economic ties, facilitate trade and investment, and improve
transportation networks. As one of the steps towards fulfilling his idea, the Chinese
leader called in particular for strengthening the cooperation between the Shanghai
Cooperation Organisation (SCO) and the Eurasian Economic Community (EurAsEC)
(Xi 2013).
The EurAsEC, a regional integration grouping that united a number of post-Soviet
countries and existed from October 2000 until October 2014, was effectively replaced
by the Eurasian Economic Union (EAEU) starting from 1 January 2015. It is notewor-
thy that all EAEU countries are also members of another regional bloc created in the
post-Soviet area, the Collective Security Treaty Organization (CSTO). Even though the
EAEU and the CSTO are de jure separate, these two most prominent regional integra-
tion groupings in Eurasia in combination constitute a single de facto structure
(Kembayev 2016), subsequently for discussion purposes referred to as the Eurasian
alliance.
This article examines the background, values and major areas of cooperation of the
SCO with the purpose to provide an answer to whether the SCO can establish a
meaningful partnership with the Eurasian alliance and thus facilitate the creation of
the new Silk Road through transforming itself from primarily security-oriented coali-
tion to an organisation also capable of promoting deep and comprehensive economic
cooperation between its members (or, in other words, a Silk Road Union).

SCO background

The SCO’s background traces its roots to the reconciliation process between China and
the USSR that began in the late 1980s after a long period of sporadically bloody
confrontation. After the breakup of the USSR, rapprochement continued in the frame-
work of the BOne plus Four Formula^, i.e. China and four post-Soviet (or Eurasian)
countries: Kazakhstan, Kyrgyzstan, Russia and Tajikistan. Reducing tensions around
the borders, China and the former Soviet republics gave birth to a political grouping
that became known as the BShanghai Five^. The grouping’s annual meetings held
alternately in each of the five countries became an established practice and it developed
into a major forum for discussion of key matters of regional and global security,
gradually supplementing its agenda with issues of economic, social and cultural
cooperation, environmental protection and water resource management. Celebrating
its fifth anniversary on 15 June 2001, the grouping admitted Uzbekistan as a new
member and decided to create permanent institutional structures for facilitating their
cooperation by establishing the SCO. As a result, during the next summit on 7
June 2002, the newly created organisation adopted its Charter endowing the SCO with
legal personality and precisely fixing its goals, principles and basic directions of
activities. On 15 January 2004, the official inauguration ceremony of the SCO Secre-
tariat took place and the organisation, which comprises six member states, with two of
them being permanent members of the United Nations (UN) Security Council, covering
more than 20% of the Earth’s surface and representing 21.6% of the world’s population,
started its operation.
The most prominent role in constructing and institutionalizing the Shanghai process
was obviously played by China that considers this undertaking to be a Bkey point^ in its
Implementing the Silk Road Economic Belt: from the Shanghai...

foreign policy (Chung 2006, 5) and indisputably exercises the greatest influence on the
organisation. In fact, the SCO is the first and until the establishment of the Asian
Infrastructure Investment Bank (AIIB) in 2014 has been the only regional organisation
initiated by China. The SCO is a China-driven and China-inspired organisation clearly
reflecting China’s rise as an emerging global power willing to assume a greater and
more active leadership role in regional and global affairs.
Yet the Chinese efforts are not entirely altruistic. As Zhao Huasheng puts it, BChina
has contributed to the SCO most, both politically and economically… [and] has made it
a natural duty to keep the organisation moving forward… [as it] considers the SCO first
and foremost a unique instrument to implement its interest in Central Asia and beyond^
(Zhao 2013, 436). Accordingly, from a geopolitical viewpoint, the SCO can undoubt-
edly be considered a tool for Chinese penetration of Central Asia, a region that was
traditionally dominated by Russia, another major SCO member. This is especially true
as China desires to transform the SCO into a comprehensive organisation dealing with
a large variety of regional issues, as Bthe Chinese leadership’s perception of the SCO
has shifted from initially a defensive move to tackle separatists and resolve border
disputes, to a more positive outlook on the framework as an avenue through which it
can develop markets for trade and secure access to energy resources^ (Aris 2011, 58).
In fact, over the past 20 years, Beijing has significantly enhanced its presence in the
post-Soviet area in both the political and economic fields. Moreover, as noted by
Lanteigne, BChina continues to grow politically and economically, developing a more
independent and activist foreign policy… and the SCO, while still a very new security
organisation, has been at the forefront of China’s efforts to expand its strategic interests
in Eurasia and solidify both its security and, increasingly, its economic interests in this
pivotal region^ (Lanteigne 2010, 176).
The growing Chinese influence in the region became, however, one of the major
reasons prompting the development of Moscow-led regional integration processes
among a number of post-Soviet countries. Revealingly, China’s active diplomacy and
extraordinary economic growth that led to the creation of the SCO gave also a
significant impetus to regional integration in Eurasia and almost coincided with the
establishment of the EurAsEC on 10 October 2000 (the today’s EAEU), and the CSTO
on 7 October 2002, i.e. the Eurasian alliance that currently unites Armenia, Belarus,
Kazakhstan, Kyrgyzstan, Russia and Tajikistan,1 and aims in particular at balancing the
increasing power of China with the purpose of preventing its domination in the region.
On the other hand, despite fears of Chinese hegemony, Russia and Central Asian
countries have been actively supporting the merits of the SCO and constantly promot-
ing its importance on the world stage due to a number of various reasons that will be
discussed subsequently.

