VZCZCXRO7304
OO RUEHBC RUEHCN RUEHDBU RUEHDE RUEHDIR RUEHGH RUEHKUK RUEHVC
DE RUEHBJ #3353/01 3061028
ZNY CCCCC ZZH
O 021028Z NOV 06
FM AMEMBASSY BEIJING
TO RUEHC/SECSTATE WASHDC IMMEDIATE 1600
INFO RUEHOO/CHINA POSTS COLLECTIVE
RUCNCIS/CIS COLLECTIVE
RUCNIRA/IRAN COLLECTIVE
RHEHNSC/NSC WASHDC

C O N F I D E N T I A L SECTION 01 OF 03 BEIJING 023353 
 
SIPDIS 
 
SIPDIS 
 
DEPT FOR SCA, EAP/CM AND INR (FOR G. KNIGHT) 
 
E.O. 12958: DECL: 11/02/2031 
TAGS: PREL ENRG PTER ZK RS CH IR
SUBJECT: SCHOLARS SAY SCO EXPANSION, IRANIAN MEMBERSHIP, 
GREATER ENERGY ROLE POSSIBLE BY NEXT YEAR 
 
REF: A. BEIJING 9673 
 
     ¶B. BEIJING 20105 
 
Classified By: Political Minister Counselor Daniel Shields. 
Reasons 1.4 (b/d) 
 
Summary 
-------- 
 
¶1. (C) Chinese scholars say that by 2007 the Shanghai 
Cooperation Organization (SCO) could be in a position to 
accept new permanent and observer members and will further 
establish a framework to address economic development, good 
governance and energy issues in Central Asia.  Iran could 
become a permanent member of the organization next year, 
scholars told us, although an MFA official was more cautious 
about the pace of SCO expansion.  SCO activities will likely 
include joint military exercises and establishment of an 
"Energy Club" among SCO members.  China will place priority 
on economic and infrastructure development in Central Asia as 
a way of promoting stability while protecting security and 
preventing terrorism.  China continues to voice willingness 
to defer to Russia in the region but notes that Russia may 
fear China's expanded influence and see Central Asia as a 
competitor for meeting China's energy needs.  Finally, 
Beijing is suspicious of what it sees as U.S. support for 
destabilizing "color revolutions."  End Summary. 
 
¶2. (C) Chinese officials and academics say the Shanghai 
Cooperation Organization (SCO) hopes to have a framework in 
place by next year that would allow the SCO to accept new 
permanent and observer members.  Iran could become a 
permanent member next year if newly drafted regulations for 
expanding SCO's permanent and observer members are adopted, 
scholar Wang Lijiu of the State Security-affiliated China 
Institute of Contemporary International Relations (CICIR) 
recently told visiting EAP analysts Sam Chernawski and David 
Longenecker.  MFA Deputy Director for SCO Affairs Wang Wenli 
said Iran and Pakistan have applied for permanent SCO 
membership, but that the process was not likely to be 
completed by 2007.  In its 2007 leaders meeting, the SCO will 
likely ratify the newly drafted regulations but would take on 
new members only after careful deliberation, she said. 
Noting Ref A discussions with U.S. officials, MFA's Wang said 
China is aware of U.S. concerns about SCO expansion to 
include Iran and is taking a "measured" approach. 
 
Iran a "Natural Fit" to Join SCO, Scholar 
----------------------------------------- 
 
¶3. (C) It would be "natural fit" for Iran to join SCO as a 
permanent member given its historical, political and economic 
influence in the region, CICIR scholar Wang said.  At the 
July and September summits, the SCO delegated to SCO 
Secretary General Zhang Deguang authority to establish a 
 
SIPDIS 
legal framework to allow for new permanent and observer 
members.  The SCO is an "open" organization, he said, and the 
frameworks developed should provide an opportunity not only 
for Iran but perhaps also for the SCO's three other observer 
members to become permanent members.  The SCO has 
contemplated creating some form of dialogue partner status 
for the United States, the European Union and other groups 
outside the region, he said, but is unlikely to put a high 
priority on expansion by non-permanent members outside 
Central Asia in order to maintain the SCO's regional focus. 
 
Energy Club Likely To Win PRC Support 
------------------------------------- 
 
¶4. (C) China continues to seriously consider the Russian 
proposal from the July SCO Summit to establish a separate 
"Energy Club" of SCO members by 2008, Assistant to SCO 
Secretary General Du Wei told visiting INR analyst Greg 
 
SIPDIS 
Knight.  It remains unclear what form the energy cooperation 
will take, but MFA's Wang said China envisions a club that 
governments, private companies and think tanks might join 
which would conduct joint research and policy formulation. 
The Energy Club would be a more vigorous institution than the 
current SCO expert-level energy working group, she said. 
 
¶5. (C) CICIR's Wang advocates a dialogue between energy 
producers and consumers that might later be replicated on a 
larger, even global, level to improve coordination and help 
stabilize the global energy market.  China and Russia agree 
on most bilateral issues, CICIR's Wang said, and both see the 
proposed SCO "Energy Club" as a friendly vehicle through 
which differences between energy exporters and importers 
 
BEIJING 00023353  002 OF 003 
 
 
could be discussed and resolved. 
 
