SCO summit: a Eurasia that no longer seeks US permission

In Bishkek, the 25th anniversary summit of the Shanghai Cooperation Organisation (SCO) concluded with Chinese President Xi Jinping proclaiming a "golden period" in ties between China, Kyrgyzstan, and Iran. Xi emphasized that the SCO's mission no longer requires permission from the United States, as the three nations lead the most heavily sanctioned economies in the world.

The summit highlighted two important objectives: a move towards local-currency settlements to bypass Western financial systems and progress towards an SCO Development Bank. China had first proposed the concept in 2010, with Xi reviving it at the 2025 Tianjin summit. Initially, Russia and India were hesitant about a bank dominated by China, but US actions have changed their minds.

Central Asian states require infrastructure capital that no other lender will provide at acceptable rates. The SCO Development Bank will operate outside the dollar-denominated financial system, offering a settlement architecture for sanctioned or wary states to move money outside the dollar-clearing system. The US Treasury's recent sanctions against Iran and its trading partners have made the SCO Development Bank an attractive option for these nations.

However, a US Treasury sanctioning a major Chinese bank would have severe economic consequences for Beijing, making de-dollarisation an attractive strategy for China. The SCO summit marked a significant step towards a post-dollar regional economic bloc, as it brings together nations facing US sanctions, creating a new avenue for economic cooperation and reducing reliance on the dollar.