SCO values

Examining the SCO background makes it clear that the SCO could affirm itself as a
robust multilateral architecture picking up its propulsion against the backdrop of two

1
Tajikistan, which is a CSTO member and was one of the founding members of the EurAsEC, is not currently
a member of the EAEU but explores the possibility of joining it (Putz 2016).
 Z. Kembayev

major processes: first, China’s rise and international expansion, and second, Russia’s
resurgence as a Eurasian power (Stobdan 2008, 527). The SCO’s ability to accommo-
date these processes is largely due to the fact that it is an organisation uniting countries
that, to a significant extent, share common values, termed the BShanghai Spirit^ and
defined as a set of guiding principles including Bmutual trust, mutual advantage,
equality, mutual consultations, respect for cultural variety and aspiration to joint
development^.2
Broadly formulated, the Shanghai Spirit constitutes the backbone of the SCO
guaranteeing the sovereignty of its members and allowing them to develop their
cooperation within agreed parameters rather than detailed codified guidelines and
regulations. In effect, the Shanghai Spirit means that the SCO puts a strong emphasis
on respect for state sovereignty (in particular as it consists of members that are different
in their size and their role in international relations), non-interference in the domestic
affairs of the members, and stability, i.e. political constancy and the absence of
revolutionary change. At the same time, however, SCO Charter is (similar to constitu-
tive documents of the Eurasian integration groupings) devoid of any mention of
democracy. Indeed, all of SCO (and thus also CSTO/EAEU) members are character-
ized, though in different forms and degrees, as authoritarian countries (Democracy
Index 2016), which are united by the desire to work collectively to preserve their
political systems and to safeguard the non-democratic status quo in the region against
domestic opponents and external critics (Ambrosio 2008, 1330, 1341). Of particular
note is also a view that Bthe authoritarian consensus in Eurasia is not going to vanish in
the foreseeable future, but is more likely to become stabilized in various forms of
conservative modernization^ (Kreikemeyer 2013, 180).
The SCO member states’ consensus that Bpolitical stability takes precedence over
democratization^ (Yuan 2010, 862) and their opposition to interference in domestic
affairs are also clearly reflected in the SCO’s commitment to developing and promoting
Ba new democratic, fair and rational political and economic international order^ 3
premised on political multipolarity. In fact, the SCO adopted numerous declarations
stressing political sovereignty and calling for the establishment of a new global
architecture based on Bpeaceful co-existence and consensus-based dialogue between
various civilizations^, 4 as opposed to attempts to establish domination of one (or a
group of) state(s).
The commitment to the Shanghai Spirit is fully shared by the Eurasian alliance. It is
noteworthy that the CSTO is also aimed at forming a Bjust and democratic world
order^, 5 while the EAEU proclaims Bthe respect for specific features of the political
structures of the Member States^6 as one of the major principles of its activities, which
clearly shows that the Eurasian alliance is also fully committed to multipolarity in

2
SCO Charter of 7 June 2002, Preamble. http://www.hrichina.org/sites/default/files/PDFs/Reports/SCO/2011-
HRIC-SCO-Whitepaper-AppendixA-SCO-Docs.pdf. Accessed 15 April 2017.
3
SCO Charter of 7 June 2002, Article 1.
4
See e.g. Declaration on the Fifth Anniversary of the SCO of 15 June 2006. http://www.china.org.
cn/english/features/meeting/171589.htm. Accessed 15 April 2017.
5
CSTO Charter of 7 October 2002, Article 4. http://www.odkb-csto.org/documents/detail.php?ELEMENT_
ID=1896. Accessed 15 April 2017.
6
Treaty on the EAEU of 29 May 2014, Article 3. http://www.un.org/en/ga/sixth/70/docs/treaty_on_eeu.pdf.
Accessed 15 April 2017.
Implementing the Silk Road Economic Belt: from the Shanghai...

