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O 290248Z APR 06
FM AMEMBASSY BEIJING
TO RUEHC/SECSTATE WASHDC IMMEDIATE 4186
INFO RUEHOO/CHINA POSTS COLLECTIVE
RUCNCIS/CIS COLLECTIVE
RUEHLM/AMEMBASSY COLOMBO 0803
RUEHIL/AMEMBASSY ISLAMABAD 6339
RUEHSK/AMEMBASSY MINSK 0075
RUEHBS/USEU BRUSSELS

C O N F I D E N T I A L SECTION 01 OF 03 BEIJING 008117 
 
SIPDIS 
 
NOFORN 
SIPDIS 
 
E.O. 12958: DECL: 04/29/2021 
TAGS: PREL PGOV PTER EAID CH KG UZ KZ
SUBJECT: PRC/SCO: MFA DISCUSSES SCO MILITARY EXERCISES, 
REPORTS NO PLANS TO ADMIT NEW MEMBERS 
 
REF: A. FBIS 20060426063052 
     ¶B. FBIS 20060427027023 
 
Classified By: Political External Unit Chief Edgard 
Kagan.  Reasons 1.4 (b/d). 
 
Summary 
------- 
 
¶1.  (C) The Shanghai Cooperation Organization's (SCO) 
recent decision to conduct a joint counterterrorism 
exercise in Russia in 2007 is based largely on the 
experience of the 2005 China-Russia military exercise, but 
no regular mechanism for joint military drills has so far 
been established, according to an MFA official responsible 
for SCO affairs.  The June SCO Summit in Shanghai will 
focus on implementing specific economic cooperation 
programs intended to bring tangible benefits to member 
states, as well as feature the selection of new SCO 
Secretary General (likely to be a Kazakh) and Regional 
 
SIPDIS 
Anti-Terrorism Structure (RATS) Executive Commitee 
Director.  The SCO will not admit any new members this year 
but will consider applications for observer status from 
Belarus and Sri Lanka.  The SCO has not created any legal 
framework for security cooperation with APEC, while a 
memorandum of understanding reached by the SCO and ASEAN 
last year has not generated any concrete results in the 
counterterrorism field.  Because China has responded to 
most financial assistance requests from SCO members, the 
actual amount Beijing allocated to member states in 
preferential loans will likely exceed the USD 900 million 
it pledged in 2004.  End Summary. 
 
2007 Joint Counterterrorism Exercise 
------------------------------------ 
 
¶2.  (C) The decision to conduct a Shanghai Cooperation 
Organization (SCO) joint counterterrorism exercise in 
Russia in 2007, which was announced at the April 26 SCO 
defense ministers' meeting in Beijing (Ref A), was based 
largely on the experience of the 2005 China-Russia military 
exercise, Deputy Director of the MFA Department of European 
and Central Asian Affairs Department Fifth (SCO) Division 
Wang Wenli told poloffs on April 28.  Because last year's 
exercise was held in China, Russia was selected to host the 
upcoming one.  While noting that SCO security cooperation 
also includes regular contacts between member states' law 
enforcement and border security agencies, Wang remarked 
that the objective of next year's exercise is to improve 
SCO countries' collective defense and military 
capabilities.  A regular mechanism for military exercises 
has not yet been established and there are currently no 
plans for annual joint exercises.  She commented, 
nonetheless, that SCO military cooperation remains very 
flexible, highlighting the 2003 China-Kyrgyz and the March 
2006 Uzbek-Kyrgyz-Tajik military exercises officially 
conducted under SCO auspices.  Further consultations 
between member states are necessary to finalize the details 
of the 2007 joint exercise, including the number of troops, 
type of weapons, specific scenarios and financial 
contributions related to the activity, Wang said. 
 
 
Prospects for the June Shanghai Summit 
-------------------------------------- 
 
¶3.  (C) The agenda of the Shanghai SCO Summit in June will 
cover five main areas, according to Wang.  In addition to 
commemorating the fifth anniversary of the SCO's founding, 
heads of state will evaluate the organization's progress 
since its inception in 2001 as well as reviewing the past 
year's accomplishments.  Second, the Summit will feature 
discussions of major international and regional issues. 
Third, a new Secretary General and Regional Anti-Terrorism 
Structure (RATS) Executive Committee Director will be 
selected for a three year term starting in 2007.  According 
to existing rotation guidelines, the Secretary General post 
will be given to Kazakhstan, but the recipient country of 
the RATS Executive Committee Directorship has not yet been 
decided, Wang stated. 
 
¶4.  (C) Stressing that the SCO has attempted to expand its 
cooperation to encompass political, security, economic, 
cultural and various other areas, Wang said that the fourth 
item on the agenda is to discuss ways to achieve "concrete 
 
BEIJING 00008117  002 OF 003 
 
 
results," specifically in improving member countries' 
economic conditions.  Given that the legal framework is now 
in place, it is crucial to generate tangible benefits for 
SCO countries in specific fields, including education and 
economic assistance.  In the security realm, member 
countries will deepen discussions on jointly combating the 
"Three Evil Forces" (terrorism, separatism and extremism) 
as well as narcotics trafficking.  They will focus on the 
particular steps necessary to implement SCO security 
agreements in areas such as the collective investigation of 
criminal cases. 
 
