Obama’s Politics of Change and US Policy on China
Henry C.K. Liu

Part I: The Song Stays the Same
Part II:  US Domestic Politics and China Policy
Part: III: The New Deal Dollar and the Obama Dollar
Part IV:
Brzezinski’s G2 Grand Strategy

Part V: G2 and SCO

As Zbigniew Brzezinski’s G2 concept of a US-China convergence in geopolitical interests is not yet official US policy, China is likely to merely keep monitoring signs of its evolution in US policymaking without direct formal official response, while exploiting the concept’s diplomatic possibilities for improving bilateral relations.
Although China desires well-deserved recognition of it as a world power by the sole remaining superpower, albeit one that is fading, a G2 in the context of hawkish realpolitik generally associated with Brzezinski’s world view would go against China’s long-standing preference for multilateralism that would allow it to form bilateral partnerships and special relations around the globe and to participate as an independent power in regional organizations.
China Rejects Concept of G2
On May 20, 2009, at the end of the 11th China-EU summit held in Prague, attended by European Commission President Jose Manuel Barroso, Czech President Vaclav Klaus, whose country held the rotating EU presidency, and EU foreign policy chief Javier Solana, Chinese Premier Wen Jiabao took the opportunity to assuage European concerns by dismissing as “groundless” the view that China and the United States - through the framework of a Group of Two (G2) - will monopolize world affairs in the future. “Some say that world affairs will be managed solely by ChinaUnited States. I think that view is baseless and wrong,” Wen told the press. “It is impossible for a couple of countries or a group of big powers to resolve all global issues. Multipolarization and multilateralism represent the larger trend and the will of the people.” The statement, while dismissing the prospect of G2 hegemonic condominium, does not specifically deny the usefulness on strong bilateral relations between China and the US, nor the beneficial possibilities of close China-US cooperation on global issues.

China has always been committed to an independent foreign policy of peace and has continued to pursue a win-win strategy of opening up, said Wen. “It stands ready to develop friendly relations and cooperation with all countries and it will never seek hegemony.” Wen said China remains a developing country despite remarkable recent socio-economic achievements and that its modernization will continue for a long time with the unceasing efforts of many more generations.
Shanghai Cooperation Organization (SCO)
Even if the idea of a US-China G2 should become official US policy, China still will have to ensure that a formal G2 framework does not affect the strategic intent of the Shanghai Cooperation Organization (SCO), an interstate mutual-security organization originally founded in 1996 by the governments of China, Kazakhstan, Kyrgyzstan, Russia and Tajikistan. Initially known as the Shanghai Five and organized as a multilateral confidence-building mechanism to peacefully resolve legacy border disputes and to demilitarize the long border between China and the new independent states of the former Soviet Union, the Shanghai Five was joined by Uzbekistan in 2001 after which the members renamed the organization as SCO.
A permanent organ of the SCO is the Regional Anti-Terrorist Structure (RA-TS), established in 2004 and headquartered in Tashkent, Uzbekistan. The RA-TS promotes cooperation between SCO member states against cross-border security threats from terrorism, separatism and extremism. The US, by its past actions, while being a selective opponent to terrorism and extremism after the 9/11, 2001 terrorist attacks, had been a covert and sometimes overt supporter of separatism in other countries around the world during and after the Cold War. The problems related to Al Qeuda, the Taliban and Afghanistan are classic examples of “blowback” from CIA handiwork. 
Mongolia, an independent state created in early 20th century by goreign imperialist supported separatism from a China then beset with internalpolitical upheaval, won SCO observer status in 2004. Iran, Pakistan, and India became observers in 2005.