global affairs, inviolability of state sovereignty and non-intervention in domestic affairs

with the purpose of preserving the existing political systems in its member states and
preventing Bcolour revolutions^.
The authoritarian nature of the SCO and the CSTO/EAEU grouping is evidently
reflected in their institutional frameworks, which are top-down structures totally dom-
inated by their respective supreme bodies consisting of the highest ruling authorities of
the member states. The institutional resemblance of the SCO and the Eurasian integra-
tion groupings along with substantial overlap in the membership convert the meetings
of the SCO’s supreme body, the Council of Heads of State into a format of BChina plus
the Eurasian alliance^. In fact, four (Kazakhstan, Kyrgyzstan, Russia, and Tajikistan) of
six members of the Eurasian integration groupings (all except for Armenia and Belarus)
are in the SCO whereas four of six SCO members (all except for China and Uzbekistan
7
) participate in the CSTO and the EAEU.
The objective of establishing political multipolarity in international relations as a
guarantee to maintain their authoritarian political systems is a common denominator
uniting all SCO members (and in particular, China and Russia) on the international
scene. According to Ziegler,
BThe SCO states emphasized the importance of preserving sovereignty, in an era
when US unilateralism had demonstrated a tendency to intervene in the internal affairs
of other countries, most blatantly with the bombing of Serbia in 1999. Serbia was
followed by the Georgian, Ukrainian, and Kyrgyz Bcolour revolutions^ and the
May 2005 uprising in Andijon, Uzbekistan, all of which [along with the US invasions
of Afghanistan in 2001 and Iraq in 2003] the SCO members viewed as inspired and
supported by the US^ (Ziegler 2013, 493–4).
In fact, China and Russia found themselves increasingly united in their joint quest to
confine the virtually unipolar predominance of the USA in the post-Cold War era and
their common opposition to the US foreign policy agenda. From Moscow’s perspec-
tive, Washington’s decision to keep, even in the face of Soviet collapse, the North
Atlantic Treaty (NATO) alive, and worse still to significantly expand it by inviting
former Warsaw Pact states (including former republics of the USSR), aimed at ulti-
mately containing Russia. At the same time, in Beijing’s view, a series of US initiatives
in the Asian Pacific region (and in particular strengthening US-Taiwanese relationship)
sought to circumvent and restrain China, thus constituting another component (along
with NATO enlargement) of Washington’s overarching strategy to maintain global
dominance. Consequently, in September 1994, Russia and China established a
Bconstructive partnership^ and, in April 1996, the two states moved their relationship
to yet a higher level by establishing a Bstrategic partnership^, which laid the foundation
for the elaboration of the Shanghai Spirit, the formation of the BShanghai Five^, and
subsequently, the establishment of the SCO.

7
Following the Andijon events of May 2005 and deterioration of relations with the EU and the USA,
Uzbekistan joined the Eurasian alliance by obtaining membership in both EurAsEC in January 2006 and the
CSTO in June 2006. However, due to the gradual improvement of relations with the West and most
importantly deepening integration processes in Eurasia (in particular, the creation of a Collective Rapid
Reaction Force within the CSTO in 2009 and the establishment of a customs union in the framework of the
EurAsEC in 2010), Uzbekistan decided to suspend its membership in EurAsEC in November 2008 and in the
CSTO in June 2012. Yet Uzbekistan remains fully committed to its membership in the SCO, an organization
that serves as a forum for dialogue and cooperation but does not pursue deep integration projects.
 Z. Kembayev

Advocating the concept of a multipolar world and positioning itself as an alternative

authority within the international system, the SCO has become an increasingly impor-
tant global actor with tremendous geopolitical potential generating interest in its
associate or even full membership in a number of countries. 8, 9 Accordingly, the
SCO includes currently six observer states (Afghanistan, Belarus, India, Iran,
Mongolia and Pakistan) and six dialogue partners (Azerbaijan, Armenia, Cambodia,
Nepal, Turkey and Sri Lanka). Moreover, the SCO has considered the candidacies Iran,
India and Pakistan as potential members.10 The admission of Iran has until recent times
been hampered by international sanctions imposed over its nuclear program, but at
present, it is assumed that Iran may possibly obtain the SCO membership in near future.
The accession of India and Pakistan was hindered by various regional security issues
between those countries as well as between India and China. Also, there was significant
distrust that in particular India’s participation could deter using the SCO to maintain an
authoritarian status quo. Yet, since joining the SCO as an observer in 2005, the world’s
most populous democracy has been consistently articulating its desire to play a more
meaningful and constructive role in the SCO, as New Delhi seeks to expand its role in
regional and global affairs, and in particular in Eurasia (Roy 2012, 648). At the same
time, Moscow and Central Asian have always been interested in creating a Bstrategic
triangle^ among China, India and Russia not only to counter Washington’s influence in
international relations but also to balance the growing Chinese power within the
alliance. Thus, during the double BRICS 11-SCO summit hosted by Russia on 9–10
July 2015, it was announced that the SCO would start the accession procedure for two
new members, India and Pakistan. At the most recent Tashkent summit, on 24
June 2016, the two countries signed their respective accession memorandums and are
expected to join the SCO as full-fledged members by July 2017. These developments
evidently show that SCO members are able to strike compromises for the sake of
promoting the Shanghai Spirit in the global scale and achieving their strategic objec-
tives including the implementation of the SREB Initiative.
The values that underpin the SCO, and fully shared by the Eurasian alliance, are
considered Ba major factor guiding the progression of the organisation^ (Aris 2011, 39).
Indeed, SCO members steadfastly emphasize their devotion to the Shanghai Spirit, as it
helps them to jointly pursue strategies of asserting their regime security and legitimacy
by promoting their values through safeguarding regional security and facilitating
economic cooperation.