News Observers Possible, But No New Members 
------------------------------------------- 
 
¶5.  (C) The fifth item on the Summit agenda is the SCO's 
external cooperation, Wang noted.  Several countries and 
international organizations, including the UNDP, World 
Customs Organization and the EU, have expressed strong 
interest in developing ties with the SCO.  The SCO is 
prepared to enhance its external relations with any country 
or international organization that supports the SCO's 
principles and objectives. 
 
¶6.  (C) Wang reported that the SCO will not approve any new 
members during the June Summit, emphasizing that the SCO 
has not established any legal procedures for the absorption 
of new member states.  (Note:  Russian Embassy contacts, 
including the DCM and the Russian Representative to the SCO 
have also told us that no members will be added at the June 
Summit. End Note) However, the legal framework for 
admitting observer countries does exist, so it is possible 
that formal applications for observer status from Belarus 
and Sri Lanka will be accepted.  The decision to admit new 
observers must be unanimous.  Wang said the organization 
will have to consider the growing international interest in 
SCO observer status.  That said, the SCO needs to further 
study the role of its observers, particularly the current 
ones, in the organization's overall development.  Moreover, 
member states must examine the impact of accepting new SCO 
observers and expanding the SCO's geographical scope on the 
organization's effectiveness, she suggested.  The SCO must 
also look at the nature of bilateral ties between 
prospective observers and current members to determine the 
applicant's suitability.  Playing down any problems 
stemming from India and Pakistan both serving as SCO 
observers, Wang stated that observer countries are required 
to pledge not to raise any matters unrelated to the 
organization in SCO forums.  While observers are invited to 
large scale SCO events, such as summits and PM-level 
meetings, they are not permitted to attend smaller-scale 
and closed sessions, including expert meetings.  Observers 
are also not allowed to sign SCO joint declarations and 
agreements. 
 
SCO External Security Cooperation 
--------------------------------- 
 
¶7.  (C) During the April 25-28 ASEAN Regional Forum (ARF) 
Inter-Sessional Meeting on Transnational Crime and Counter 
Terrorism, the Russian representative to the forum proposed 
the creation of a collective SCO-ASEAN-APEC 
counterterrorism mechanism.  Asked for preliminary thoughts 
on the idea, Wang remarked that such a proposal might be 
feasible in the future, noting that that SCO Tashkent 
Declaration offered principled support for cooperation with 
Asia-Pacific international organizations.  However, there 
is presently no legal framework for SCO security 
cooperation with APEC and any decision to establish a 
relationship with APEC must be approved by all SCO members, 
requiring further deliberation. 
 
¶8.  (C) Wang pointed out that in April 2005 the SCO and 
ASEAN Secretariats signed a memorandum of understanding 
covering a range of areas for cooperation.  The Philippines 
has urged China to encourage the SCO to enhance 
counterterrorism cooperation with ASEAN.  The SCO-ASEAN 
agreement, however, has to date not yielded any tangible 
results in terms of joint security activities.  In addition 
to ASEAN, Wang said that the SCO has established formal 
ties with two other international organizations, the 
Commonwealth of Independent States (CIS) and the UN, which 
granted the SCO observer status in 2004. 
 
SCO Funding Sources 
 
BEIJING 00008117  003 OF 003 
 
 
------------------- 
 
¶9.  (C) China and Russia, the most financially capable 
countries in the SCO, agreed from the outset to fund the 
largest proportion of the SCO budget, to which each member 
country contributes in accordance with its economic 
situation, Wang explained.  Funding is primarily funneled 
through the SCO Secretariat and RATS, and limited amounts 
of SCO resources are allocated for specific infrastructure 
projects, counterterrorism activities and equipment 
procurement.  The USD 900 million China pledged in 
preferential loans to SCO members in 2004 has already been 
allocated, mostly for infrastructure projects.  The actual 
disbursements will likely exceed USD 900 million, given 
that Beijing responded to practically all SCO members' 
financial assistance requests.  Noting that PRC assistance 
to SCO countries has been delivered through bilateral 
channels, Wang highlighted the challenges to multilateral 
economic cooperation within the SCO.  The recently 
established SCO banking liaison and entrepreneurs 
committees will hopefully boost economic and trade 
relations among member states, she remarked. 
 
SCO Speakers Meeting 
-------------------- 
 
¶10.  (C) Wang confirmed media reports that the first 
meeting of SCO parliamentary chairmen will be held May 30 
in Moscow (Ref B).  Member countries' parliaments already 
maintain close contact, so this meeting represents the 
transition from bilateral to multilateral cooperation among 
SCO legislatures. 
SEDNEY