SCO Supports Uzbek Demand for US Withdrawal
In 2005, with SCO support, Uzbekistan called for a fixed time schedule for the withdrawal of US forces from the Karshi-Khanabad Air Base (KKAB) located in southern Uzbekistan. After the 9/11 terrorist attacks on the US, Uzbekistan had been solicited to become a strategic partner of the US, cooperating with US forces on counterterrorism activities and allowing US use of the KKAB for antiterrorist purposes in return for US security guarantees and supply of military equipment. The Uzbek government subsequently grew apprehensive of US instigation of pro-democracy color revolutions in other post-Soviet states such as Georgia, Ukraine, and Kyrgyzstan. SCO declaration of support for Uzbek decision to end its military cooperation with the US added geopolitical weight and accelerated US withdrawal which was completed by the end of 2005.
The Soros Foundation, along with the CIA, was accused of supporting and even planning the color revolutions in order to serve western interests. After the Orange Revolution in Ukraine, several Central Asian nations took action against the George Soros’ Open Society Institute (OSI). Uzbekistan closed the OSI regional offices, while Tajik state media accused OSI-Tajikistan of corruption. The Guardian claimed that USAID, National Endowment for Democracy, the International Republican Institute, the National Democratic Institute for International Affairs and Freedom House are directly involved in the color revolutions. Both the Washington Post and the New York Times also reported substantial US involvement in these political events.
SCO 2009 Summit
The SCO has now moved into a new era of pragmatic cooperation that will benefit its member states and the international community. The SCO will hold its 9th annual summit June 15, 2009 in Yekaterinburg, a major city in the central part of Russia and the administrative center of Sverdlovsky Oblast (federal subject) on the eastern side of the Ural Mountian range. It is the most populous oblast within Asian Russia.
Soon after the Russian Revolution, on July 17, 1918, Tsar Nicholas II and all members of the imperial family were executed by Soviet revolutionaries at the Ipatiev House in Yekaterinburg. US spy plane U-2 pilot Gary Powers was shot down in 1960 over Yekaterinburg. In 1977, the Ipatiev House was demolished by order of Boris Yeltsin who later became the first President of the Russian Federation.
The 2009 summit will be held on the eighth anniversary of the establishment of SCO. Under the guidance of the Shanghai Spirit, which enshrines mutual trust and benefits, equality, negotiation and respect for cultural diversity, the SCO has evolved into an efficient mechanism for maintaining common benefits for and promoting cooperation among member states. It has also grown into a major force in facilitating the realization of lasting peace and common development. The SCO also has made crucial contributions to the establishment of a just and rational international order.
As SCO members have strengthened mutual trust and coordinated their stances on international issues, political collaboration within the SCO is expected to become a potent mechanism in setting up a new global political order. In terms of security, a major priority within the SCO, all member states have made achievements in fighting terrorism, drug trafficking and other problems. In particular, several meetings this year have outlined a more tangible “roadmap” for further cooperation in this sphere.
SCO Conference on Afghanistan
Member states at the first SCO conference on Afghanistan held March 27, 2009 in Moscow reached consensus on comprehensive cooperation against terrorism, drug trafficking and organized crime. The defense ministers of SCO member states also endorsed a cooperation plan for 2010-2011 after an April 29, 2009 meeting in Moscow. A series of cooperation documents concerning transborder organized crime, money laundering and oil and gas pipeline security were signed after the first meeting of the SCO interior and public security ministers in Yekaterinburg on May 18, 2009.
SCO Economic and Trade Cooperation
Economic and trade cooperation has also been undergoing smooth development among SCO members. A series of trade and investment projects are being implemented, including transportation projects involving China, Kyrgyzstan and Uzbekistan. A new outline for multilateral economic and trade cooperation among member states signed by SCO prime ministers at the 2008 October summit has marked key points for future initiatives.
Moreover, SCO members have also started to discuss a joint mechanism against the ongoing global financial crisis. Relevant issues are expected to top the agenda at the Yekaterinburg summit. China has been playing an active role in SCO trade and economic cooperation. Trade volumes between China and the other member states have increased at an average annual growth rate of 30% - from US$12.1 billion in 2001 to US$67.5 billion in 2008. By the end of 2007, China has provided the other SCO members with investments worth US$13 billion.