8
In fact, the SCO may grant states or international organisations concerned the status of an observer or a
dialogue partner and may be joined by new members upon the decision of the Council of Heads of State based
on a recommendation of the Council of Ministers of Foreign Affairs, provided new members will respect and
comply with the provisions of the SCO treaties and instruments. See SCO Charter, Article 14.
9
Ibid., Article 13.
10
In 2013–2014, the possibility of obtaining full membership was also expressed by Turkey but rather as a
diplomatic gesture indicating Turkish frustration with the stalled negotiations on EU accession. However,
Turkish membership in the SCO is hardly possible in view of the Turkish participation in NATO.
11
BRICS (an association of major emerging national economies: Brazil, Russia, India, China and, since 2010,
South Africa) has held annual summits since 2009, with members taking turns to host. The grouping’s first
summit, held in Yekaterinburg (Russia), also coincided with the SCO top-level meeting.
Implementing the Silk Road Economic Belt: from the Shanghai...

Safeguarding regional security

Maintaining border and regional security is the starting point of the SCO, as China and
post-Soviet countries have a common border stretching over 7300 km and are vitally
interested in constructing a sound neighbourly environment. For that purpose, SCO
members decided (a) to transform their borders to Bfrontiers of eternal peace and
friendship^ 12 and (b) jointly struggle against terrorism, separatism and extremism
(called Bthree evils^).13
With respect to the first purpose, it is noteworthy that the SCO, unlike the CSTO, is
not a collective security system and does not provide hard security. Nevertheless, it is a
political alliance based on the principle of mutual assistance. Thus, any SCO member,
in case of a situation threatening its security, may hold consultations with other
members to provide an adequate response to the situation emerged. Also, SCO
members pledged themselves not to participate in coalitions or organisations directed
against other members, not to support any actions hostile to other members and to
prevent any Billegitimate acts^ directed against SCO interests. 14 As pointed out by
Facon, BThe SCO may not be destined to become an Eastern NATO… However, one
cannot deny that… [it is] a demonstration of force aimed at showing the West who is in
control and in charge of the region^ (Facon 2013, 465).
As to the second purpose, the Bthree evils^ are closely related to the expansion of
Islamic fundamentalism and are considered major threats to the national security and
public stability in all SCO members. At the same time, however, the SCO’s legal
instruments provide a very broad interpretation of Bthree evils^, giving their signatories
a wide leeway to suppress extremists and political opponents alike. As noted by Aris,
Bat the heart of the SCO definitions of the proclaimed Bthree evil^ forces are consid-
erations of regime security^, as those definitions offer Bsignificant scope for its member
states’ leaderships to act pre-emptively to nullify any threat to [them]… and to act with
force to defend their position against any opposition that can be defined as representing
a violent challenge to their authority^ (Aris 2009, 467).
In pursuing its purposes the SCO closely cooperates with the CSTO, an organisation
that may seem to be in conflict with the SCO due to its clashing security mandate. Even
though the SCO is certainly an instrument for increasing Chinese influence in the
region that the Kremlin traditionally considers its backyard, on 5 October 2007, the
SCO and the CSTO concluded a Memorandum of Understanding agreeing to cooperate
Bwithin the limits of their [respective] competence^ in the fields of regional and global
security, the struggle against terrorism, drugs and arms trafficking, transnational orga-
nized crime as well as other areas.15 The conclusion of the Memorandum demonstrates
China’s willingness to recognize the Eurasian alliance and thus Moscow’s primary

