Widening Inequality Between Russia and China on Display at SCO Summit

The Shanghai Cooperation Organization (SCO)’s summit in Astana last month was significant. It was a continuation of Russian President Vladimir Putin’s diplomatic excursions amid the ongoing war in Ukraine. Putin enjoyed a sideline bilateral meeting with Chinese President Xi Jinping in which they jointly praised the Sino-Russian partnership and promised greater collaboration.

But there should be no confusion. Russia is increasingly a junior partner, and the Astana Summit speaks to China’s gradual overtaking of Russia in the SCO region. The summit in Astana has implications for the future of Russia’s place in the region, China’s attempts to secure its vision for the world, and the shifting balancing of their limitless partnership.

The SCO was formed in June of 2001 and prioritizes security, consensus-building among members, and economic cooperation. The most significant of the SCO’s outputs at that time was the security-focused Regional Anti-Terrorist Structure (RATS). RATS is archetypal of how the SCO functions, forming quite loose partnerships and agreements on a limited number of consensual priorities. In Central Asia in 2001, this was mostly focused on combatting global terrorism. Since then, the SCO has expanded. Belarus is the latest new member. Iran joined in 2023 and India and Pakistan joined in 2017. With the growing membership, the priorities and turbulence within the SCO have also grown.

Central to the SCO is the “Shanghai Spirit,” which is a moniker for the guiding ethos of the organization. It is also tied to China’s global ambitions. In a speech entitled “Carry Forward the Shanghai Spirit; Build a Community of Shared Future,” at the 18th meeting of the Council of Heads of Member States of the Shanghai Cooperation Organization in 2018, Chinese leader Xi Jinping said that the Shanghai Spirit was based on “mutual trust, mutual benefit, equality, consultation, respect for diversity of civilizations, and pursuit of common development. The Shanghai Spirit, transcending outdated concepts such as the clash of civilizations, Cold War thinking, and zero-sum mentality, has turned a new page in the history of international relations and is winning increasing support from the international community.”

In 2022 and 2023, communications from the Samarkand and New Delhi summits continued to articulate the Shanghai Spirit in the same way. In those summits’ declarations, the Shanghai Spirit was meant to represent a “new type of international relations.” 

If you read what the SCO says about the world, they see the Shanghai Spirit as speaking to the current reality of the international order. In the New Delhi Declaration of 2023, the signatories reaffirmed their view that “the world is undergoing unprecedented transformations, stronger multipolarity, increased interconnectedness, interdependence and an accelerated pace of digitization.” These same notions were repeated in Astana.

For the SCO, and the Sino-Russian partnership, multipolarity is a good thing, and their hands-off, consensual approach means that states can focus on what matters: getting rich and being safe. The international order that the United States represents is unfair, hegemonic, and interested in making states share the same political values. If you read how Chinese ideologues speak about the world, multipolarity is the natural order of things; it is more democratic as it allows states to agree, rather than be told.

However, the SCO is not an institution of absolute equality. Of the original founding “Shanghai Five,” China and Russia have done most of the heavy lifting, China especially. The Interbank Consortium (IBC), for example, is one of several so-called “non-governmental organizations” attached to the SCO. The role of the IBC is the joint funding of development projects in SCO members. The IBC has representative banks from most member states, such as Russia’s VEB.RF, or India’s Infrastructure Finance Company, but it is the Chinese Development Bank (CDB) that dominates, offering a vast majority of its preferential loans. This is all done to service China’s global ambitions, like the Belt and Road Initiative (BRI).

In 2018, Xi announced that China would set up a 30 billion yuan special lending facility within the IBC to help build infrastructure that would inevitably serve the BRI. Before this, the CDB was already loaning billions of dollars to SCO members through the IBC. This is despite billions of dollars in outstanding loans from previous payments. This just made states in the region more reliant on China.

While one unit in the Central Committee wrote in the CCP’s ideological journal, Qiushi, the “endless source of energy to drive common development” stems from states cooperating and safeguarding security, it is impossible to say that China is taking a step away from its dominance of the region. In fact, because of Russia’s war in Ukraine, its dominance has grown.

Russia and China do have a close partnership, but it is unwise to believe it is truly limitless. Indeed, the SCO is a site of the two’s subdued spats over Central Asia more widely. Russia backed India’s membership in the SCO despite a lack of enthusiasm from China. This strategically balanced the dominance of China, politically and economically. Russian support for India’s membership had to be balanced with Pakistan’s inclusion, which was supported by China. Subsequently, India has resisted and openly protested the BRI’s lack of transparency. China has not, unsurprisingly, treated India equally.

