The SCO emerged in 2001 as successor to the so-called Shanghai Five, which comprised Russia, Kazakhstan, Kyrgyzstan, Tajikistan and China. The earlier grouping was initially established to rectify the borders between China and the new Central Asian states in the aftermath of the collapse of the Soviet Union. But while China and Russia also used the SCO to maintain a dialogue, contemplating their respective strategic interests in Central Asia and the grouping's potential value, they had different visions from each other, a fact that stalled the SCO's development.
Russia saw the group as a potential political and even security bloc, a way for Moscow to guarantee regional security while maintaining its interests in Central Asia. The group, Russia hoped, would also draw in China to provide greater leverage in dealing with the United States. China, too, wanted the grouping to strengthen Beijing's hand when dealing with Washington, but it saw the SCO more as a potential economic bloc, one that would help China take full advantage of the region's natural resources. Moscow and Beijing's differences made any plans to expand the SCO's purview or accept new members complex and compromise slow.
The diverging visions have their roots in Russia and China's different national strategies. Russia believes military might is the basis for national strength, power and influence. Economics matter, but it is the ability to apply force where needed that truly expresses power. When Moscow has an issue with a neighbor, it may employ economic tools and political manipulation, but Russia has shown that it is also willing to back up demands with force.
China, by contrast, sees economics as power. For Beijing, military might rests on a strong economic base, and global power stems as much from the ability to shape global markets as it does from military force. Though China is willing to sail its ships and fly its planes around disputed islands, it is more adept at using its economic heft in disputes with neighbors. In this way it has managed to shape the behavior of Taiwan, the Philippines and even Japan by placing or removing barriers to trade.
These different assessments of the nature of power shape Russia and China's national strategies as well as their actions in the SCO and the BRICS grouping. Both countries measure their strength by comparing themselves to their neighbors and one another. Moreover, China-Russia relations have a complex history of both conflict and cooperation. But they also measure themselves against the single largest global power, the United States. From China, U.S. power stems from its role as the center of global trade and the dominance of the U.S. dollar. The United States' military might is secondary. For Russia, the measure of power is reversed — U.S. might is more important than its economic heft.
Groupings where both countries are included, such as SCO or BRICS, enable Russia and China to forward their basic regional interests but also serve to counter U.S. economic, political and military power. With the crisis in the eurozone, instability in Ukraine and disputes in the South China Sea, Moscow and Beijing see both a need and an opportunity to erode U.S. influence by building on their respective strengths through cooperation.
The SCO is in the midst of another expansion to incorporate India and Pakistan after years of keeping the two at arm's length. India has been the most contentious addition because of Beijing's objections. China, however, has come to see including India as a way of drawing the country into a trading network centered on China while slowing the growth of U.S.-India defense cooperation. Russia wants to avoid losing the Indian market for Russian arms as well as to add India's 1.24 billion people to a regional grouping that does not include the United States. The expanded SCO creates a space in which U.S. economic power is diluted and in which the two most populous nations in the world are included. It lays the rough framework for a future economic space that could theoretically rival the heft of the European Union or the United States, diminishing U.S. economic leverage, such as sanctions and dollar-denominated oil trade, to influence Russian or Chinese behavior.
An Alternative Institution
In some ways, the BRICS summit serves a similar purpose. The BRICS as an organization emerged in 2006 after China and Russia appropriated the acronym from a 2001 Goldman Sachs report. The report initially grouped Brazil, Russia, India and China together as the top emerging, if not leading, economies in their respective regions. In 2010, the BRIC members decided to include South Africa as well, making it BRICS. Together, the BRICS make up approximately 20 percent of global GDP. As a grouping, then, the BRICS serve as a potential alternative to a U.S.-centric economic system. Like the slow start of the SCO, the BRICS group has yet to develop into a meaningful alliance. And whereas the SCO members are all in the same geographic area, BRICS is more contrived and each is economically different.
The last few years have shown the vulnerability of many developing nations' currency and financial markets to fluctuations in Western financial markets. The goal of the BRICS members, particularly China, is to help balance these financial flows by providing financing without the constraints of Western-led organizations such as the World Bank and International Monetary Fund. In 2014, China formed the Asia Infrastructure Investment Bank to rival the World Bank, IMF and the U.S. and U.S.-allied Asia Development Bank.
The BRICS are signing the final documents to launch the BRICS New Development Bank in July as well. The New Development Bank will have an initial capitalization of $100 billion ($41 billion from China, $18 billion from Russia, India and Brazil, and $5 billion from South Africa), though the initial capitalization will be $50 billion. The New Development Bank will promote infrastructure and sustainable development in emerging economies as well as their own through loans. Beijing sees the BRICS bank as yet another tool, along with Asian Infrastructure Investment Bank, to pick away at the U.S.-dominated financial system. With its financial system relatively isolated from the West because of sanctions, Moscow sees the development of alternative institutions as imperative at this time.
Reflecting Changing Needs
The gradual evolution of BRICS and SCO into more meaningful organizations reflects the current positions of Russia and China, their relationship to one another and their mutual relationship with the United States. The sanctions on Russia, coupled with the low global oil prices, have hampered the Russian economy. Russia has reached out to China as an alternative market for Russia's energy exports. Russia is also using Chinese credit agencies more, and Chinese investment is flooding into Russia. Finally, Moscow is once again promoting a China-Russia bloc that can pick away at U.S. hegemony.
China, meanwhile, sees opportunities to exploit Russia's changing needs and capabilities. The China-Russia energy negotiations have favored China's terms. Moreover, China has long wanted to invest into its large neighbor but has previously been blocked. With a weaker Russia, China can expand into their shared region of Central Asia. Like Moscow, Beijing too is interested in promoting the perception of a China-Russia bloc as a counter to the U.S.-led system.
The SCO and BRICS organizations' evolving focus reflect each country's changing needs. But while it appears as if Russia and China have found common ground as a bloc and within these organizations, their underlying perceptions of power and risk leave them constantly mistrustful of one another. Russia resents China's economic investment as much as it depends on it. China mistrusts Russia's military actions even though they keep the United States distracted in Europe. But the common need to counter the dominant United States is once again drawing China and Russia into closer cooperation. Concrete progress in evolving the SCO and BRICS is just one reflection of these priorities.