SCO member states also emphasize the enhancement of cooperation in culture, education, healthcare, disaster management and relief.  SCO has become “a platform for setting up collective measures,” said SCO Secretary General Bolat Nurgaliyev. In compliance with an increasing need for foreign exchanges and cooperation, the SCO in recent years has accepted Mongolia, Pakistan, Iran and India as observers. It also has established contact group relations with Afghanistan and obtained observer status in the United Nations General Assembly. The SCO has also begun to study the procedural mechanism of accepting new member states.
The reason SCO will thrive and prosper is that its tenets and formation are congruous with the multipolar and globalizing trend, the political and economic development of the Eurasia region and the fundamental interests of their peoples.
Amidst the current financial crisis, strengthening economic and financial cooperation among SCO member states helps to enrich cooperation within the organization’s framework. SCO member states - China, Russia, Kazakhstan, Kyrgyzstan, Tajikistan and Uzbekistan - adopted a program of multilateral trade and economic cooperation in 2003. Since then, cooperation in security and economic matters has been gradually evolved, with economic cooperation gaining an increasingly important influence.
In October 2005, the SCO banks consortium was established, indicating the start of financial cooperation among the member states. Since then, the members have been actively cooperating by offering financial support to key projects, making the consortium an important platform to push for regional cooperation within the SCO.
In the financial sector, China’s Banking Regulatory Commission signed a memorandum of understanding on bilateral supervision cooperation with Central Asian member states. The central banks of the SCO members also signed financial cooperation treaties.
Beijing and Moscow held several financial cooperation forum, the two central banks signed multiple bilateral agreements, and the commercial banks of the two countries established broader business ties. To further develop trade among member states, the SCO also established professional work teams to ensure the research and coordination of SCO members in the areas of quality supervision, E-commerce and investment promotion.
Strengthening economic and financial cooperation is an inevitable choice for SCO members in order to meet the challenges of regional integration and globalization. It also is an important measure to cope with impacts from the global financial crisis.  Through economic and financial cooperation, SCO members can increase cohesion, broaden cooperation, heighten vitality, and strengthen interdependence.
SCO and the International Financial Order
China and Russia are emerging economies and the other SCO members are developing countries. As such, their importance and interests have not been properly represented separately in the existing international financial order. SCO members as a block can cope with the global crisis more effectively, by raising the region’s visibility and status to strengthen their collective voice by enhancing economic and financial cooperation.
China had provided a preferential credit of more than US$900 million for the SCO. China had made and will continue to make contributions in promoting economic and financial cooperation in the organization. SCO will be an effective venue for restructuring the existing international fiancé architecture.
SCO different from NATO
The SCO is not a mutual defense pact, unlike the North Atlantic Treaty Organization (NATO) which is a military alliance that has since expanded its original defensive mandate way beyond the North Atlantic region to carry on offensive operations in the Balkans, Afghanistan and Iraq. On April 16, 2003, NATO agreed to take command of the International Security Assistance Force (ISAF) in Afghanistan. The decision came at the request of Germany and the Netherlands, the two nations leading ISAF at the time of the agreement, with unanimous support of all nineteen NATO governments. The handover of control to NATO took place on August 11, and marked the first time in NATO’s history that it took direct charge of an offensive mission outside the North Atlantic theatre.
Since its establishment, SCO member states have held joint military exercises, most recently in 2007 near Russia’s Ural Mountains. Still, the SCO serves more as a forum to discuss multilateral issues of trade and security than a fully-developed counterpart of NATO, which has expanded its sphear of operation way beyond the North Atlantic region.
On October 27, 2007, the SCO signed an agreement with the Collective Security Treaty Organization (CSTO) whose members are Armenia, Belarus, Kazakhstan, Russia and Tajikistan, in the Tajik capital Dushanbe, to broaden cooperation on issues such as security, crime, and drug trafficking. Joint action plans between the two organisations were signed in early 2008 in Beijing. Uzbekistan became a full member in 2008. CSTO is an observer member of the UN General Asembly.
