Regional Politics in Economic Perspective: A Case Study of Shanghai Cooperation Organization

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This modern world cannot be encountered alone; therefore, states are preferring to involve in regional blocs. This is the century of trade and commerce. This is the era of economic development. It is due to regionalism in politics that SCO formed in the last decade of the 20th century with the initial name of Shanghai five with the purpose of the economic integration of Central Asian Republics. CARs were facing serious economic depression, and ethnic diversity in these states made the situation worse. Islamic fundamentalism was also posing a challenge to the ruling authorities in this whole region. On the other hand, the US wants to access the energy recourses of Central Asia. Although SCO members have a common interest in the exploitation of energy resources, expansion and improvement of transportation, expansion of trade links will move further towards the formation of a common economic market.                                                                                                            

Key Words

Regionalism, Regional Politics, SCO, Economic Cooperation, Regional                                 Development, China, Russia and CARs



Continuous socio-economic and cultural advancements depend upon nations’ intercourse. Although the basis of each nation’s culture is, of course, native but modern nation-state culture in all civilized societies is uniform which naturally affects the political relations among the regional states. In the words of H. Fisher,

The thirst for morality and truth- the two master passions of the noble nature, having nothing to do with the distinction of race, geography, or political constitution (Fisher).”

Regionalism in the sense of grouping states by a common bond of policy existed since prior to the League of Nations.  According to the covenant of LONs,

“There is no such thing which deems to affect the validity of international engagements, treaties of arbitration or regional understandings like the Monroe Doctrine for securing the maintenance of peace” (, n.d.).

Since very recently, the inadequacies of the UN, changing nature of the Cold War, the growth and expansion of Regional Organizations, the proliferation of nuclear weapons and the continued shrinking of the universe have kept the heat of regionalism at a relatively high level. It is therefore that by combining states into the regional grouping, a global balance of power will be maintained, and so persistence security of states will be ensured. Moreover, regional economic cooperation provides more efficient economic units than the smaller states, and these units can compete successfully in world markets (Margaret, 2005). On the other hand, uninterestingly, the frequent use of ‘veto power’ and non-cooperation of the world powers completely undermine the concept of collective security, which compelled smaller nations of the world to enter into regional arrangements for their security purposes.  That’s why article 52 of the UN states that members of the UN entering into regional setup shall make every effort to achieve pacific settlement of local matters and disputes through regional agencies before referring them to UNSC (Zacarias, 1996). 

The word “Region” is derived from the Latin word “Regio”, which means

An administrative area or broad geographical area distinguished by similar features”.

Regionalism refers to the process and structure of building up an area that has some politico-economic cum socio-cultural proximities among societies and states that exist together in a geographical entity.

In the words of Russel,

Region is a certain degree of cultural homogeneity.”

With the dissolution of the Soviet Union in 1991 and the end of the Cold War, regional movements around the globe were observed more deeply by the analysts and very few of them were found to be ethnically homogenous. At the commencement of ‘New World Order,” challenges like democracy, political freedom, human rights, peace and development are some of the hopes that proved in the hearts of developing societies, but still, the real issue was regional economic development and security challenges as they have become intensified which diffused mutual patience and sharpened consciousness in diverse peoples (Hashmi, 2012). Mukherjee value it in a positive context and expressed regionalism as,

“building the nation or national cohesion provided the political system is accommodative of timely meeting the demands of regions.”3

The term regionalism got importance in the current century both as a political, economic and social organization as well as a field of study. Attempts were made over this phenomenon to clarify the need, mean and explanation of the term regionalism. Regionalism is an ideology and political movement that aims to advance the causes or problems of regions (Ijaz Latif, 2004).

Shanghai Cooperation Organization, shortly termed as SCO, was formed in 1996 by the five countries, namely China, Russia, Kazakhstan, Azerbaijan and Tajikistan. After the Soviet disintegration, it was divided into many states. The border of these states is adjacent to China. There were many border disputes with these states. As a result, this organization was formed to settle the border disputes between China, Central Asian countries and Russia. Its initial name was Shanghai Five. Initially, this organization focused on settling the border disputes as these countries have porous borders, so these countries took joint steps for boundary demarcation and confidence-building measures. China has made a 7400 km long border of peace, progress and prosperity (Boland, 2011).