¶6. (C) Xia Yishan of the MFA-affiliated China Institute for 
International Studies (CIIS), a consultant in the SCO's 
formation, told poloff that energy is the field where 
divergence of Chinese and Russian interests with respect to 
Central Asia is most likely.  China would prefer bilateral 
energy cooperation with Cental Asian states, such as a 
pipeline from Kazakhstan, with those channels only later 
opening to Russia, he said.  Russia wants to maintain 
"bottleneck" control of the ability to transfer Central Asian 
oil and gas to Europe and forer Japanese PM Koizumi's August 
trip to Central Asia added to concerns about competition ovr 
the region's natural resources, Xia said.  Russia also sees 
Central Asian states, specifically Kazakhstan and 
Turkmenistan, as competitors for serving China's growing 
energy market, he said.  As a result, SCO members may begin 
discussing energy cooperation, but Xia found it unlikely that 
a SCO energy pipeline or corridor would be established 
anytime soon. 
 
Economics, Governance On Par With Security Issues? 
--------------------------------------------- ----- 
 
¶7. (C) China believes it must foster economic development in 
Central Asia in order to create a more secure environment 
because economic backwardness contributes to instability, 
according to both the MFA's Wang and CICIR's Wang.  Applying 
President Hu Jintao's "harmonious world" philosophy to the 
region, China supported economic development projects in 
Central Asia, including several announced at the September 
SCO Prime Minister's meeting, according to CIIS' Xia.  At the 
September meeting (ref B), China announced support for large 
development grants, extension of electrical grids, 
construction of a road and transport corridor and many other 
infrastructure projects, Xia said.  These projects are funded 
by a $900 million Chinese loan and by $720 million funded by 
central banks in the region which aims to become a SCO 
interbank network, Du said. 
 
¶8. (C) The SCO continues to expand from its origin as a 
regional security and terrorism prevention network to address 
good governance, law enforcement and other fields, Du said. 
March Uzbek-Kyrgyz border exercises, August military 
exercises involving Kazakhstan and China, and September 
anti-terrorism exercises in Tajikistan conducted under SCO 
auspices show that the SCO's framework for enhancing military 
cooperation is complete, Du said.  MFA's Wang said the joint 
exercises conducted this year focused on law enforcement 
aspects of counter-terrorism and counter-narcotics, often 
involving police forces.  An anti-terrorism military exercise 
slated to be held in the Russian Far East during the first 
half of 2007 will be coordinated by defense ministries and 
will be of much larger scale than this year's exercises, she 
said. 
 
¶9. (C) SCO leaders emphasized their interest in focusing on 
transportation and energy during their September meetings, 
but MFA's Wang said the SCO has no overall plan that guides 
recent, spontaneous ministry-to-ministry exchanges in other 
areas.  Cooperation among SCO ministers in governance and 
cultural aspects has expanded greatly, she said.  In 
September, China hosted a meeting of SCO Supreme Court 
Presidents, while in October SCO Education Ministers 
exchanged ideas at a session held in Beijing.  Prosecutors, 
customs officials, culture ministers and the heads of 
environmental protection agencies from SCO nations also met 
in China in recent months, the SCO Secretariat's Du said. 
 
China Lets Russia Take Lead But Expands Own Network 
--------------------------------------------- ------ 
 
¶10.  (C) Du disputes the premise that China is becoming a 
monopolistic leader within the SCO.  While China's fast 
economic development is obvious and has become a model for 
some Central Asian countries to emulate, Du said the SCO's 
emphasis on consensus decision-making prevents China or 
Russia from dominating the organization's deliberations. 
Moreover, China continues to defer significantly to Russia on 
relations with Central Asian states.  China knows that it 
cannot compete with personal relationships between Russian 
and Central Asian leaders that were built up over decades, Du 
said.  Renmin University Dean for international political 
economy Zha Daojiong noted that China was initially 
interested in donating more than $900 million to Central Asia 
this year for bilateral infrastructure projects.  But after 
scholars raised possible concern that Russia would view a 
 
BEIJING 00023353  003 OF 003 
 
 
larger donation as too aggressive and threatening to its 
regional interest, the Chinese government cut back its 
proposed contribution, Zha and CIIS' Xia separately told us. 
China has no intent to challenge Russian influence, Xia said, 
but cannot exclude the possibility that Russia is concerned 
about an expansion of China's relations in Central Asia. 
 
Color Revolutions Destabilizing, Scholars Say 
--------------------------------------------- 
 
¶11. (C) Changes of government are destabilizing in Central 
Asia, Xia told poloff.  China believes strong leaders in 
Central Asia are necessary to control the risk of Islamic 
fundamentalism and fears U.S. ideological intentions because 
future "color revolutions" might increase the chance that 
Islamic extremists take power, he said.  CICIR's Wang also 
expressed skepticism about U.S. support of "color 
revolutions" and asked whether the United States places a 
greater priority on democracy or on regional stability. 
Visiting EAP officials disputed China's view that stability 
and democracy are contradictory and emphasized that U.S. 
policy is designed to support both objectives. 
 
¶12. (C) INR analyst Knight and EAP officials Longenecker and 
Chernawski, whose meetings contributed to the substance of 
this message, did not have an opportunity to clear this cable. 
Randt