The CSTO charter reaffirmed the desire of all participating states to abstain from the use or threat of force. Signatories would not join other military alliances or other groups of states, while aggression against one signatory would be perceived as an aggression against all. To this end, the CSTO holds yearly military command exercises for the CSTO nations to have an opportunity to improve inter-organization cooperation. The largest-scale CSTO military exercise held to date were the "Rubezh 2008" exercises hosted in Armenia where a combined total of 4,000 troops from all 7 constituent CSTO member countries conducted operative, strategic, and tactical training with an emphasis towards furthering efficiency of the collective security element of the CSTO partnership
The CSTO grew out of the Commonwealth of Independent States (CIS), a regional organization whise members are former Soviet Republics. CIS first began as the CIS Collective Security Treaty (CST) which was signed on May 15, 1992, by Ameenia, Kyrgyzstan, Russian Federation, Tajikistan and Uzbekistan in the city of Tashkent. In 1993 Azerbajian signed the treaty on Septemeber 24, Georgia on December 9 and Belarus on December 31. The treaty came into effect on April 20, 1994.
SCO and the Eurasian Economic Community (EurAsEC)
The CIS is similar to the original European Community. Although the CIS has few supranational powers, it is more than a purely symbolic organization, possessing coordinating powers in the realm of trade, finance, lawmaking, and security. It has also promoted cooperation on democratization and transborder crime prevention. As a regional organization, CIS participates in UN peacekeeping forces. Some members of the CIS have established the Eurasian Economic Community (EurAsEC) with the aim of creating a full-fledged common market.
EurAsEC, created on October 10, 2000 in Kazakhstan’s capital Astana by Presidents Alexander Lukashenko of Belarus, Nursultan Nazarbayev of Kazakhstan, Askas Akayev of Kyrgyzstan, Vladimir Putin of Russia, and Emomalia Rakhmonov of Tajikistan, originated from the Commonwealth of Independent States custom union between Belarus, Russia and Kazakhstan created on March 29, 1996. The Treaty on the establishment of the EurAsEC was subsequently signed on October 7, 2005 with Uzbekistan joining. Common Economic Space is expected to be launched on January 1, 2010.
The Organization of Central Asian Cooperation (OCAC) was an international organization composed of Kazakhstan, Kyrgyzstan, Tajikistan, Uzbekistan and Russia. Georgia, Turkey and Ukraine had observer status. Kazakhstan, Kyrgyzstan, Tajikistan, Turkmanistan and Uzbekistan formed the OCAC in 1991 as Central Asian Commonwealth (CAC). The organization continued after 1994 as Central Asian Economic Union (CAEU), in which Tajikistan and Turkmenistan did not participate. In 1998 it became Central Asian Economic Cooperation (CAEC), which marked the return of Tajikistan. On February 28, 2002 it was renamed to its current name OCAC.
Russia joined OCAC on May 28, 2004 on the initiative of Uzbekistan. In October, 2005 Uzbekistan applied for membership in EurAsEC. OCAC de facto dissolved on January 25, 2006, when Uzbekistan joined EurAsEC.  On November 12, 2008, Uzbekistan temporarily suspended its membership in EurAsEC.
The creation of a common economic space between the CIS countries of Russia, Ukraine, Belarus, and Kazakhstan, was agreed in principle after a meeting in Moscow on February 23, 2003. The Common Economic Space would involve a supranational commission on trade and tariffs that would be based in Kiev, would initially be headed by a representative of Kazakhstan, and would not be subordinate to the governments of the four nations. The ultimate goal would be a regional organization that would be open for other countries to join as well, and could eventually lead even to a single currency.
On May 22, 2003, the Ukrainian Parliament voted 266 to 51 in favor of the joint economic space. However, the Orange revolution of 2004 that brought to power Viktor Yushchenko dealt a significant blow against the project. Yushchenko has shown renewed interest in Ukrainian membership in the European Union, and such membership would be incompatible with the envisioned common economic space.
The Paris summit of September 2008 hosted by Nicolas Sarkozy, President of France and president-in-office of the European Council, attended by Javier Solana, High Representative of the EU for common foreign and security policy and other high ranking officials from Brussels, was a major event in the EU-Ukraine bilateral relations.
