Geopolitical Monitoring Report | September 16, 2022
Xi and Putin Plot for a Multipolar World
Chinese President Xi Jinping and Russian President Vladimir Putin were both in attendance at the Shanghai Cooperation Organization (SCO) summit in Uzbekistan this week, where they were selling the organization as a viable alternative to U.S.-led international institutions in what they see as an emerging multipolar world order.
The SCO moved to begin a system to allow SCO countries to trade with each other using their own national currencies, avoiding the US financial system and thereby also removing the risks of US sanctions impacting trade among SCO member countries. Xi also announced that China would provide training to approximately 2,000 police officers in SCO countries with the goal of preventing “color revolutions” in member states and is proposing wide-ranging security agreements among SCO member states.
The organization also welcomed Iran as its latest member, in another move that clearly demonstrates the organization’s anti-Western tilt and will test the viability of the organization’s new sanction-busting plans. While the SCO appears to be looking towards the future, serious disputes within its own membership base will need to be sorted out before it can even begin to serve as a viable alternative to the US.
For example, SCO member countries Kyrgyzstan and Tajikistan engaged in border clashes while the summit was occurring that have continued since its conclusion. These clashes are made more notable by the fact that both countries are also members of the Collective Security Treaty Organization, a military defensive pact that was set up by Russia following the fall of the Soviet Union.
Also, Indian Prime Minister Narendra Modi criticized Russian President Vladimir Putin for the Russian invasion of Ukraine. Modi stated that diplomacy was preferable to war and that the war was straining food and energy resources globally. Putin responded that he was trying to end the conflict as soon as possible. This is the sharpest criticism Russia has faced from India, which has deep defense ties with Moscow dating back to the Cold War and has been reluctant to apply sanctions on Russia, since the war began in February.
Putin stated that Russia would respond to the additional Ukrainian counter offensives by targeting key infrastructure, admitting it already had as a warning, and the operation in Ukraine is proceeding as planned.
The SCO has lofty aims of becoming a legitimate alternative to the US-led global order, but continues to face significant challenges internally that will impede these goals. The first being the organization’s inability to fulfill one of its primary purposes, which is ensuring security among the member countries, given the fact that Kyrgyzstan and Tajikistan were engaged in an open border conflict while the summit was ongoing in neighboring Uzbekistan.
Making matters worse for the SCO, both nations were founding members of the organization. In addition to conflict between Kyrgyzstan and Tajikistan, SCO observer members Armenia and Azerbaijan also engaged in their own border clashes during the summit. Fighting has currently ceased between those two countries, and the leader of Azerbaijan credited Putin with negotiating the ceasefire, but the situation remains precarious as Russia previously negotiated a ceasefire in 2020 that has clearly failed to hold.
US House Speaker Nancy Pelosi is expected to visit both countries, which could be a sign of future mediation attempts by the US amid Russia’s apparent failure to reduce tensions two years ago. In addition, signs that India may be breaking with SCO in some areas – such as Modi’s criticism of Putin’s invasion of Ukraine – may further weaken the organization’s impact.
However, their plans for a broad based sanctions-busting regime and the admission of Iran into the SCO does highlight significant risks for companies doing business with or that have supply chains that run through these countries.
While the SCO does face significant challenges to becoming a true alternative to the US on the global stage, their near-term plans to provide countries with a way around US sanctions will present significant risks to companies doing business with or in any SCO member state. This risk is especially high for financial institutions in those countries.
Companies that operate in these environments will need to ensure that their supply chains and other partners are not engaging in business with sanctioned entities. In addition, more entities are likely to come under Western sanctions as the SCO begins to set up its sanctions-busting plan.
While the SCO may not be completely ready to establish a true multipolar world, Chinese and Russian online propaganda campaigns and disinformation outlets have continuously touted the benefits of a multipolar world to audiences around the world. These campaigns will almost certainly increase in the future, as Beijing and Moscow work to court new members to their growing bloc.
The continued efforts by Xi and Putin to establish a multipolar world will further increase bifurcation between their countries and the West. For example, Russia is now planning on building new gas pipelines to China to replace lost revenue from Europe and Germany has seized three Russian-owned oil refineries because it no longer considers Russia a “reliable energy supplier.”
An end to Russia as Europe’s primary energy supplier was unthinkable just a few years earlier and now looks like it may be the reality if Europe refuses to lift sanctions on Russia. With Xi reportedly telling his military to be prepared to invade Taiwan by 2027, according to the CIA, the shocking realignment of the European economy may be repeated in East Asia as early as that year.
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