Shanghai Cooperation Organization (SCO) covers sixty percent of the landmass of Eurasia and nearly one-third of the world population. It covers nearly half of the human race. Countries consist of five civilizations, namely Chinese, Russian, Muslim, Hindu and Buddhist. SCO countries cover the arctic to Indian Ocean and Kaliningrad to shanghai. It covers an area from the South China Sea to the Baltic Sea and from the Persian Gulf to the Bay of Bengal.  Brzezinski said that control of Eurasian landmass is the key to global domination, and control of Central Asia is the key to control of Eurasian landmass. SCO is considered to be an ambitious organization. SCO countries did military exercises in 2007 near Russia Ural Mountains. Central Asian countries have 21.4 percent of oil reserves and 45 percent of natural gas reserves (Bailes, 2007).


The Need for Regional Organizations

There are many other regional organizations in Central Asia, apart from SCO. Central Asian Alliance was formed in 1994, which changed into the Central Asian Economic Community. This organization was later on named as Organization of Central Asian Cooperation. Then this organization was mixed with the Eurasian Economic Community[EAEC]. Another organization was formed by the President of Kazakhstan, i.e.Central Asian Countries Alliance[CAC]. The purpose of this organization is the economic integration of the Central Asian Republics.

Uzbekistan refused to become a member of CAC. Kyrgyzstan willfully agreed to accept the membership of CAC. Tajikistan showed a neutral stance towards the organization. The Central Asian states do not show consensus, but they realize a need to solve their problems multilaterally. Russia has established other organization with Turkey and Belus, i.e. Common Economic Space[CES]. (Aitmurzaev, 2013)


SCO Stand on Separatist Movements

SCO countries are facing a huge problem of separatist movements inside the countries which are striving for autonomy. There is a Chechen separatist movement in the northern Caucasus which is fighting a war against Moscow. East Turkestan Islamic movement in China, Xingjian Uyghur province is fighting to make a separate state, Islamic movement of Uzbekistan Hizbullah, which is backed by Taliban and working in Central Asia, is a huge problem for the region. India is facing the problem of many separatist movements. There are separatist movements in Pakistan that are striving for autonomy. All these separatist movements are facing a huge problem for SCO countries. Therefore, SCO has focused on the elimination of separatism from the region by adopting the policy of non-interference in each other affairs as these separatist movements are sponsored by outside countries. Therefore, SCO has emphasized adopting the policy of non -intervention in the internal matters of each other and focused on mutually friendly co-existence with each other purely on socio-economic uplift of one another and regional security enhancement. They have determined to work together for the elimination of separatism (Frost, 2009).

Gandhi has expressed such motives in the following words

Regionalism has often expressed itself in terms which are opposed to national unity and integrity and challenged the legitimacy of the state while the rulers see it as a threat to development, progress and unity” (Gochhayat, 2007).


Major Causes of the Formation of Shanghai Five

One of the reasons for the formation of shanghai five is the shared interest of the member countries. It was formed in April was the time when the member countries were facing some serious problems which were similar to each other. One of them was international prestige. China was criticized by the West and the US on issues of human rights and lack of democratization. The Tiananmen incident greatly affected the image of the country. Similarly, China was facing issues of separatism and extremism in the Xinjiang autonomous region. The extremists were struggling for the formation of East Turkestan. West was pressing China to accept its values of a democracy (wilson, 2004).