Russian President Dmotry Medvedev has indicated that the creation of a common economic space for Russia, Kazakhstan, and Belarus may be launched on January 1, 2010. Russian Foreign Minister Sergei Lavrov said on December 10, 2008 that Moscow is ready to build a common economic space with both Europe and the United States on a basis of equality.
Kazakh President Nursultan Nazarbayev has proposed the creation of a common noncash currency called yevrav for the community. This would help insulate the countries from the dollar global economic crisis.
In May 2007 the CSTO secretary-general Nikolai Bordyyuzha suggested Iran could join the CSTO saying, "The CSTO is an open organization. If Iran applies in accordance with our charter, we will consider the application." [27] If Iran joined it would be the first state outside the former Soviet Union to become a member of the organization.
On October 6, 2007, CSTO members agreed to a major expansion of the organization that would create a CSTO peacekeeping force that could deploy under a UN mandate or without one in its member states. The expansion would also allow all members to purchase Russian weapons at the same price as Russia. CSTO signed an agreement with the SCO, in the Tajik capital Dushanbe, to broaden cooperation on issues such as security, crime, and drug trafficking.
On August 29, 2008, Russia announced it would seek CSTO recognition of the independence of Abkhazia and South Ossetia, which touched off a war between Russia and Georgia. Three days before, on August 26, Russia recognized the independence of Georgia’s breakaway regions of Abkhazia and South Ossetia.
The CST was set to last for a 5-year period unless extended. On April 2, 1999, only six members of the CST signed a protocol renewing the treaty for another five year period – Azerbaijan, Georgia and Uzbekstan refused to sign and withdrew from the treaty instead. At the same time Uzbekistan joined the GUAM group, established in 1997 by Georgia, Ukraine, Azerbijian and Moldova, changing the name to GUUAM group and largely seen as intending to counter Russian influence in the region. In the years following the signing of its charter the GUAM grouping was generally considered to have stagnated. During 2005, the CSTO partners conducted some common military exercises. In 2005, Uzbekistan withdrew from GUAM and joined the CSTO in 2006 in order to seek closer ties with Russia.
In June 2007, Kyrgyzstan assumed the rotating CSTO presidency and in October 2007, the CSTO signed an agreement with the SCO, in the Tajik capital Dushanbe, to broaden cooperation on issues such as security, crime, and drug trafficking.
On October 6, 2007, CSTO members agreed to a major expansion of the organization that would create a CSTO peacekeeping force that could deploy under a UN mandate or without one in its member states. The expansion would also allow all members to purchase Russian weapons at the same price as Russia.
On August 29, 2008, Russia announced it would seek CSTO recognition of the independence of Abkhazia and South Ossetia. Three days before, on August 26, Russia recognized the independence of Georgia’s breakaway regions of Abkhazia and South Ossetia.
On February 4, 2009, Russian President Dmitry Medvedev announced that the rapid military reaction-force that would be deployed during a military aggression against a CSTO member would be “just as good as comparable NATO forces”. He added that Russia would be ready to contribute a division and a brigade.
SCO Economic Cooperation
All SCO members except China are also members of the EurAsEC. A Framework Agreement to enhance economic cooperation was signed by the SCO member states on 23 September 2003. At the same meeting Chinese Premier Wen Jaibao proposed a long-term objective to establish a free trade area in the SCO, while other more immediate measures would be taken to improve the flow of goods in the region. A follow up plan with 100 specific actions was signed one year later, on September 23, 2004.
On 26 October 2005, the Moscow Summit of the SCO, the Secretary General of the Organisation said that the SCO will prioritise joint energy projects; such will include the oil and gas sector, the exploration of new hydrocarbon reserves, and joint use of water resources. The creation of an Inter-bank SCO Council was also agreed upon at that summit in order to fund future joint projects. The first meeting of the SCO Interbank Association was held in Beijing on 21-22 February 2006.
