How an SCO development bank could shift the global financial order

At the 25th Shanghai Cooperation Organisation summit in Tianjin this week, Chinese President Xi Jinping urged member states to accelerate the creation of an SCO development bank, a proposal that could mark a turning point in Asia’s financial landscape. While headlines focused on the high-profile presence of Russian President Vladimir Putin and Indian Prime Minister Narendra Modi, Xi’s proposal points to the SCO’s evolution from a security bloc into a financial actor.

Xi also pledged US$1.4 billion in loans over three years to SCO states and called on the bloc to reject the Cold War mentality, rival blocs and bullying. The loans could be seen not just as Chinese largesse but also as a signal that the SCO is developing its own financial instruments to be less vulnerable to US pressure.

An SCO development bank could echo the Brics bloc’s New Development Bank, but with a sharper regional focus. Unlike Western-dominated institutions such as the International Monetary Fund or the World Bank, such a bank could offer credit lines, infrastructure funding and crisis assistance without conditions. For countries facing Western sanctions, including Russia and Iran, the mechanism could serve as a financial lifeline.

For Iran, the timing is especially critical. By late September, the “snapback” mechanism of UN Security Council Resolution 2231 could restore sanctions that were suspended under the 2015 nuclear deal; the resolution itself expires in mid-October. Either way, it would again cut off international finance, just months after Iran’s devastating war with Israel and the United States.

While Iranian President Masoud Pezeshkian did not give lengthy remarks in Tianjin, Tehran has emphasised that integration into SCO financial frameworks is essential for survival under renewed sanctions. The sanctions are likely to target not only Iran’s energy exports but also banking, shipping insurance and access to global payment systems, straining an already battered economy.

The political dimension is no less important. Iran’s admission to the SCO has been framed in Tehran as a strategic victory, signalling that, despite renewed US and European pressure, the country retains allies and avenues for cooperation in the East.

South China Morning Post