The China-Pakistan Economic Corridor (CPEC) falls under one of numerous bilateral economic initiatives within the BRI. It is focused on energy transfer and storage, with an added soft power from the huge flow of investment. CPEC has flared Sino-Indian tensions because the building plans run through Pakistan-administered Kashmir, a contested territory with India. Similarly, India backed Russia’s Eurasian Economic Union (EAEU) over that of the BRI, while Russia suggested China buy into the Russian-dominated Eurasian Development Bank, due to its skepticism about China’s dominance of the IBC.

Because of Russia’s invasion of Ukraine, however, the SCO region is more important to Russia than ever. Yet Russia is now more reliant on China than ever. Russia needs China to legitimize (or at least not criticize) its illegal war, and to allow Russia access to its markets amid international sanctions. As reported in The Financial Times, China's trade with Russia has more than doubled since 2020, from $108 billion to $240 billion. Natural resources are imported by China from Russia, and critically in return, China has exported machinery and key equipment, some of which can, incidentally, be used in weapons fabrication.

Russia’s dominance in Central Asia and the SCO has not collapsed, but China’s prominence has grown. As Luca Anceschi, a professor of Eurasian Studies at the University of Glasgow has written, host Kazakhstan and fellow SCO member Uzbekistan have put themselves at arm’s length from Russia, turning toward China on the back of their concerns about Russia’s aggressive foreign policy.

However, Russia is not without friends in Central Asia. The European Bank for Reconstruction and Development (EBRD) reported that while, because of sanctions, exports from the West into parts of Central Asia have increased, so too have SCO member states’ exports into Russia, including the exporting of sanctioned goods. Kyrgyzstani exports to Russia might have dipped at the beginning of the invasion in February 2022, but since then, they have nearly tripled. Capital flows from Russia have increased in turn.

On balance, the SCO and its members increasingly hold sway over Russia. The summit in Astana was an opportunity to observe Russian statecraft at a time of desperation.

China is taking the lead in what used to be Russia’s backyard, shifting the balance of power in the region in its favor. According to official reports from Uzbekistan and Kazakhstan, China makes up 21.3 percent of their total foreign trade (Russia lagged consistently). It is now the main trading partner of all five Central Asian states, four of which are SCO members (Turkmenistan abides by a policy of “positive” neutrality and has never joined). China also enjoys a greater deal of gravitas because of Russia’s war. Unlike Putin, Xi can travel without the risk of arrest on an International Criminal Court (ICC) warrant, and because of Russia’s dependency on China, China is able to further its image as a peacemaker, a “responsible great power,” and a diplomatic link between the West and Russia. This is all at the expense of Russia’s continued isolation.

China gains by Russia being cowed and Russia is acutely aware of all of this. However, Putin’s attempts to court North Korean dictator Kim Jong Un risk aggravating Beijing. As Oriana Skylar Mastro wrote in Foreign Affairs, Russia’s seeking military support from North Korea, which considers China its closest and most imperative ally, undermines China’s authority over the peninsula. It also strikes against China’s official position on the war in Ukraine, where it insists that it will not arm Russia. Putin’s recent visit has hinted at the Kremlin’s unease at the subsequent expansion of China’s orbit in Central Asia and the SCO. Russia, unwilling to play second fiddle to an extent that might impact its ability to win the war, might seek to undermine China’s growing authority.

China wants a multipolar order on its terms – the SCO region is an insight into the limits of its vision, and the specter of a displaced Russia. China’s global project revolves around a continuous and unperturbed economic integration. With sanctions and moral condemnation, Russia’s isolation feeds directly into China’s vision for a secure rise, spreading outwards from its own borders. Russia’s decline economically and its increased reliance on China makes the SCO increasingly hospitable to China’s rise.

While Putin grumbles, he plays a risky game if he thinks he can work against Xi’s interests, even slightly. Whilst the SCO’s summit in Astana was excruciatingly routine, it is becoming even more important for China’s authority in the region, and its relationship with Russia. After the concert hall attack in Moscow, combatting regional terrorist networks and security remained prominent on the agenda. As for Ukraine, Russia thanked China for its peace-building efforts, but generally, Ukraine was not a hot topic for the summit. Putin and Xi’s sideline diplomatic talk doubled down on the basics, economic cooperation and security coordination – the SCO’s bread and butter. But this disguises an inequality that is widening between China and Russia in Eurasia.