The global struggle for geopolitical domination never really stops, but it certainly has its periods of storm and calm. Historically, the storm never seems to develop quite where people are focused. Right now all eyes are turned towards a potential US confrontation with Iran—and as a result, virtually no one is watching the recent moves made by the Shanghai Cooperation Organization (SCO).
Founded (out of the Shanghai Five Mechanism) in 2001 between China, Russia, Kazakhstan, Kyrgyzstan, Tajikistan, and Uzbekistan, the organization’s stated goal was to facilitate “cooperation in political affairs, economy and trade, scientific-technical, cultural, and educational spheres as well as in energy, transportation, tourism, and environment protection fields.” Recently, however, the SCO is beginning to look more like a modern-day Warsaw Pact, an energy-financial bloc in central Asia consciously constructed to serve as an anti-pole to US hegemony.
While no such intention is explicitly stated by the group, recent actions speak for themselves. So far in 2006, the SCO has extended de-facto offers of membership to India, Mongolia, Pakistan, and most importantly to Iran (who will officially be invited to become a full member at the SCO June 15th meeting). Beyond their expansion, the SCO member states are also taking steps to separate themselves from US-petrodollar imperialism: Russia has announced that it will open a Ruble-denominated oil and gas bourse in late 2006; China recently announced the intention to move its reserves away from the dollar and that it will use $40 billion in US dollars to purchase gold reserves; Russia’s state-owned, Vladimir Putin-controlled natural gas transport monopoly Transneft has further consolidated its pipeline control to become the sole exporter of Russian natural gas (by far the largest reserves in the world). With Iran, the SCO will control the vast majority of the world's natural gas reserves, as well as a significant portion of its oil reserves, not to mention potential control of the Strait of Hormuz.
These moves are significant because they amount to an act of energy encirclement. Central Asia, the greatest remaining promised land for oil and gas development, is completely enveloped within the SCO, limiting hydrocarbon access to non-SCO nations. China ensures the supply of energy that it will need to continue its amazing economic growth. Alternative supply sources of oil and gas to Europe now run exclusively through SCO-controlled export pipelines, allowing for a new OPEC-style cartel to bleed Europe at the optimal rate. And the ability to force the West to purchase energy in something other than dollars (to a greater extent than is currently the case) will help balance China’s export-driven surplus of foreign currency—at least until the rise of a consuming middle-class in India and China can become a self-sustaining market for their own economic production.
To the extent that this maneuvering is a move to encircle the energy supplies of central Asia, and to form an effective energy-cartel, the combined pincer maneuver is decidedly pointed at the trans-Caucus region: Georgia and Azerbaijan. With the addition of Pakistan and Iran to the SCO’s geostrategic alliance, the only remaining point of access to the riches of Central Asia are through those two nations—and the West’s “great white hope,” the Baku-Tbilisi-Ceyhan pipeline, runs precisely that route. So rather than looking towards conflict in Iran (which seems increasingly likely to be a unilateral exercise with Russia and China’s veto power firmly behind Iran at this point), perhaps we should be more carefully watching events in Georgia and Azerbaijan, as these nations represent the critical battleground between the SCO and the “West.” Russia has long been involved with fomenting problems among the Ossettians (South Ossettia in Georgia, North Ossettia in Russia), but Georgia is a traditionally Western-looking nation. More attractive to the SCO is the prize of Azerbaijan--an Asian nation with its own hydrocarbon reserves and a complete connection of the encirclement between Iran and Russia. Expect to see interesting developments regarding Azerbaijan after Iran is solidified as an SCO member on June 15th.