SCO meeting - Securing Central Asian oil for China

June 24, 2006

The Shanghai Cooperation Organization held its 5th annual meeting on June 15, 2006. The SCO was created by China in 2001 to increase free trade, and reduce the threat of terrorism, and drug trafficking along its borders, with Kazakhstan, Kyrgyzstan, Tajikistan, Uzbekistan, and Russia. SCO members have a total population of 1.5 billion, 1/4 of the world's total, and have 11% of the world’s proven oil reserves. India, Mongolia and Pakistan are observer countries, and Iran attended for the first time.

Here are the highlights from this year’s meeting:

• President Mahmoud Ahmadinejad of Iran spoke to the group about its right to develop nuclear power, mainly addressing China and Russia, who are on the UN Security Council. Iran is China’s third largest supplier of oil, and is negotiating other long term oil development investments. He also offered Tehran as host of next year’s meeting. The President also met off-line with the presidents of Russia, China, Pakistan, Uzbekistan, Kazakhstan and Tajikistan on the nuclear disarmament issue, and a variety of bilateral trade issues, including a gas pipeline through Pakistan to India, and the Sinopec investment in the Garmsar oil and gas fields.
• Ten trade agreements between member nations were signed, covering projects worth over $2 billion.
• For the first time, representatives of these countries established the Entrepreneurs Committee, to promote economic cooperation of enterprises within these countries.
• They agreed to formulate a Business Council at their next meeting.
• They made a formal statement that the United Nations, being the most authoritative international organization, is entrusted with primary responsibility in international affairs and law. The next Secretary-General of the United Nations should come from Asia.

What It Means:
As an alliance, these neighboring countries are forming a powerful bloc based on mutual advantage in trade and security. Reading between the lines, they are fairly unified against the U.S. intervention in the Middle East, if only because it could pose a threat to the uninterrupted flow of oil to China. It is another way that China is building a stable economic base that will advance its continued growth.

Action Steps:
Stay invested in emerging market mutual funds, despite the recent nasty correction. China is taking the right steps to maintain its economic growth over the next 10 - 30 years.

Source: SCO web site, Islamic Republic News Agency,