 If we look at the era of the formation of SCO, it was a hard time for Russia had gone through dismemberment and economic depression. It had transformed from a communist state and lost its international prestige. West categorized Russia as a third world country. The only distinction left with Russia was its security sector. Similarly, West criticized the human rights scenario in Russia. It also criticized Russia handling of the Chechen problem. NATO was advancing towards it. Therefore, Russia needed a platform to improve its international prestige. Kazakhstan, Kirghizia and Tajikistan also had a difficult time at home (Ambrosio, 2008). They had poor economies. They were facing serious economic depression; ethnic diversity in these countries made the situation worse. Islamic fundamentalism was also posing a challenge to the ruling authorities in these countries. These fundamentalists were posing a severe challenge to law and order of the countries. To make things worse, religious extremists challenged the secular political authorities in these countries (wilson, 2004). These countries needed some external support to control the internal situation of the countries, and the support was provided in the shape of SCO. These countries needed the support of China and Russia. These shared interests compelled the five countries to form a forum and get closer to each other (Ambrosio, 2008).



Shared Norms

The countries of SCO are weak states, and they need international support for their security. All of them believed in non-aggression, non-interference in their support. They support the territorial integrity of other states. Due to this reason, the states of SCO have shared norms. These similar norms compelled these states to come closer to each other and form SCO (Zhuangzhi, 2004). All of these states support the authority of UNO; they endorse the international non-proliferation regime. They are in favor of the ABM Treaty ratified by the US and USSR in 1972. They are against terrorism. They are against NMD. They condemn the nuclear arms race in South Asia. They vowed for the enhancement of all kinds of relations between them (Zhuangzhi, 2004).



The members of Shanghai five have adopted a pragmatic approach. After the formation of the shanghai five, they emphasized confidence-building measures. After building confidence, they decreased the number of troops on the border. After decreasing troops, they resolve the border disputes among each other. The next step of Shanghai five was to emphasize security measures. They strived hard and focused on the security of member countries and took security measures. They organized joint military exercises. They paid attention to the eradication of terrorism and fundamentalism. China is facing the problem of the separatist movement in Xingjian. Similarly, other SCO countries are also facing the problem of separatism and sectarianism (Frost, 2009). SCO took effective measures in curbing terrorism, separatism and sectarianism. The next step of the SCO was that it emphasized the economic sector. SCO countries like China and Russia extended economic support and help to the energy-rich Central Asian republics. China initiated joint projects with Central Asian republics for the import of energy and made pipelines. Russia also started projects with Central Asian republics (T.S, 2004). All these measures show that SCO has moved in a very pragmatic way from confidence building to security measures and then the economic sector. This is the reason behind the expansion of shanghai five into SCO (Frost, 2009).

The first era of this organization focused on solving disputes related to boundary settlement and arms reduction. From the era of 1996 till 2001, the organization held declarations for boundary demarcation and arms reduction anti-NATO alliance. This organization was given no attention by the US and West as they considered it of less significance. Initially, the organization was less active, and it caught less attention from analysts and policymakers. But later on, as the activation of the organization grew, it aroused feelings of concern in Washington and West as they called it a new Warsaw pact of the east. It was regarded as an anti-NATO alliance that is formed to curtail the influence of the in the region and a move towards the Multi-Polar world of Russia and China. If we analyze the evolution of this organization, we can categorize it into three Phases phase first described its formation till 2001, when its focus was mainly on border disputes and arms reduction in the region (Yuan, 2010).   

The second phase started in 2001 when its focus shifted to problems like terrorism, separatism and extremism. SCO has established RATS, i.e. regional anti-terrorist structure. The main purpose of this body was to take joint steps for the elimination of terrorism, separatism and extremism. SCO countries have taken a joint step to start military exercises. They have determined to take steps for not only eliminating terrorism but also the root causes of terrorism like unemployment, poverty, extremism etc. (Yuan, 2010).

In the third phase, the main emphasis cooperation as on economic development. In 2001 this organization was renamed as a shanghai cooperation organization. This organization condemned the terrorist attacks on the twin towers and supported the US in the war against terrorism. Currently, SCO is committed to fighting against terrorism, separatism and extremism. Afghanistan SCO has given utmost importance to Afghanistan as it has stressed the rebuilding of Afghanistan’s.problems of extremism and drug trafficking is mainly emerging from Afghanistan, which is the main problem for SCO countries as they are filtrating to Pakistan, China, and central Asia. Afghanistan is very important is a very important country strategically, and it has an impact on the whole region; therefore, SCO has given due importance to Afghanistan. Central Asian republic participation is limited in rebuilding efforts (Norling, 2007).

