The Shanghai summit in June 20006 marked the fifth anniversary of the Shanghai Cooperation Organization (SCO) which has six member states - China, Russia, Kazakhstan, Kyrgyzstan, Tajikistan and Uzbekistan and four observer states - India, Pakistan, Mongolia and Iran. While it has been repeatedly emphasised by member states that the SCO does not target any particular country or regional body, speculation regarding the impact of SCO on NATO generally and the US in particular has been rife.

The recently concluded summit provides some reason to suggest that such fears are plausible. The most important aspect of the SCO summit was the participation of Iran as an observer state. Russia and China have been vocal in their support for resolving the Iranian nuclear crisis through dialogue and have consistently opposed any imposition of UNSC sanctions against Iran. Iran's participation was thus a clear political statement assuring it of continued support in future. The SCO may also evolve a common position on the Iran issue, which will inevitably be shaped by its two prominent members. This poses a serious setback for the US in bringing international pressure to bear upon Iran.

Its unease with the SCO could also be attributed to the perceived threat from SCO members to US energy interests. During his visit to Moscow in April 2006, Iran's Deputy Foreign Minister, Mohammadi, spoke of coordinating Russian and Iranian energy production and the creation of a "gas-and-oil arc". This scenario could emerge if Iran gains permanent membership of the SCO. Iran's involvement in SCO's energy projects would also enable it to bypass US sanctions that limit its access to technology.

American foreign policy in Central Asia, geared towards securing access to oil and gas from the region, has not been very successful. Its hopes to expand physical control over Kazakhstan's oil reserves have not borne fruit at a time when the China National Petroleum Corporation (CNPC) has taken over PetroKazakhstan for $4.2 billion. An oil pipeline from Kazakhstan to China became functional in May 2006. A subsidiary of CNPC has also won the rights for oil and gas exploration in Uzbekistan and plans to spend $210 million over the next five years. Trans-continental pipelines for oil and gas from Russia to China are in the process of construction. An energy grid seems to be emerging in the region with formal SCO support, which hopes for greater "cooperation in the oil sector", but could well ensure American exclusion.

As SCO structures in the region are strengthening there appears to be a simultaneous decline in the American strategic presence. The US lost its Karshi-Khanabad base in Uzbekistan late last year, and the future of the Manas Air Base in Kyrgyzstan is uncertain as the Kyrgyz have demanded a hundred per cent increase in rent for continued lease of the base. SCO statements regarding the need to realise "democracy in international relations" echo what Iran has been saying over the last few months about "making the world more fair". The implications of such statements are anyone's guess. It is intriguing that the US thought it prudent to apply for observer status (a request that was refused last June) even though it has maintained a studied nonchalance towards the activities of the SCO. The fact remains that the SCO has become increasingly vocal on strategic and political issues in the region. In the past it has called for NATO withdrawal from Central Asia and, more recently, accused the US of "double standards" in the fight against terror, while asking for the extradition to China of five ethnic Uyghurs released from the US military prison in Guantanamo Bay. As the US battles to win its war on terror and keep its allies in Central Asia, the extension of full membership to the present observer states of SCO would lead to encirclement of NATO in Afghanistan, seriously curtailing NATO activities.

It is obvious that the SCO presents China and Russia with the opportunity to strengthen their economic and strategic ties in Central Asia, while undermining the US presence in the region. At the same time however, the care that both Russia and China have taken to reassure the US about their intentions, makes it clear that neither country is willing to risk open hostilities with the United States. Nonetheless, the expansion of SCO membership could perceptibly alter the balance of power in the region, and is thus a situation that merits close observation.