SCO Summit 2023: Significant takeaways for India

The July 4 SCO (Shanghai Cooperation Organisation) Council of Heads summit, held virtually and chaired by Indian Prime Minister Narendra Modi, was significant for several reasons.

Firstly, the meeting was held days after PM Modi’s visit to the US. One of the reasons cited for the virtual format was that given the current state of India’s relations with both China and Pakistan, the environment was not appropriate for an in-person meeting.

Secondly, while the joint statement released after the summit spoke about a “multi-polar” and “democratic order”, India refused to accept the part of the joint statement which referred to China’s Belt and Road Initiative (BRI).

Thirdly, countries spoke about ‘de-dollarization’. While commenting on Russia’s trade with China, the Russian President said, "Over 80 percent of commercial transactions between Russia and the People's Republic of China are made in Rubles and Yuan,"  Chinese President Xi Jinping also pitched for SCO countries to conduct trade in local currencies.

Finally, Iran has formally become a member of the SCO.

Timing of the meeting and India-US-China triangle

India’s purchase of oil from Russia, at discounted prices, has not gone down well with the US. Apart from this, India as Chair of G20 has repeatedly been speaking about the need for International Financial institutions to pay greater attention to the Global South.

While addressing the 3rd India-Pacific Islands Cooperation (FIPIC) Summit in Papua New Guinea, Modi in a veiled dig at the developed world said, “Today we are seeing disruption in the supply chain of fuel, food, fertiliser and pharma. Those whom we trusted didn’t stand with us when needed….”

Like many other countries, India has also been batting for ‘de-dollarization’, or lesser dependence upon the Dollar, and has tried trade in INR with a number of countries, though there have been logistical problems.

In spite of the differences with the US, when it comes to the China factor, New Delhi and Washington DC have clear convergences – especially in the aftermath of the Galwan clashes in 2020. During the Indian PM’s US visit, last month, there was emphasis on strengthening the strategic partnership. It is true that there was no direct reference to China; the Indian PM in his joint address to the US Congress had said, “The dark clouds of coercion and confrontation are casting their shadow in the Indo-Pacific.”

He has also alluded to China’s BRI project and its economic implications for developing countries. During the SCO virtual meet, PM Modi while alluding to China’s BRI spoke about the need for regional connectivity which was transparent and did not impinge upon ‘sovereignty’. India refused to endorse the part of the SCO joint statement which hailed the BRI. 

Iran’s entry into SCO

Iran’s entry into the SCO is important for several reasons. First, it will help Tehran in countering the perception that it has been isolated regionally. India has developed the first phase of Chabahar Port, and the project is important not just in the context of it being a gateway to Afghanistan and Central Asia, but also to Europe via the International North South Transport Corridor (INSTC). 

India, Iran, and Afghanistan on May 24, 2016 signed a historic trilateral agreement in Tehran to develop part of  phase 1 of the strategic Iranian port of Chabahar. While there have been complaints that India had begun to lose interest in the project, after the imposition of US sanctions on Iran in 2018, in recent years India has been paying closer attention to the project. In fact it would be pertinent to point out that in 2022, there was a significant rise in trade between India and Russia via Iran 

The Indian PM while welcoming Iran into the SCO said that he was happy that Iran was joining the SCO. India’s ties with Iran, which is close to Russia and China, are also a reiteration of its foreign policy where it needs to strike a fine balance.  

While the entry of Iran into SCO is important and could benefit the organisation (Gulf states are also liking) the scope for any substantial progress in SCO is limited given the strains between India and China and India and Pakistan. BRICS also faces a similar challenge.

The author is a New Delhi-based policy analyst associated with the OP Jindal Global University, Sonipat

(Disclaimer: The views expressed above are the author's own and do not reflect those of DNA.)