China has made the greatest efforts in rebuilding efforts and has invested three billion US$ in Ayanak Copper Mine Contract. Karzai has backed participation in rebuilding efforts. The third phase of the development of mainly of economic development. It took steps for the making of roads, railways, banks, and industry. In the first phase of the development of SCO, it laid emphasis on the settlement of border disputes. It held many declarations for border settlement and arms trafficking. In the second phase, its focus shifted towards the evil of terrorism and extremism (Norling, 2007).


SCO and the Western World

The US wants to access the energy recourses of Central Asia. SCO has concerns over the liberalizing and democratizing reforms of the US in Afghanistan as most SCO countries have autocratic regimes. China thinks of the US presence in Afghanistan as a move to contain China. The US has backed the color revolutions in Ukraine to change autocratic regimes in these countries. SCO wants the US to withdraw its military forces from the region as their continued presence may result in more involvement in the region (Norling, 2007).

They have growing concerns about the continued presence of US forces in the region US has applied for the membership of SCO, which has been denied. The most important move of SCO was when these countries urged the US to give a timeline to vacate Afghanistan and its bases in Central -Asia. This move aroused hostile reaction from the US, and the west US regarded SCO as an anti-NATO alliance and viewed it with suspicion. As a result, US policymakers became very active and signed a nuclear deal with India. In this way, the US wanted to break the influence of this organization and the rising power of China in the region by curtailing China through India. In July 2005 summit Astana, Kazakhstan, Uzbekistan, Kirgizstan showed their concern over foreign military deployment in central Asia and asked them a final deadline of troops withdrawal (Sachdeva, 2006).

If we analyze the relationship of SCO with the West, we come to know that many of the countries like China, Central Asian countries, India, Pakistan etc., have trading ties with the US and West. They are relying on the West for their trade. Therefore, they cannot think of a hostile relationship with the West or the US; therefore, the assumption of the US about SCO may be wrong. They call it an anti-NATO military alliance. On the other hand, none of the SCO countries is in a position to adopt an anti-western stance. Even China is cautious about it. On the other hand, SCO. Countries are emphasizing economic cooperation and regional security (Bailes, 2007).


SCO and Economic Development

Theory of Regionalism though promotes developments in all political and socio-economic sectors of all the regional states but here in the Central Asian region, as like all other regional arrangements (ECO, SAARC, ASEAN), the economic development was suffering from bilateral or multilateral border issues, water disputes, security clashes and budget allocation to SCO developmental projects among the member states due to which economic aspect of SCO was impacted negatively. The chances of making the free trade zone in the Central Asian region was less because of different political setups; for example, Russia was not in favour of free trade while China supported it. Although SCO members have a common interest in the exploitation of energy resources, expansion and improvement of transportation, expansion of trade links will move further towards the formation of a common market (K, 2006).  Besides Russia and China, the rest of the states of Shanghai five have very limited exports. Kazakhstan exports oil and metal, Kyrgyzstan mainly metal and gas, Tajikistan exports electricity, cotton and aluminium, Turkmenistan products are cotton and natural gas, and Uzbekistan exports are cotton and gold. There are many obstacles to the movement of goods in the region due to transport. Protectionist trade policies have also hindered trade due to high prices (K, 2006). 

In the 2003  ministerial meeting of SCO, an outline for multilateral economic and trade cooperation was adopted, formulating a macro program for the promotion of regional economic integration and free flow of commodities, capital, skills and services (Pomfret, 2006).

 China offered 900 million dollars in credit at preferential rates to other SCO members. The organization also emphasized the proper management of dams construction.

