What's in it for Iran? Three Ways Tehran Will Benefit From Joining Shanghai Pact
19:54 GMT 29.09.2021 (Updated: 05:42 GMT 30.04.2023)
Earlier this month, Iran formally launched the procedures for its accession to the Shanghai Cooperation Organization (SCO), a political, economic and security community that includes much of Asia.
The SCO was formed in 2001 and today has nine members: China, Kazakhstan, Kyrgyzstan, Russia, Tajikistan, Uzbekistan, India and Pakistan - and now Iran, although its accession process could take two years to complete. Together, they account for 40% of the world’s population and 28% of its gross domestic product (GDP).
Addressing SCO members at the group’s summit in Dushanbe, Tajikistan, on September 17, Iranian Foreign Minister Hossein Amir Abdollahian said Iran’s acceptance would have an "important impact" on its multilateral cooperation within the framework of its foreign policy "oriented towards neighbors and Asia.”
But what’s that really mean for the Islamic Republic of Iran? Here are a few ways the country will benefit from its membership in the SCO.
Promoting Regional Stability
While the SCO isn’t a tightly integrated economic bloc like the European Union, or a military bloc like NATO, it does provide a forum in which broad cooperation between Eurasian nations can be coordinated and promoted. At its core, the SCO is an organization for promoting regional stability, and Iran can benefit greatly from that.
Iran’s relations with Tajikistan have already benefited. Despite sharing a language - Tajik and Persian are mutually intelligible - Dushanbe has repeatedly accused Tehran of supporting the Islamic Renaissance Party of Tajikistan (IRPT), an Islamist party banned since 2015. During the civil war of the 1990s, the IRPT was on the losing side in the three-way conflict that the parliamentarians under President Emomali Rahmon won. Past applications by Iran to join the SCO were vetoed by Tajikistan on that basis.
However, at the Dushanbe summit, Iran and Tajikistan seemed to have finally buried the hatchet as they signed eight new trade agreements expected to increase commerce between them tenfold.
Tehran also has a major stake in the stability of Afghanistan after the US withdrawal and Taliban takeover. Except for Turkmenistan, all of Afghanistan’s bordering nations are SCO members. As Sputnik has reported, Iranian diplomats have worked to coordinate a regional response with those nations, that include Pakistan, Uzbekistan, Tajikistan, and China, that will push the Taliban into forming a moderate and inclusive government and proscribe supporting terrorist groups.
The SCO doesn’t have a free trade zone or common banking system and isn’t likely to sprout one anytime soon, despite some early rumblings in that direction in some corners. However, the tracks for signing new bilateral or multilateral trade agreements have been heavily greased by Iran’s membership in the SCO, which could take some pressure off Tehran from the US’ “maximum pressure” sanctions.
Even before accession began, Iran had signed a 25-year cooperation agreement with Beijing in March that will, among other things, lead to its participation in the Belt and Road Initiative, a globe-spanning infrastructure megaproject initiated by China. Similarly, Iran has sought to revise its 20-year friendship deal with Russia, which would have been automatically extended in March.
The 7,200-kilometer International North-South Transport Corridor (INSTC) between Mumbai, India, and Moscow, Russia, runs the length of Iran and negotiation of the corridor, which is intended to compete with the Suez Canal for Eurasian trade, has brought Iran closer to other nations.
In particular, Iran helped expand the port facilities at Chabahar, a coastal city just miles from the border with Pakistan, and has negotiated use of the railway connecting Chabahar to Zahedan, 628 kilometers inland. Zahedan is a key gateway to Afghanistan, where India has acquired several iron mining concessions in Hajigak - iron that will have to pass through Iran.
Surviving US Sanctions
Hadi Tizhoush Taban, chairman of the Iran-Russia Joint Chamber of Commerce, told Tehran Times on Tuesday that joining the SCO was a “golden opportunity” for Iran to develop its non-oil exports. This will help it to compensate for the loss of GDP resulting from US sanctions intended to totally eliminate Iran’s petroleum exports.
World Bank data from 2017 - the last year before the US reimposed economic sanctions after accusing Tehran of violating the 2015 nuclear deal - shows petroleum formed 17% of Iran’s GDP that year. However, since 2009, Tehran has successfully halved its national budget’s dependency on oil revenues from 60% to 30% as part of a long-standing plan to move away from dependency on petroleum.
According to the Iranian daily Financial Tribune, in the fiscal year 2019-2020, Iran’s non-oil exports exceeded the value of its oil exports for the first time in its history, with about half of those exports coming from Iran’s manufacturing sector.
Mehdi Mir-Ashraf, head of Islamic Republic of Iran Customs Administration (IRICA), said in late July that the March-July period had seen a 47% increase in non-oil exports over the same period a year prior. Last week, Islamic Republic News Agency (IRNA) reported a 126% increase in mining exports in the five months since March - when the Iranian calendar year began - over the same period a year prior, and a 176% increase in steel exports during that period.
However, while Iran hasn’t been as isolated from SCO members as it has from other states by US sanctions, it would be a mistake to see the bloc as anti-American or anti-Western. Pakistan and India are close partners of the United States, and India was significantly deterred by the onset of US sanctions.