12
Treaty on Long-Term Good-Neighbourliness, Friendship and Cooperation Between the Member States of
the SCO of 16 August 2007, Article 5. http://www.hrichina.org/sites/default/files/PDFs/Reports/SCO/2011-
HRIC-SCO-Whitepaper-AppendixA-SCO-Docs.pdf. Accessed 15 April 2017
13
Shanghai Convention on Combating Terrorism, Separatism and Extremism of 15 June 2001 and the SCO
Counter-Terrorism Convention of 16 June 2009
14
See SCO Charter, Articles 2, 4 and 6.
15
See the text of the Memorandum in Russian at http://rus.sectsco.org/documents/?page=2. Accessed 15
April 2017.
 Z. Kembayev

position in Central Asia and at the same time Russia’s consent to recalibrate its role in
the region to accommodate the growing influence of China.
In fact, the SCO and the CSTO share a number of areas of common interest. Along
with combating terrorism and Islamic fundamentalism, of particular note is their strong
opposition to democracy enforcement campaigns in the mould of Iraq and Libya and
suppression of civil resistance and internal Bcolour^ revolutions.16 It is very indicative
that after a series of successful and attempted government overthrows in post-Soviet
countries, CSTO created a Peacekeeping Force in 2007 and a Collective Rapid
Reaction Force (CRRF) in 2009. Theoretically, the former is intended to enforce peace
and security and may be deployed upon a UN mandate anywhere in the world while the
second purports to repulse military aggression, to conduct anti-terrorist operations, and
even to neutralize the effects of natural disasters. Yet primarily, they aim at establishing
CSTO’s Bpeacekeeping^ monopoly in the territory of its members and preventing any
forcible change of political regime (Kembayev 2016, 172–173).17
Another major reason underlying a good relationship between the SCO and the
CSTO is certainly that China wants to ensure the stability of the country’s vulnerable
western frontier, Xinjiang. Of particular note is also that the Chinese leadership
considers Bcolour revolutions^ as products of external interference designed to weaken
or even to topple the political regimes in the respective countries (Shambaugh 2008,
87–92) and has demonstrated increasing worries about Western attempts to undermine
its own legitimacy and the possibility of those revolutions being exported from the ex-
Soviet sphere to China itself (Lanteigne 2010, 172).
Of particular note is also that the SCO and the CSTO share their negative attitude to
the NATO. In fact, emphasizing Bpolitical stability^ and Bnon-interference into domes-
tic affairs^, both the SCO and the CSTO attempt to exclude Western influence from the
region and, as such, they both present a challenge to the US-led security model. For
their part, the NATO and other Western organisations view both the SCO and the
CSTO primarily as groupings helping to maintain authoritarian regimes and achieve
their security by sacrificing human rights values. Therefore, Western organisations have
approached their relations with SCO and CSTO countries solely on bilateral terms and
never treated them as members of a bloc with the purpose to weaken their groupings
Bby steering each target country’s foreign and military policies in the direction of
individual arrangements reached with Washington^ (Chung 2008, 761).
The Ukrainian crisis made the relations between the West and the SCO (the same as
with the CSTO) even more distrustful. At the same time, it led to more intense
cooperation between two major SCO members, Russia and China. Even though China
did not openly support Russia, it also did not join or impose any sanctions against

16
It is also noteworthy that the SCO members agreed in recent years to boost interaction in the field of
information security and to build a Bsecure information environment^ with the alleged purpose of fighting
extremist ideology and terrorist propaganda.
17
It is noteworthy that during the events in Kyrgyzstan in 2010 (a coup d’état against President Bakiev in
April and the eruption of ethnic violence between the Kyrgyz majority and the Uzbek minority in June), there
were calls, in particular from Belarusian President Lukashenko, to deploy the CRRF to support Bakiev. But
Russia and other CSTO member states were reluctant to use the CRRF, not least because those who seized
political power in Kyrgyzstan were even more pro-Russian than those who were deposed. At the SCO summit,
in June 2010, the parties expressed only their hope for Ba speedy stabilization of the political situation in
Kyrgyzstan^. See Declaration of the 10th Meeting of the SCO Council of Heads of States of 10–11 June 2010.
http://rus.sectsco.org/documents. Accessed 15 April 2017.
Implementing the Silk Road Economic Belt: from the Shanghai...

Moscow. Furthermore, China was ready to engage in even more intensive political and
economic cooperation with Russia for a number of reasons: first, China’s vision of
multipolar world is unthinkable without Banti-Western^ Russia; second, the conflict in
Ukraine distracts the US paying now less attention to Chinese moves in Asia-Pacific;
and third, under the Western sanctions, Russia would have no choice than being more
accommodating to China, even if Moscow’s dependency on Beijing will grow and
Russia may turn into China’s junior partner. Yet the Kremlin certainly wants to prevent
the last scenario. It has apparently achieved a success with establishing a Bstrategic
triangle^ among China, India and Russia and will support the accession of other
potential candidates, in particular Iran.
As obvious, safeguarding regional security within the SCO is inseparably connected
with protecting authoritarian values underlying the SCO members both from internal
and external threats. This most fundamental function of the SCO serves as a solid
foundation uniting China and members of the Eurasian alliance.

