Iran’s Hyped-Up SCO Entry Leaves Economic Expectations Unmet

Amir2018TaghatiAugust 4, 2023
Iran’s Hyped-Up SCO Entry Leaves Economic Expectations Unmet
In recent weeks, officials and representatives of Ebrahim Raisi’s government have launched

shanghai coooperation organization (1)
Written by
Moussa Afshar

In recent weeks, officials and representatives of Ebrahim Raisi’s government have launched an extensive propaganda campaign regarding the Iranian regime’s membership in the Shanghai Cooperation Organization (SCO). Given the unprecedented international sanctions affecting all trade and economic transactions with Iran, any external engagement with this regime raises a crucial question: Is Tehran’s membership in the SCO a lifeline for its collapsing economy or merely a spectacle with no tangible benefits?

What is the Shanghai Cooperation Organization?
The initial Shanghai Five Mechanism was an “intergovernmental organization” established on April 26, 1996, by China, Russia, Kazakhstan, Kyrgyzstan, and Tajikistan to promote multilateral cooperation in security, economic, and political spheres in the Eurasia region. It was initially founded to counter the influence of the United States and the North Atlantic Treaty Organization (NATO) in the region. Soon after, Uzbekistan also joined the organization, and it was officially renamed as the “Shanghai Cooperation Organization.”

In addition to the core members, Mongolia became an observer in 2004, followed by Iran, Pakistan, India, and Afghanistan in 2005, and later Belarus joined as an observer. India and Pakistan became full members of the SCO in June 2017.

Iran’s Process of Joining the SCO
On September 17, 2021, with Ebrahim Raisi traveling to Dushanbe, the capital of Tajikistan, and attending the SCO Summit, the regime finally secured its long-desired membership in the organization. The bill for the regime’s accession to the SCO was approved by the regime’s parliament on December 27, 2022. In less than two years, and during the virtual summit of member countries held in India on July 4, 2023, Tehran’s official membership in the SCO was approved and announced.

After the official membership in the Shanghai Cooperation Organization, the factions that are now removed from power denigrated it as a “pseudo-achievement for Ebrahim Raisi.” In their own media outlets, they wrote, “Iran’s membership in the SCO was among the first issues raised in the thirteenth government. Although Tehran had been striving for it for years, thanks to propaganda and success- embellishment, it was branded under the name of the thirteenth government.”

International sanctions and sponsorship of terrorism are the primary reasons for the prolonged process of Tehran’s membership in the Shanghai Cooperation Organization (SCO). These requests for SCO membership were blocked until 2015 due to the United Nations sanctions against the regime. In 2010, during the Tashkent Summit, the SCO members agreed that any country seeking full membership should not be subject to UN Security Council sanctions.

 

Tajikistan, as one of the member countries, opposed Tehran’s membership in the organization because of its affiliation with Muhiddin Kabiri, the leader of the Islamic Renaissance Party of Tajikistan (IRPT). In 2005, the IRPT was declared illegal in Tajikistan, accused of attempting to overthrow the government and establish a system similar to the Iranian regime in a Persian-speaking country.

According to the internal regulations of the SCO, any new country’s membership in the organization is subject to approval from all members. Tajikistan’s opposition led to security talks between Tehran and Dushanbe, resulting in Tajikistan also agreeing to Iran’s membership.

In order to become a member of the SCO, the Iranian regime was forced to retreat from its strategy of sponsoring terrorism within member countries. It had to waive investments in national and religious fault lines in those countries, which had always been a pretext for the regime to sponsor terrorism and increase what they called “strategic leverage” in negotiating.

Resolving Tehran’s economic problems
Commenting on how the SCO might help the regime, Mohammad Lahooti, a member of the Tehran Chamber of Commerce and the head of the regime’s Export Confederation, stated on July 10, “SCO member countries have reduced their trade with Iran due to Iran’s non-membership in FATF [Financial Action Task Force]. China is not willing to directly export many goods to Iran because Iran is on the FATF blacklist.”

The FATF is an intergovernmental organization that develops policies for combating money laundering and terrorism financing around the world. The regime is on the FATF blacklist for not adhering to the body’s rules for financial transparency.

“During previous rounds of sanctions, Chinese energy companies abandoned Iran’s industry, and China reduced its oil imports from Iran. India, another SCO member, also decreased its oil imports from Iran during the previous sanctions and continues to do so now. Therefore, Iran should not hope to benefit from the resources of SCO member countries to alleviate the effects of sanctions,” Lahooti concluded.

In a report titled “Iran’s Membership in the Shanghai Cooperation Organization: Consequences for Economic Diplomacy,” the Center for Research of the Chamber of Commerce, Industries, Mines, and Agriculture of the regime also concluded that the benefits of the regime’s membership in the SCO are practically tied to the lifting of international sanctions.

 

Ebrahim Rahimpour, the former Deputy of Asia and Oceania at the regime’s Ministry of Foreign Affairs, stated, “China, as the most important member of the SCO, and not India, has not invested in Iran as expected. It does not seem that either of these two countries is willing to provoke a reaction from the United States, and it is unlikely that formal membership in the Shanghai Cooperation Organization will change this reality.”

“Since Iran is isolated by the West, the members of the Shanghai Cooperation Organization will not be willing to cooperate with Tehran and develop relations. They prefer to work with a country that is not under sanctions and does not have issues with dollar transactions. This, along with Iran’s being designated on the FATF blacklist, is among the obstacles that economists point to as hindrances to developing relations with member countries of the Shanghai Cooperation Organization. The Chinese previously informed us that we must first approve FATF to expand cooperation,” Rahimpour added.

Vague hopes for SCO investments
State-affiliated economists believe there are multiple challenges to using the economic benefits of the Shanghai Cooperation Organization. Iran is not an attractive transit route due to deficiencies in modern railway and road networks and the lack of access to ports. Iran faces difficulties in financing major projects, which will not be alleviated by membership in the SCO.

According to Ebrahim Rahimpour, there is no mechanism for economic transactions between the nine SCO members for mutual cooperation using their national currencies.

“China has initiated a very important and highly invested project called the Belt and Road Initiative, but unfortunately, Iran has been largely sidelined in investment routes, despite its high potential for access to warm waters,” Rahimpour said. “That is why the economic advantage for Iran is not really evident on the ground.”

Conclusion
The regime’s pursuit of membership in the Shanghai Cooperation Organization seems to be fueled by hype rather than tangible benefits. Given the regime’s ongoing international sanctions and its presence on the FATF blacklist, the economic advantages of joining the SCO remain elusive. Furthermore, under the clerical dictatorship, Iran’s economic structure lacks the appeal to attract strategic investments. The prevailing uncertain political climate and the potentially volatile society raise concerns for investors contemplating long-term economic engagements with the regime. Hence, one should understand that the overhyped accomplishment is not about what is actually achieved, but rather whom it is meant to deceive.

Amir2018TaghatiAugust 4, 2023
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