Putin Proposes Joint Bonds for Shanghai Cooperation Members

Post by : Monika

Photo: Reuters

Russian President Vladimir Putin has made a significant proposal at the Shanghai Cooperation Organisation (SCO) summit, held in Tianjin, China. He suggested that the 10-member countries of the SCO should issue joint bonds to strengthen economic cooperation and reduce dependence on Western financial systems.

The SCO, established in 2001, consists of China, Russia, India, Pakistan, Kazakhstan, Kyrgyzstan, Tajikistan, Uzbekistan, Iran, and Belarus. This organization is designed to promote collaboration in political, economic, and security areas among its members.

Purpose of the Proposal

The main goal of President Putin’s proposal is to create a unified financial approach that can help SCO countries work together more effectively. Joint bonds would allow these countries to pool resources for shared development projects such as infrastructure, energy, transport, and technology.

By doing this, the SCO nations can strengthen their economies and reduce reliance on Western countries for funding. Many experts see this as a step toward greater economic independence and stability for the member countries.

Issuing joint bonds means that all member nations would collectively invest in a single financial instrument. This strategy allows countries to share both the risks and benefits of economic projects. It also creates a sense of unity and encourages countries to work together toward common goals. According to analysts, such a move could help SCO countries attract investors who are looking for regional cooperation and long-term stability.

Shared Payment and Settlement System

Alongside the bond proposal, President Putin also suggested creating a shared payment and settlement system for SCO countries. This system would allow member states to conduct trade using their local currencies instead of relying on the U.S. dollar or the euro.

Currently, most international trade is dominated by these two major currencies, which gives Western countries significant control over global financial transactions. By using their own currencies, SCO countries can reduce the impact of international sanctions and strengthen their financial independence.

This shared payment system would simplify transactions among SCO countries. It would make trade faster, reduce costs, and encourage member states to increase commerce with each other. Such a system could be especially helpful for countries like Iran and Pakistan, which face restrictions in global financial networks. By using a SCO-based payment method, these nations can continue to trade and invest without relying on Western banking systems.

Proposal for a Dedicated Investment Bank

President Putin also recommended creating a bank dedicated to funding joint investment projects across the SCO. This bank would focus on supporting large-scale infrastructure projects, energy development, and other initiatives that require significant investment. The idea is that the bank would serve as a central financial institution to help coordinate funding for projects that benefit multiple member countries.

For example, the bank could finance cross-border energy pipelines, transportation networks, or industrial development zones. By pooling resources and expertise, SCO countries can undertake projects that might be too large or risky for a single country to handle alone. This initiative would also help the SCO strengthen economic ties among its members and create long-term opportunities for growth.

Economic Performance of SCO Countries

The SCO region has been showing steady economic growth in recent years. President Putin highlighted that the combined economies of SCO member states grew by an average of 5% in 2024. This indicates that the member countries have strong potential for further economic cooperation.

By introducing joint financial instruments and shared systems, the SCO could achieve even greater economic integration and sustainable development.

The proposal for joint bonds and other financial initiatives comes at a time when many countries are seeking to diversify their economic relationships. Western sanctions and global economic pressures have prompted emerging economies to look for alternative ways to secure trade and investment.

The SCO, with its large population and natural resources, is in a strong position to create a self-reliant economic bloc.

Importance of Economic Cooperation

President Putin emphasized that SCO countries have many shared interests, including energy security, trade, infrastructure development, and technology exchange. By strengthening financial cooperation, the organization can enhance stability and prosperity across the region. The joint bond initiative is seen as a way to formalize economic collaboration and encourage member states to work toward shared objectives.

Economic cooperation within the SCO could also lead to increased investment opportunities. Businesses in member countries may find it easier to access funding for projects across borders. In addition, the joint bonds and shared banking systems could attract international investors interested in long-term projects in the SCO region. By demonstrating a unified approach to economic development, the SCO can increase confidence in the region’s stability.

Reducing Dependence on Western Financial Systems

One of the main reasons behind President Putin’s proposal is to reduce SCO countries’ dependence on Western financial systems. Many member states face challenges due to sanctions, trade restrictions, or currency fluctuations.

Relying on the U.S. dollar or euro for trade and investment can leave countries vulnerable to economic pressures from Western governments.

By issuing joint bonds and using local currencies for trade, SCO countries can minimize these risks. A shared payment system and investment bank would provide additional safeguards, allowing member states to fund development projects without being constrained by Western financial rules. This approach could enhance the overall economic resilience of the SCO region.

Benefits for Member Countries

• The proposed initiatives offer multiple benefits for SCO countries:
• Stronger Economic Integration: Joint bonds and a dedicated investment bank encourage collaboration on projects that benefit multiple countries.
• Financial Independence: Using local currencies reduces reliance on Western financial systems and minimizes vulnerability to sanctions.
• Increased Investment: A coordinated approach to funding projects could attract both domestic and international investors.
• Infrastructure Development: Centralized funding could support large-scale infrastructure and energy projects across the SCO region.

Regional Stability: Economic cooperation strengthens political and social ties among member countries, promoting stability.

These benefits could help the SCO region become more self-reliant and competitive in the global economy. By working together, member countries can create opportunities for growth that might be difficult to achieve individually.

Challenges and Considerations

While the proposal has many potential benefits, there are also challenges to consider. Coordinating financial policies among ten countries with diverse economies and political systems can be complex. Each country has its own priorities, regulations, and financial stability concerns. Implementing joint bonds and a shared banking system would require careful planning, strong governance, and trust among member states.

In addition, countries would need to address differences in currency values, economic policies, and legal systems. For example, China and India have large and rapidly growing economies, while other SCO countries have smaller or less stable economies. Balancing the interests of all member states would be essential for the success of these initiatives.

Global Significance of the Proposal

The proposal reflects a broader trend toward economic multipolarity. Emerging economies are increasingly seeking alternatives to the dominant Western financial system. By creating joint bonds, a shared payment system, and an investment bank, the SCO could position itself as a significant economic bloc with greater influence in global trade and finance.

This initiative also sends a message to the global community that SCO countries are committed to strengthening economic independence. By working together, they can create a financial and trade network that supports sustainable growth and development. It may encourage other regional organizations to explore similar cooperative financial measures.

President Vladimir Putin’s proposals at the SCO summit represent a major step toward greater economic cooperation among member countries. The introduction of joint bonds, a shared payment and settlement system, and a dedicated investment bank could transform how SCO countries fund development projects and conduct trade. These initiatives aim to reduce reliance on Western financial systems, strengthen economic stability, and promote shared prosperity.

If implemented successfully, these measures could make the SCO a more integrated, resilient, and influential economic bloc. The proposal highlights the importance of collaboration, financial independence, and regional development. As member countries continue to discuss and plan these initiatives, the SCO could emerge as a strong force in global economic governance, providing a model for economic cooperation among emerging economies.

SCO (Shanghai Cooperation Organisation)