Facilitating economic cooperation

Along with ensuring regional peace and security, the SCO aspires for the creation of a
Bregion of prosperity and harmony^ by facilitating Bdeep and dynamic^ multilateral
economic cooperation. 18 From the very beginning of its existence, the SCO aims at
facilitating Bcomprehensive and balanced^ economic growth in the region by (a)
improving transportation and communication infrastructure, transit capabilities and
energy systems; (b) fostering favourable environment for trade and investments; and
subsequently (c) gradually achieving free flow of goods, capital, services and technol-
ogies.19 As these objectives are fully in line with the SREB, it is hardly surprising that
the Chinese leader placed a significant part of his expectations with the respect to the
implementation of his initiative on the SCO.
China has been the driving force promoting economic cooperation within the SCO
and actively pushed economic issues to the forefront of the SCO agenda. Beijing has
initiated, inter alia, the establishment of an Interbank Consortium in October 2005,
consisting of development banks of SCO members and coordinating their activities, as
well as a Business Council in June 2006, a non-governmental body bringing together
business communities of SCO members with the aim of boosting economic coopera-
tion. Yet, of particular note is that China uses the SCO as a useful platform for
advancing bilateral cooperation with its members. While the SCO regulatory frame-
work provides common values and major principles, all detailed provisions of eco-
nomic cooperation are governed by respective bilateral instruments. Accordingly, the
SCO is similar to a hub (Beijing) and spokes (other members) arrangement, which
allows China to take a flexible approach with respect to both individual Eurasian
countries and their integration grouping for the purpose of implementing specific
projects.

18
See e.g. Declaration of the Heads of State of the Member States of the SCO on Building a Region of Lasting
Peace and Common Prosperity.
19
See SCO Charter, Article 1.
 Z. Kembayev

Of particular importance among those projects have been those related to construction of
oil and gas pipelines from Central Asia and Russia to China. Beijing’s anxiety to pursue
pipeline projects has been determined not only by economic but also by geopolitical
considerations as China is very much interested in developing a steady and secure external
energy supply that cannot be subject to any maritime blockade imposed by Western politics.
As a result, the Kazakhstan-China oil pipeline running from Kazakhstan’s Caspian shore to
Xinjiang in China (2228 km) was put into operation in 2006, followed by the Central Asia-
China gas pipeline from Turkmenistan through Uzbekistan and Kazakhstan to China
(1833 km) in 2009. Yet it is noteworthy that Beijing does not attempt to monopolize the
energy sector in Central Asia. Instead, a peculiar division of influence has emerged between
China, Russia and the Central Asian states, with Russia retaining significant influence over
energy resources in the region. At the same time, however, China’s expansion destroyed
EU’s plans to build pipelines from Turkmenistan via the Caspian Sea to Europe. Thus,
unintentional Chinese support for Russian strategic goal to keep the EU out of Central Asia
made it easier for Moscow to accept the loss of its privileged position and adapt to Beijing’s
advancements (Kaczmarski 2015, 93). As to recent events, in May 2014, Russia and China
concluded a $400 billion deal paving the way for the supply of Russian gas to China via the
BPower of Siberia^ pipeline in the time when Moscow urgently needs help to sustain the
confrontation with the USA and the EU and considers energy partnership with China as an
antidote to Western sanctions. These developments again evidently manifest that the
economic cooperation within the SCO is closely related with (geo-)political interests of its
members, which support each other on the international scene.
As a result, China has become a leading trading partner of Russia and all Central
Asian countries (second only to the EU as a whole in the case of Russia and Kazakhstan)
and it continues to use the SCO framework to further boost regional economic cooper-
ation. Thus, in June 2009, in the aftermath of the global financial crisis, China allocated
a $10 billion loan to SCO members to support economic stability and to complete the
existing common infrastructural projects (Xinhua 2009). In June 2012, China provided
another $10 billion loan under SCO auspices for the purpose of supporting economic
cooperation projects within the SCO (Sputnik 2012). In November 2014, China set up a
Silk Road Fund with $40 billion to support infrastructure investments in countries
involved in the SREB and the Twenty-First Century Maritime Silk Road initiative,
known collectively as BOne Belt and One Road^ initiative. Furthermore, in October
2014, China established the AIIB with all SCO members becoming founding members
and with the authorized capital of $100 billion (in operation since January 2016) to
improve trade relationships and boost foreign investment along the Silk Road.
Although a substantial progress has been achieved in building transportation net-
works and promoting trade and investment, Aris notes that Bthe economic element of
the SCO is lagging far behind the security element in terms of practical
implementation^ (Aris 2011, 31). In fact, as clearly seen from the above-mentioned
SCO economic objectives, the organisation’s ultimate purpose is Bmaximizing the
efficiency of the use of regional resources^ by gradual realization of a free-trade area
by 2020.20