China has signed an energy agreement with Uzbekistan of 600 million dollars. In 2005 president Hu Jintao announced that China would set aside a developmental fund of 10 million dollars for training 1500 people from SCO countries in areas of economic, technical and humanitarian cooperation. China and Tajikistan have agreed on the construction of a 410 km Dushanbe –Ayni-shahriston-istaravshon-Khujand-buston motorway along the Tajik border, which will improve the communication links and border control in the region. China, Kazakistan, and Russia have started some joint ventures in the hydroelectric power sector (De Melo, 2001). Similarly, the trade volume has increased from 460 million $ to 1.82 billion $ from 1992 to 2000. In 2005 it reached 8.7 billion $. In 2006 the trade volume exceeded 10 billion $ when Russia and China became one of the important trade partners. A number of agreements concerning economic cooperation were concluded. The Eurasian university and economic forum were approved. In June 2006, ten more agreements were signed, which include the resolution of the SCO business council and an action plan of the SCO interbank association for supporting economic cooperation. President Nazarbeav announced that Russia and Kazakhstan had established a Eurasian bank that would act as a vehicle of financial enterprises. Projects involving quality identification were 127 custom houses, investment, telecommerce, telecommunication, traffic, transport and energy. Russian President Putin has initiated the creation of an energy club within SCO that would possess half of the natural gas reserves and almost a quarter of all oil reserves. If Iran is included, this project will bring prosperity to the region (De Melo, 2001).

Central Asia is one of the most energy-rich regions of the world. According to the 2008 BP energy survey, the five nations bordering the Caspian Sea hold 21.4 percent of the total world’s Natural gas reserves. Russian President Putin called for cooperation in the field of energy for the formation of an energy club. This energy alliance can prove to be very powerful, and it can become a threat for the West if Iran attains full membership. The oil percentage of SCO members and Iran is about 20 percent of the world resources, and gas is about 50 percent. According to the western analyst, it would be an OPEC with bombs (Marat, 2007).

The SCO has also established a program of multilateral trade and economic cooperation that encompasses over 120 projects, including energy and transportation cooperation. The SCO has created an organizational structure to link all such kind of economic activity. The SCO business council, which was founded in 2006, has a secretariat based in Moscow. The main function of the business council is to cooperate in trade,  credit, finance, science, transport, telecommunication to implement projects in different sectors of the economy in members territory and to assist in finding funding for and to take steps to improve economic cooperation between the member states (Cohen, 2006).

The SCO interbank association established in 2005 is also striving to increase the cooperation among major banks of the region. The IBA had agreed to credit a joint investment project worth 742 million by 2006. In 2009 IBA mentioned some of the ongoing activities like the interaction between major banks of the SCO countries. Under the umbrella of SCO, the member states can increase ties among one another. Kyrgyzstan, a northwestern province, in 2011, announced to start an economic partnership with Altai province. In 2009 the SCO finance ministers showed their commitment to cooperate with each other in the global financial crises. China announced a 10 billion credit line for SCO members to help them financially. This loan would focus on the transportation project and energy project. In 2004, China pledged 900 million dollars of preferential export buyer’s credit to other SCO countries. In 2007 Chinese govt. Has pledged 1.2 billion dollars of credit for SCO countries (Qingguo, 2007).

SCO countries have recognized the importance of transport for trade and business and improving the link between these countries. The construction of a road between the cities of Volgograd-astrakhan-atrau-baineu-kungrad and roads linking aktau-bainue-kungrad with the construction of bridge over kigach river in 2007. The SCO is also working with the Asian development bank and the UN’s economic and social commission for Asia and the pacific to promote trade and tourism. Economic focus is rising because it has often been noted in the international world that trade and business have been the pioneer in making links between the countries in spite of political tensions (Khon, 2013). Ninety-nine percent of all traffic from China to the EU is carried out through the sea (Emerson, 2009). The transoceanic routes have several benefits, such as low cost & high quality. But these goods are delivered 2 to 3 times slower than the land routes.. Therefore if the transportation is improved the goods can be delivered earlier. It the member countries build up the consensus of opinion, they can work on big projects like “The Great Silk Road” (Dunay, 2007).


