Night Watch

Shanghai Cooperation Organization

Afghanistan: The Shanghai Cooperation Organization will grant Afghanistan observer status and accept Turkey as a dialogue partner, Chinese President Hu Jintao said on 7 June.

Iran-Russia: Constructive cooperation between Iran and Russia will help bring peace and security to the region, President Ahmadi-Nejad said on 7 June during a meeting with Russian President Putin. The two met on the sidelines of the Shanghai Cooperation Organization summit in Beijing.

Iran-Pakistan: Iran is ready to trade Iranian gas and electricity for Pakistani goods, President Ahmadi-Nejad said June 7, according to Iranian news reports.

Iran-China: Iran is ready to deliver oil to China by constructing pipelines through Afghanistan and Pakistan in order to meet China's long-term energy demands, President Ahmadi-Nejad said on 7 June.

Comment: The SCO sumit covered many central Asian security issues. The organization is emerging as the coordinating body for a growing, influential community of states. The member states have both competitive and divergent strategic interests, but their leaders agree on the need for regional stability so that no power vacuum emerges after the US withdrawal from Afghanistan, which international terrorists might exploit, and that there is no uncertainty about leadership or direction in the future.

Iran used it to show the limits of sanctions and that it is not internationally isolated.

Russia and China appear to have used the SCO meeting as the forum for displaying their intentions to take advantage of the US statements about the strategic tilt to East Asia. The message is that since the US is deemphasizing the Middle East and Central Asia, the Russians and Chinese, as continental powers, are prepared to step into leadership roles in both areas. This explains the attention to Afghanistan as well as the Russia proposal on Syria, below.

The US strategic shift will be most visible in the redeployment of naval power. China demonstrated at the SCO meeting that it has the continental connections that will enable it to become less vulnerable to maritime pressure. That is the purpose, for example, of its extensive railroad construction projects in central Asia and to Iran and Pakistan, both of whom showed they are willing partners in giving China outlets to the Indian Ocean. It even co-opted Turkey which could lead to an overland Chinese outlet in the Mediterranean.

At this meeting, the SCO moved beyond local issues and staked a claim as an alternative leadership forum for Central Asia and for key Middle East issues.

Russia-Syria: In Beijing at the SCO meeting, Russian Foreign Minister Lavrov pushed to have an expanded international coalition to support the Un-sponsored peace plan for Syria. Lavrov proposed adding Turkey and Iran who he described as states with real influence on the contending parties. He specifically mentioned the Arab League, the Organization of the Islamic Conference and the EU.

The US Secretary of State replied that an international forum geared toward solving the crisis in Syria, as proposed by Russian Foreign Minister Lavrov, is difficult to envision because it could involve a country that supports the Asad regime's efforts to repress Syrians, referring to Iran.

Comment: Lavrov's proposal appears intended to shift the balance of going forward to the US, French and Saudi side of the Syrian proxy fight. His remarks about including states with real influence on opposition groups is a reaction to the leadership role assumed by some of the permanent members of the UN Security Council. He essentially challenged them with not being any more qualified to lead the peace than any other interested group of states. He also implied they were not serious because they had been selective in applying international pressure behind the Annan peace plan. Lavrov proposed that all interested states support a peace plan that applies equally to the opposition and to the government.

Sri Lanka-China: China and Sri Lanka are willing to work to improve bilateral relations and military ties, Commander of the Sri Lankan Army Lt. Gen. Jagath Jayasuriya and Chinese Defense Minister Liang Guanglie said on the 7th.

Comment: China and Sri Lanka have longstanding arms relations, as part of China's policy of establishing military ties with nearly every nation that shares a border with India. High level visits are arranged long in advance, but it seems more than coincidental that the Chinese Defense Minister is in South Asia at nearly the same time as the US Defense Secretary.

Spain: Update. Fitch Ratings Agency cut Spain's government debt rating to BBB from A and gave the country a negative outlook. Fitch cited Spain's association with the eurozone crisis as reason for the negative outlook. Fitch said Spanish banks would need €60 billion ($75 billion) to €100 billion to recapitalize. Fitch analysts reported that Spain's banks need much more liquidity than they thought and that Spain will remain in recession through 2013, vice the earlier estimate that recovery would being in 2013

The Fitch statement said, "Spain's high level of foreign indebtedness has rendered it especially vulnerable to contagion from the ongoing crisis in Greece." There is an increased likelihood that Spain will require external financial support, i.e., a bailout.

End of NightWatch

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