20
See Program of Multilateral Economic and Trade Cooperation between SCO Member States of 23
September 2003. The text in Russian is available at http://www.sco-ec.gov.cn/crweb/scor/info/Article.jsp?a_
no=721&col_no=67. Accessed 15 April 2017
Implementing the Silk Road Economic Belt: from the Shanghai...

Achieving this purpose, however, met with substantial difficulties, as the relation-
ship between SCO members is characterized not only by mutual interest but also by a
growing rivalry among its members, in particular between China and Russia. Russia
fears the political repercussions of China’s growing economic weight, and its formal
projections of cooperation can hardly hide its concerns about China’s growing regional
influence. While the Russian and Chinese economies were roughly the same size in
early 1990s, in 2014, China’s economy was 5.5 times larger than Russia’s economy
(World Bank 2016). The rapidity of China’s economic growth and the growing power
imbalance between the two states raise serious concerns for Russia. Therefore, as put
by Song, it is not surprising that BRussia treats the SCO as more of a regime of dialog
between the leaders of the member states rather than an executive body with practical
power^ (Song 2014, 93).
Having already displaced Russia as the main trading partner of Central
Asian countries, China will obviously continue increasing its economic and
political power in Central Asia mostly at Russia’s expense, in particular
through the SREB initiative, which may be considered as an attempt to drive
Russia out of this resource-rich region. Accordingly, while tolerating and in
certain cases welcoming large-scale, state-controlled infrastructural and ener-
gy projects, Moscow has been until recently very sceptical about the China-
driven free-trade agenda and thus the complete removal of trade barriers,
considering it a distant objective and putting it off for the indefinite future.
As put by Facon,

BMoscow is well aware that it does not have the financial muscle and political
energy to completely resist Beijing’s deepening influence… Many elements in
Russia’s policy toward the SCO show that the Kremlin is eager to make sure that
this organisation is not going to advance Chinese interests in Central Asia in a
disproportionate way. [Therefore], Russia has been resisting China’s effort to
strengthen the economic dimension of the SCO, which would obviously be to
Beijing’s advantage… [and] rejecting China’s proposal to create a free-trade area
on the basis of the SCO^ (Facon 2013, 470-2).

The Kremlin’s concerns that launching a free-trade area within the SCO would
necessarily lead to Chinese domination have been fully shared by the Central Asian
states, which Blike Russians, or perhaps even more, are afraid of the growing Chinese
economic strength... and have therefore opposed the Chinese wish for free trade^
(Oldberg 2007, 35). Also, despite the commitment of the Central Asian states to
multivector foreign policy, some vectors have obviously a greater importance than
others. In the view of China’s rapidly increasing regional and global outreach, in
particular Kazakhstan, Kyrgyzstan and Tajikistan in particular consider maintaining
and even strengthening traditional links with Russia as a main priority, which helped
Russia to retain its leading position in the region and significantly contributed to
facilitating regional integration processes in the post-Soviet area not only in the realm
of security but also in the economic field by establishing the EurAsEC in October 2000
and subsequently the EAEU in May 2014. As noted by Azizian and Bainazarova: Bthe
Eurasian Union could be the first step... [towards developing] coherent long-term China
strategies and policies^ [by Eurasian countries] enabling them Bto coordinate their
 Z. Kembayev

