[PRIMER] Shanghai Cooperation Organization (SCO) Summit on September 15-16th

Analysis details (12:37)

OVERVIEW: The Shanghai Cooperation Organisation (SCO) members include China, Russia, India, Kazakhstan, Kyrgyzstan, Pakistan, Tajikistan, Uzbekistan, and Iran. The group accounts for around a third of the world’s land, with exports in the trillions of Dollars. Several themes will be eyed as “anti-West” leaders gather in Uzbekistan, namely the theme of de-dollarisation alongside sideline meetings between Chinese President Xi and Russian President Putin, whilst Iranian bilateral and multilateral talks will also be eyed as its nuclear deal talks with the West have seemingly been less constructive.

AGENDA: An official agenda has not yet been released on the SCO website, although taking a look at the Indian press release regarding the event: “During the Summit, the leaders are expected to review the organization’s activities over the past two decades and discuss the state and prospects of multilateral cooperation in the future. Topical issues of regional and global importance are also expected to be discussed at the meeting.” Meanwhile, NewEurope reports that “Thirty coordinated documents have already been prepared, which are aimed at strengthening the multifaceted interaction of the SCO… the final document that will be issued at the conclusion of the summit and which will reflect the common agreements by all of the SCO countries.”

THEMES/MEETINGS TO OBSERVE

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  DE-DOLLARISATION: The overarching theme of the summit from a market perspective will likely be the process of replacing the USD for trade settlements. Although the theme itself is not surprising and is more of a longer-term setup, it will likely attract attention. In September, a long-term contract was signed for China National Petroleum Corporation (CNPC) payments to Gazprom to be split into CNY and RUB – a 50/50 ratio. According to SGH Macro, China has pressed Saudi and other Gulf countries to follow similar agreements. Citing sources, SGH Macro says “Beijing would be to start trading crude oil and other commodities with RMB quotas, which would be expanded each year until it became the main settlement currency with Riyadh in bilateral trade”, with an initial quota of some USD 15-20bln vs USD 90bln total trade between the two countries last year. Note, in March, WSJ citing sources suggested Saudi is in active talks to price some oil sales in Yuan amid anger with Washington over US’ security commitments to defend the Kingdom.


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  CHINA-RUSSIA: One of the main focal points of this summit is the touted meeting between Chinese President Xi and Russian President Putin – the first face-to-face between the leaders since Russia’s invasion of Ukraine. Ties between the nations have been warming, with China refusing to condemn Russia for the commencement of the war, whilst Russia has been increasing its exposure to the Yuan via reserves and gas deals in a bid to circumvent western sanctions. From a military perspective, reports via the Kremlin have also suggested Putin has attended large-scale exercises involving Chinese forces and militaries of several Russian-friendly countries, which comes at a time of heightened tensions between China and Taiwan. The two leaders will likely reaffirm their commitment to deepening ties whilst criticising the West.


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  IRAN/PARTNERS: The recent optimism on progress regarding the Iran nuclear deal once again proved to have been misplaced. France, Britain and Germany said Iran’s latest responses to the EU raised serious doubts about its intentions to return to the nuclear deal and that Iran’s position is incompatible with international obligations. Iran suggested it expects to hold bilateral and multilateral meetings between President Raisi and some of the SCO member-state presidents. Potential discussions between Iran, Russia, China and India could be of note, particularly from an oil or weapons supply angle and the subsequent impact on relations with the West. 

12 Sep 2022 - 12:37- EnergyResearch Sheet- Source: Newsquawk