SCO Summit Marks a Shift in Global Power Dynamics

The latest summit of the Shanghai Cooperation Organisation held in Tianjin, China, underscored a sea change in the alignments of world powers. The camaraderie exhibited by Indian Prime Minister Narendra Modi, Russian President Vladimir Putin, and Chinese President Xi Jinping signaled a different geopolitical dynamic than what most expected to unfold in 2025. The summit, featuring a groundbreaking agreement for the Power of Siberia 2 (POS-2) pipeline that will transport Russian natural gas to China, represented much more than a diplomatic photo op. It symbolizes a transformative moment in international energy politics, highlighting Europe’s decreasing relevance, growing challenges to US LNG exports, and the collapse of the US strategic dominance over Russia which was mainly conceptualized during the volatile 1990s.

This Tianjin meeting manifested a nascent geopolitical status quo. The increasingly aligned interests of India, Russia, and China, show evidence of solidifying energy alliances beyond just diplomatic niceties. The “binding memorandum” for POS-2, designed to carry 50 billion cubic meters of gas from Russia’s Yamal fields to China through Mongolia, is integral to this shift. The POS-2 pipeline will tap the same Arctic reserves in Yamal that fueled Germany’s industry boom for decades, diverging from the Power of Siberia 1 which sources gas from Irkutsk (north of Mongolia). The decades-long prosperity of Germany hinged on a simple understanding: Russia provided economical gas, and in return, reaped the benefit of high-quality German manufactured goods.

The current energy landscape has been shaped—faster than expected—by Russia’s decision to focus on Asia, which was further expedited by Western sanctions following the Crimea annexation in 2014 and the 2022 invasion of Ukraine. When the planned expansion of existing pipelines and POS-2 become operational around 2030, Russia is expected to provide China with up to 100 billion cubic meters (bcm) of gas each year. This volume is considerably less than the peak 150 bcm supplied to Europe and is priced lower to accommodate China’s sensitivity to cost. Although this landscape shift implies lower revenue due to lower volume and prices, it greatly bolsters Russia’s economic security following the sabotage of the Nordstream pipeline.

For India, the Shanghai Cooperation Organisation summit presented an opportunity to show resistance to outside pressures. Stung by President Trump’s decision to raise trade tariffs from 25% to 50% in response to India’s purchase of Russian crude oil, Prime Minister Modi was clear about India’s new approach. Never before has a world leader, particularly of an economy the size of India’s, reportedly avoided phone calls from the US President. However, PM Modi’s refusal to answer President Trump’s calls indicates a shifting geopolitical current. Indeed, India is not only fortifying diplomatic connections with Russia and China but also plans to ramp up its imports of Russian oil, thereby rebuking US secondary sanctions.

Taking a stand against what it perceives as double standards in US policy, India is unyielding. As pointed out by Foreign Minister S. Jaishankar during his recent Moscow visit, the United States singles out India for punishment with high tariffs while China, importing more Russian oil, and Europe, the largest consumer of Russian gas, face no such action. Despite continued warfare in Ukraine, the US and European Union still import large quantities of Russian energy and various materials, from liquefied natural gas to enriched uranium. The outcomes of the sanction regime are far from the initial predictions.

In 2022, European Commission President Ursula Von Der Leyen derisively commented that Russia’s industry was in total disarray. She suggested that Russia was so desperate that it was removing chips from consumer electronics to fix military equipment. Fast forward to the present and we see Germany, France, and the UK grappling with economic and political struggles, while Russia shows relative stability. Russia has skillfully pivoted eastwards, cultivating energy and trade relations with China and India, as well as nations like Turkey and Brazil. The POS-2 deal, while still pending final details, demonstrates Russia’s triumph in securing alternative markets for its gas supplies.

Ironically, perhaps the largest strategic misjudgment was committed by the US in its dealings with India. Over the past 20 years, India and the US were fostering relations, motivated by shared concerns about China’s ascendancy and India’s economic rise. Relations were further bolstered by increased collaborations such as the Quad. India, long entrenched in defense cooperation with Russia, was perceived by the US as a possible Western ally-in-the-making. However, President Trump dealt a severe blow to this assumption by levying an additional 25% tariff rate on Indian exports to the US due to India’s Russian oil purchases. The same treatment was not meted out to China or Europe, despite their higher imports from Russia.

The EU’s self-defeating efforts to punish Russia provide a case study in unintended consequences. In the pursuit of punishing Russia, the EU cut itself off from inexpensive Russian gas shipped right to its doorstep. As a result, Europe has had to turn to pricier LNG imports. Western sanctions that were meant to devastize Russia seem to have inflicted more harm on Europe’s economy. The POS-2 arrangement only compounds this significance. Germany, once the locomotive powering European growth, now confronts potential deindustrialisation and higher unemployment.

Western overconfidence may well have orchestrated its own marginalisation, permanently altering the global energy landscape. Time will tell if these shifting alliances and fortunes can be reversed. Lessons learned from past actions will hopefully inform future decisions in a world where energy is increasingly tied to political and economic fortunes.