On 30 November 2006, at an international conference: The SCO: Results and Perspectives, held in Almaty, the representative of the Russian Foreign Ministry announced that Russia is developing plans for an SCO “Energy Club”.  The need for this “club” was reiterated by Moscow at an SCO summit in November 2007. Other SCO members, however, have not committed themselves to the idea. The August 28, 2008 summit issued a statement that read:  “Against the backdrop of a slowdown in the growth of world economy pursuing a responsible currency and financial policy, control over the capital flowing, ensuring food and energy security have been gaining special significance.”
In the St. Petersburg International Economic Forum held on June 5-6, 2009, the joint response of SCO members to the ongoing financial crisis, and the potential restructuring of the global financial and economic system, were the key topics of discussion. Panel members also noted the importance of development cooperation within the SCO, and interbank links between SCO member countries to finance key joint projects.

SCO countries have not escaped the consequences of the global financial crisis. Member countries need to consider the development and implementation of new economic and financial market regulations that differ from the principals established at Bretton Woods. It was noted that SCO members should implement joint efforts to handle the global financial crisis, and coordinate efforts to maintain trade relations at pre-crisis levels.
Representatives of SCO member countries confirmed that they plan to transform the SCO into a new economic structure with management bodies on top of regional governments. The SCO, it was acknowledged, remains a forum for discussion and the development of joint projects in various areas including medicine, education, logistics and insurance. SCO members plan to accelerate cooperation with observer countries in the organization, including India and Iran.
SCO members are considering establishing an energy club to intensify dialogue in the spheres of energy and water reserves. Several SCO members have significant energy reserves, while a growing number of member countries – particularly in Central Asia – face potential water and energy deficits.
The development of a modern logistics network is vitally important for SCO member countries. The members are currently focused on creating a multinational logistics system (project E40), which envisages the establishment of several logistics centres on the territory of SCO members. Notably, several SCO countries have no access to seaport infrastructure.
The key task is to maintain stability in the SCO region, but this cannot be achieved without an adequate financial and economic base. The SCO interbank association plans to become more closely involved in financing projects oriented towards all six SCO members. It was confirmed that the SCO’s upcoming summit in Yekaterinburg will include a detailed presentation on progress in this regard.
Participants noted significant progress on various projects in the financial sphere among SCO members. EuroAsia Development Bank, created by Russia and Kazakhstan to invest in infrastructure projects, with $1billion under management, is being funded by Russian (Renaissance Capital), Kazakh (Samruk-Kazyna) and international (Macquarie Capital) financial institutions. Representatives of SCO member countries highlighted the important role of public-private partnerships several times during the discussion.
China is a key SCO member. It was acknowledged that the Chinese economy has demonstrated its ability to absorb crisis threats, and the role of the Chinese economy is strengthening within the global framework. SCO member countries, it was acknowledged, may benefit from the Chinese experience, and
Chinese officials confirmed their willingness to share this experience and support SCO member countries.
At the invitation of Russian President Dmitry Medvedev, Chinese President Hu Jintao will pay a state visit to Russia in Moscow followed by state visits to Slovakia and Croatia from June 18 to June 20, after attending the 9th annual summit of the SCO June 14-18, 2009 in Yekaterinburg, a major city situated on the eastern side of the Ural mountain range in Asian Russia. SCO leaders are expected to discuss counter-measures for tackling the financial crisis as well as expanding inter-member economic cooperation.

During the visit to Yekaterinburg, President Hu will also attend the first meeting of BRIC (Brazil, Russia, India and China) leaders.The term, BRIC, was coined by Goldman Sachs economist Jim O'Neill in 2003. BRICs account for 42% of the world’s population, 14.6% of global Gross Domestic Product (GDP) and 12.8% of the global trade volume in 2008. The first meeting of BRIC leaders, scheduled for June 16, 2009 will cover a wide range of issues including the world situation, a new global financial system, the current financial crisis, energy cooperation and environmental protection.

June 15, 2009

Next: Commonwealth of Independent States (CIS) and SCO