Regional trade shift in the spotlight at Shanghai Cooperation Organization

Sep. 16, 2022 4:31 AM ETFXI, PGJ, EWH, CAF, CYB, GXC, TDF, CHIQ, YINN, YANG, CQQQ, CHIX, MCHI, CXSE, KWEB, ASHR, KBA, CWEB, KUREBy: Yoel Minkoff, SA News Editor18 Comments

Russian President Vladimir Putin Visits China

Lintao Zhang

China's warming ties to Russia were on display on Thursday at a meeting of the Shanghai Cooperation Organization (SCO) in Uzbekistan. The relationship between the countries had been growing over the past decade, as the two nations seek to counter the power and economic strength of the U.S. and its allies. In terms of size, the SCO is one of the world's largest regional organizations, covering nearly 60% of the area of Eurasia, 40% of the world population, and more than 30% of global GDP.

Snapshot: "In the face of historical changes in the world and times, as major countries, China is willing to work together with Russia to play a leading role and to inject stability into the turbulent world," President Xi Jinping declared at the start of the two-day conference. Bilateral trade between the nations, which topped $140B last year, grew by nearly a third in the first seven months of 2022, with commodities like heavily-discounted Russia oil making up a significant amount of the cross-border flows. Natural gas being transported via the Power of Siberia pipeline also hit records this summer, and China even announced that it would start paying for gas in rubles and yuan as the countries shun the U.S. dollar's reserve currency status.

Meanwhile, Vladimir Putin praised China's "balanced position" on the Ukraine war at the meeting, with many Chinese companies - from semiconductors to automakers - taking advantage of the exodus of Western brands from Russia. "We understand your questions and concerns in this regard," Putin continued, adding that details of the war would be explained during meetings at the summit. In turn, Xi expressed appreciation for "Russia's adherence to the one-China principle and stressed that Taiwan is a part of China," especially after House Speaker Nancy Pelosi's visit to Taipei in August.

Go deeper: Putin last met with Xi during a visit to Beijing for the Winter Olympics in February. At that gathering, the two authoritarian leaders framed their "no-limits" partnership and shared their opposition to the "further enlargement of NATO." There's also some new interesting dynamics at play, as India - which is a member of the Quadrilateral Security Dialogue and the Shanghai Cooperation Organization - has been scooping up cheaper Russian oil and much-needed weapons, while Iran just signed a memorandum to become a permanent member of the SCO.

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