The middle term goal (2010) was to put an effect on developing a stable framework of SCO and predictable and transparent values & procedures for trade & investment. Economic cooperation b/w member states have more often taken place in the form of projects. In order to further stimulate project activity in 2012, the PM. At Bishkek, the SCO summit has adopted the list of measures for advancing co-operative projects between 2012 and 2016. This includes projects in seven areas, such as trade and investment, customs, standardization process, agriculture, science and technology, IT and telecommunication & environmental protection. SCO has decided to develop an SCO development fund that will help SCO countries in economic cases. In spite of all the work done, the real potential has not been fully utilized. Among other factors which obstruct the collaboration of SCO states is the gap in the economic condition of SCO states having a big state like China& poor states like Tajikistan. China’s influence is greatly increasing in other countries as China is mainly carrying out bilateral projects with central Asian republics. One of the goals of China is to develop the central & western provinces. As these provinces all bordering the Central Asian republic, so the development of these countries will aid the economic activity of China between them (Lanteigne, 2006).

The main problem of Central Asian states is the lack of sufficient water resources. The main rivers of Central Asia are the Amu Darya and the Syr Darya. These rivers are flowing through Central Asian Republics, but later on, it became bone of contention on the disintegration of the USSR. The water issue is one of the main problems in the present century. In the past, the countries used to compete with each other for oil and gas, but now, due to the scarcity of water resources, it has become the main cause of contention. The main problem of Central Asian States is that there is no multilateral forum to solve the issue of power shortage. The power projects of Tajikistan will bring prosperity to the country and fulfil the need for energy. Central Asian states are facing the problems of poverty, lack of proper infrastructure and drug trafficking. SCO can be used as a forum to resolve the issues between the Central Asian countries if SCO supervise the power projects. It will solve the issue of energy production and water use in Central Asian Republics, which will bring prosperity to the whole region.

Precisely it can be assumed that SCO members are vigorously cooperating in almost all fields of socio-economic developments, and this cooperation is going stronger with the passage of time. In early 2019 this business index was increased by 17% ranging 305 billion $ in SCO trade, and the Program of Multilateral Trade and Economic Cooperation of the SCO Member States until 2035 has been so drafted to accelerate comprehensive and balanced economic development based on transparent, predictable and stable conditions.



If we look at the SCO states, these are all geographically linked with one another and have a close link of history and culture. CARs have centuries-old trade and cultural ties with each other.  Other and are interlinked with railways and roads. These countries can take a great benefit from the resources of each other and can get these resources with less price and delivered easily and in less time as compared to far-flung states of the other continents. This is the age of regionalism, and regional blocs are emerging in different parts of the world. This modern world cannot be encountered alone; therefore, states are preferring to involve in regional blocs. This is the century of trade and commerce. This is the era of economic development. States are focusing on developing their manpower. This region is gifted with immense natural resources. The only thing which is required is to extract these resources and use these resources for the prosperity of this region and the development of this region instead of benefiting the West. The thing needed is to utilize these resources in our own region and to benefit each other. Mutual trade and exchange will increase employment, give revenue to the states holding resources and fulfill the needs of importing states in less time and greater ease.

The construction of railway lines and roads and the involvement of a powerful country like China will greatly benefit the other countries of the region, which are developing countries and have struggling economies. Nearly all of the countries of the SCO region are developing countries with great potential for trade and rich in resources. This amalgamation of states is useful for both China and Russia as well. The involvement of India and Pakistan as members is also very benefiting for the region. Mutual trade between both states will be beneficial for them instead of importing products from other countries with high prices and taxes. In future, this area can also become a free trade zone due to which free movement of goods will take along the borders. This area will become an economic hub for investors. It can emerge as a strong bloc in future that can counter the West and can have a great say in international affairs. But the only thing needed is the will and commitment on the part of SCO members, especially Russia and China. Both the powerful states have to compromise on many issues and self-interest for the interest of this region. If both these states show vigilance and commitment for the long term benefit of this region and each other, It will greatly benefit the region. The time is not far that this century is going to be the Asian century. There are clouds of poverty in this region, and SCO can be a real rescue from poverty.


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