efforts vis-à-vis their powerful neighbour^ and Bto be reactive rather than proactive^ in
mutual relations (Azizian and Bainazarova 2012, 395–6).
Under these circumstances, the same as with respect to the CSTO, China showed its
political willingness to recognize the Eurasian integration grouping and to deal not only
with individual Eurasian countries on bilateral basis but also with their alliance. This is
clearly evidenced by the conclusion of a Memorandum of Understanding between the
SCO and the EurAsEC on 8 May 2006, which laid the foundation for cooperation
between the two organisations and coordination of their activities in the areas of mutual
interest, especially in the fields of trade, energy, the development of Eurasian transport
corridors, information and communications, tourism, and protection of investment.21 Of
particular note is also Xi’s speech in Astana in September 2013, which called the
member states of the Eurasian integration grouping for intensifying the economic
cooperation with the SCO and giving Bgreen light^ to regional economic integration
along the Silk Road Bin the spirit of seeking common ground while reserving
differences^ (Xi 2013).
The appeal of the Chinese leader to connect the SREB with the today’s EAEU found
a positive reaction in Eurasian countries, which concluded that potential benefits of
linking the EAEU to the new Silk Road project outweigh possible risks. Another major
factor significantly contributing to welcoming the Chinese initiative was certainly that
Russia, confronted with the sanctions from the West, is currently more inclined to
acknowledge China’s new role in Eurasia. As a result, on 8 May 2015, the leaders of
the EAEU countries and China signed a joint declaration on cooperation in coordinat-
ing the development of the EAEU and the SREB. In doing so, they declared a goal of
synchronizing the two projects in order to build a Bcommon economic space^ in
Eurasia, which would possibly include a free-trade agreement between the EAEU
and China. The commitment to achieving this goal was reiterated during the SCO
summit in July 2015, which is to be considered as a major breakthrough in the SCO’s
development and which is most likely a part of a much broader compromise involving
also the significant expansion of the SCO membership.

Conclusion

Despite competition between China and Russia and suspicion of the Central Asian
countries of the Chinese domination, there is a powerful common denominator uniting
all SCO members, i.e. their commitment to a set of common values, called the
Shanghai Spirit. Emphasizing inviolability of the state sovereignty, non-interference
in the domestic affairs of the members, the Shanghai Spirit brings together both China
and Eurasian countries in addressing regional security issues, which lays down a solid
foundation for the cooperation between the SCO and the CSTO with the purpose of
securing stability of the existing authoritarian political regimes. Along with its major
mission, upholding security, the SCO gradually develops itself into a multilateral
medium for the implementation of numerous economic projects. The major driving
force of this transformation has been China, the world’s largest economy by purchasing

21
See the text of the Memorandum in Russian at http://base.consultant.ru/cons/cgi/online.cgi?req=doc;base=
INT;n=51522. Accessed 15 April 2017
Implementing the Silk Road Economic Belt: from the Shanghai...

power parity, which steadily attempts to increase its global outreach. Endeavouring to
enhance its role in the region and beyond, China desires to revive the ancient Silk Road
and calls for establishing close relationship between the SCO and the EAEU for the
purpose of implementing the SREB initiative.
Understanding that this ambition raises concerns of Eurasian countries about the
Chinese hegemony, Beijing agreed to substantial expansion of the SCO membership
with the purpose of bringing in more balance between its members and promoting
mutual trust. For their part, Russia and Central Asian countries welcome establishing a
meaningful partnership between the SCO and the Eurasian alliance in order to avoid a
potential clash between these two integration projects and to make them complemen-
tary and mutually reinforcing in connecting the Asian and European markets.
As relations between the SCO and the CSTO/EAEU are formalized merely by respective
memoranda of understanding, it may seem that there is not much interest in cooperation
between them. Yet due to its authoritarian nature, the SCO operates on the basis of broadly
formulated values principles rather than detailed regulatory framework. Moreover, the SCO
summits constitute de facto simultaneously the meetings of the highest bodies of the
Eurasian alliance with participation of China. The same applies to all other SCO bodies at
the level of prime-ministers, ministers and other responsible officials. Accordingly, the
institutional relations between the SCO and the Eurasian alliance exhibit Ba regularised
pattern of intense interactions between senior officials^ (Gatev and Diesen 2016, 142).
Tracing its roots to BOne plus Four Formula^, the SCO largely remains a BChina
plus Eurasian countries^ forum for promoting mutual understanding and cooperation.
However, the rapprochement between the SCO and the Eurasian alliance (the same as
between China and Russia) is an open-ended process and it is not yet clear how far it
will be carried forward with respect to the SREB implementation. Indeed, BBeijing is
not known for prioritizing friendship as a factor in its economic decision-making…
[while] the Kremlin has conceived of its pivot to Asia as a means of playing the China
card when its primary target audience is the West^ (Wilson 2016, 127–128). Yet China-
Russia relationship is primarily rooted in a largely consensual view of the political
dynamics of the international system. Accordingly, the ongoing deterioration of the
Russia-West relations and the looming US-China confrontation may give an impetus to
deepening partnership between the SCO and the Eurasian alliance and thus
transforming the SCO from primarily security-oriented coalition to an organisation
promoting also deep and comprehensive economic cooperation between its members
(or, in other words, a Silk Road Union).
Dating back more than two millennia, the ancient Silk Road was an intercontinental web
of trade routes that enabled the interaction of the East and the West. However, whether the
SREB will achieve the same importance is uncertain, as the emerging Silk Road Union (due
to its authoritarian nature) is manifestly different from the Western security and economic
cooperation/integration models and poses a challenging alternative to them.

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