The Shanghai Cooperation Organization and Iran: a power-full union.

• Author: Brummer, Matthew
• Position: ANDREW WELLINGTON CORDIER ESSAY

The need of expansion is as genuine an instinct in man as the need in a plant for the light, or the need in man himself forgoing upright.

--Matthew Arnold

The Shanghai Cooperation Organization (SCO) has emerged as a globally influential political, economic and security association. This international organization, embodied by six permanent members--the People's Republic of China, the Russian Federation, the Republic of Kazakhstan, the Kyrgyz Republic, the Republic of Tajikistan and the Republic of Uzbekistan--has garnered little attention from its western counterparts since its inception in June 2001 (see Figure 1).

[FIGURE 1 OMITTED]

This is starting to change. Recent SCO activity indicates it is dedicated to expanding member state cooperation in numerous arenas, none more important than energy and resource trade. The current unstable atmosphere in the Middle East has accentuated the need, by countries around the world, to secure alternative energy supplies. The SCO, with its large petroleum, gas and natural resource assets, is well positioned to meet these needs and, in doing so, greatly increase its sphere of influence.

As the Beijing-Moscow relationship continues to strengthen, Middle East dissension towards the West builds and Iran's bid for membership in the organization advances, the SCO is poised to emerge as an intergovernmental coalition to rival all others. Regional expert Professor David Wall puts it quite succinctly: "It would essentially be an OPEC with [nuclear] bombs." (1)

In the lead-up to the SCO's June 2006 summit in Shanghai, Iran was considered by many a lock for promotion from an observer state to a full member state. However, nuclear proliferation concerns, championed by the United States and its Western allies, stifled Iranian President Mahmoud Ahmadinejad's hopes for induction, at least temporarily The SCO's decision to offer Iran full membership was awaited with bated breath from London to Washington to Tokyo. Although the result was greeted with a relieved exhale from the West, the decision should by no means be taken as a permanent one. The SCO's decision to prioritize joint energy projects in the oil and gas sectors coincides markedly well with what Iran, the home of enormous oil and natural gas reserves, brings to the table. The inclusion and full integration of Iran into the SCO hold the potential to drastically change the anatomy and symmetry of the energy arena.

This paper will analyze the potential impact of Iranian membership in the SCO. Factors supporting Iran's admission are offered as a basis for the likelihood of its promotion from an observer state to a full member. Factors likely to hinder Iran's membership bid are also introduced to put into perspective the probability of acceptance. While Iran's position in history and the current world order has been widely described--principal issues include human rights, religious expression and nuclear development--no single defining characteristic of the Islamic Republic's past is more emblematic of its future than its energy resources. Thus, in the following pages, I will concentrate predominantly on matters directly concerning the energy arena. The treatment incorporates what the inclusion of Iran in the SCO would mean for Iran, the SCO and the West vis-a-vis energy resources, economics, trade and geopolitical influence.

WHAT THE INCLUSION OF IRAN WOULD MEAN FOR THE SCO

Clothes make the man. Naked people have little or no influence in society.

--Mark Twain

Resources

It is first important to recognize the sheer magnitude of the SCO in terms of the scope of its energy resources, and the resulting increase in its world share of these resources with the inclusion of Iran into the cooperative. The total area occupied by the SCO member states is about 30,189,000 square kilometers, or about three-fifths of the territory of Eurasia, with a population of 1.512 billion people, or approximately a fourth of the world's total population. (2) The inclusion of Iran as a full member would not only add notably to the land and population mass of the cooperative, but more importantly would offer a sizable increase in its natural resource assets, namely in oil and gas. Iran's proven oil and natural gas reserves are estimated at 132.5 billion barrels (bbl) (the third most in the world, behind Saudi Arabia and Canada) and 26.62 trillion cubic meters (Tcm) (the second most in the world, behind Russia) respectively. (3) In global terms, the SCO's combined proven reserves of natural gas account for approximately 30 percent of the world's total (see Figure 2). With Iran's inclusion this percentage would jump dramatically to roughly 50 percent (see Figure 3). (4) Although Russia and China rank third and sixth respectively in oil production, in terms of world percentage of proven reserves the SCO maintains only an 8 percent share (see Figure 4). With the inclusion of Iran, the SCO would more than double its global share to approximately 18 percent (see Figure 5). (5) As Iran continues to entice SCO members with its copious resource reserves--offering them as a means of holding sway over the entire energy market via sheer quantity--the likelihood of its application for membership being accepted becomes ever more likely.

The Caspian Sea region has historically been an oil and natural gas producer. There is a growing consensus that the potential energy reserves in the region are far greater than current production indicates. The Caspian Sea's proven oil reserves are 17 to 18 billion bbl, while natural gas proven reserves amount to 4.7 Tcm, or a 3 percent share of the world's total. (6) While these proven reserves are not staggeringly large, it is important to note that Iran's share of Caspian Sea resources are not included in these totals as verifiable data is not available. Russia's resources in the Caspian are sketchy at best, extending the inconclusive status of the sea's reserves. While not technically proven, the Energy Information Association (EIA) estimates an additional 184 billion bbl of crude oil reserves are possible, raising the total present value well over tenfold. This would amount to roughly 15 percent of the world's proven reserves, or 75 percent of Saudi Arabia's (see Tables 1 and 2). Natural gas reserves in the Caspian are also expected to be substantially higher than currently reported and have been estimated at 8.3 Tcm. (7) With Iran a member of the SCO, the majority of Caspian resources would fall under SCO influence. The potential for...