Daily Times

The Shanghai Cooperation Organization (SCO) accepted Iran as a revolutionary development with far-reaching effects. As a counter to Western sanctions, Russia, China, Iran, and other countries are rewriting the laws of international economic interaction by fostering deeper ties.

Iran is entering the SCO during a period of profound global shift. With Russia, China, and the four Central Asian nations of Kazakhstan, Kyrgyzstan, Tajikistan, and Uzbekistan as founding members, the SCO’s initial six members prioritized regional security over fighting terrorism, separatism, and extremism in the region.

Moreover, the 9/11 attacks caused a US-led coalition to engage in military operations and nation-building in Afghanistan heavily, which served as a significant impetus for this strategy. Iran applied for and was granted observer status in the SCO early on, but the international community’s disapproval of Tehran’s nuclear program prevented Iran from becoming a full member.

Iran’s acceptance of the Joint Comprehensive Plan of Action (JCPOA), sometimes known as the “Iran nuclear deal,” in 2015 removed this barrier. The JCPOA’s signatories, China and Russia, were ready to proceed with Iran’s admission to the Shanghai Cooperation Organization (SCO), which was beginning to prioritize economic matters above security concerns. They also saw the nuclear issue as settled.

The goal of the US’s friend-shoring and de-risking policies is to limit, isolate, and ultimately exert some degree of control over the economies of China, Russia, and Iran.

However, the abrupt US exit from the JCPOA in 2018 further complicated matters by reinstating US economic sanctions and undermining any plans to integrate Iran into the evolving SCO economic space.

Normal circumstances would have shown that US sanctions were a poison pill that prevented Iran from joining. Still, three developments helped offset the intimidation factor typically associated with US sanctions by altering the world’s geopolitical landscape. The Covid-19 pandemic rocked the world economy; the US withdrawal from Afghanistan allowed China to lead economic development in Central Asia; and the Russian war in Ukraine compelled numerous countries, including China, India, Pakistan (which joined the SCO in 2017), and Russia, to establish and maintain strong economic ties that either circumvented or ignored the threat of US sanctions.

When formulating the “rules of motion,” renowned physicist and mathematician Isaac Newton asserted in his Third Law that there is an equal and opposite reaction to every action. Applying Newton’s Third Law to geopolitics encompasses the consequences of sanctions policy. Recently, US Treasury Secretary Janet Yellin presented the main points of the US approach to economic involvement in a post-pandemic world that is sharply split about Russia’s ongoing war in Ukraine. The two central tenets of this strategy are “friend-shoring” and de-risking.

Financial institutions prefer the de-risking method, which aims to prevent rather than manage risk when terminating or limiting client relationships. Its first meaning suggested that the client and the institution were divorcing. In March 2023, European Commission President Ursula von der Leyen first used a more nuanced application of the phrase concerning European economic relations with China. In actuality, however, de-risking entails decoupling under conditions intended to mitigate the hazards inherent in any abrupt divorce.

The idea of “friend-shoring,” which refers to a strategy where a nation looks to procure the raw materials, components, and even manufactured goods it needs for sustained economic health from countries that share its values, is crucial to this risk management. The COVID-19 outbreak brought to light the US and Europe’s geopolitical vulnerabilities in an increasingly China-dominated global economic supply chain.

Simultaneously, the US and Europe saw their attempts to punish and isolate Russia following the Russian invasion of Ukraine fail in the face of a shifting global economy that was becoming more dependent on China. Within this framework, friend-shoring and de-risking emerged as the driving forces behind a US-led initiative to resist China’s increasing economic influence.

The goal of the US’s friend-shoring and de-risking policies is to limit, isolate, and ultimately exert some degree of control over the economies of China, Russia, and Iran. The SCO’s current economic potential, which accounts for 25% of the world’s population and 20% of the global GDP, comes into play. Growth engines that bolster their worldwide influence yearly include the SCO and BRICS (the economic forum comprising Brazil, Russia, India, China, and South Africa; Iran and other countries have asked to join).

They are de-risking benefits for all parties. In an attempt to buffer themselves from the effects of US and European sanctions, Iran, Russia, and China have turned to one another and their expanding coalition of economic allies, which includes Saudi Arabia, Turkey, Egypt, Argentina, and other countries.

The rising multi-polarity defined by SCO, whose members, including Iran, are rewriting the rules of global economic interaction, is complex for policymakers in the bastions of Western power, Washington, London, and Brussels, to accept. Iran’s membership in the SCO frees it from its previous restrictive economic ties to the West.

The writer is a freelance columnist