Founded in 2001 at the initiative of China and Russia, the Shanghai Cooperation Organisation (SCO) has emerged as the largest regional organization in Asia’s geopolitical landscape. Its roots, however, stretch back to the ‘Shanghai Five’ Agreement of 1996', which united China, Russia, Kazakhstan, Kyrgyzstan and Tajikistan to strengthen border security and mutual trust. With Uzbekistan’s entry, the grouping evolved into a permanent institutional structure and was formally renamed the SCO in 2001. Initially, it comprised six members: China, Russia, Kazakhstan, Kyrgyzstan, Tajikistan, and Uzbekistan. Over time, its ranks expanded to include India, Pakistan, Iran and most recently Belarus, which became the 10th member on July 4, 2024. Afghanistan and Mongolia hold observer status, while Nepal and 13 other countries are dialogue partners. Today, the SCO has grown beyond a regional bloc into a significant global power centre. The statistics underscore its weight: As of 2024, SCO covers approximately 42% of the world's population—about 3.45 billion people. Collectively, the bloc accounts for nearly $23 trillion in GDP, more than 20 percent of global output. It also commands a fifth of the world’s oil and gas reserves. Unsurprisingly, Western nations increasingly view the SCO not just as a security platform but as an economic and energy powerhouse.
Nepal has been a dialogue partner since 2016, taking part in workshops and ministerial meetings but playing only a limited role. This is why Prime Minister KP Sharma Oli’s current visit to China is being closely watched. The SCO Summit in Tianjin (August 31–September 1) could decide whether Nepal advances to full membership—or at least observer status. This question must be understood against Nepal’s geopolitical position. Wedged between India and China, Nepal has traditionally pursued “balance and non-alignment.” Yet shifting power dynamics are reshaping the region. China is extending influence through the Belt and Road Initiative (BRI). India, frustrated by US tariffs, has sought closer cooperation with Russia and China. Meanwhile, the deepening partnership among Russia, Iran and China has unsettled Western powers. Within this flux, the SCO is consolidating its role. For Nepal, deeper engagement with the SCO presents both opportunities and risks. On the opportunity side, it could reduce overdependence on India, which accounts for more than 60 percent of Nepal’s trade—much of it heavily imbalanced. SCO connectivity could open routes to China, Central Asia and Iran, offering markets for Nepal’s hydropower, tourism, and exports. The scale of the opportunity is vast: in 2023, China’s trade with SCO member states reached nearly $890 billion. Yet the challenges are real. Longstanding disputes—India-China border tensions, India-Pakistan hostilities and Russia-West frictions—make the SCO internally fragile. Critics call it “ambitious but weak,” with lofty declarations but limited implementation. For Nepal, navigating such rivalries requires exceptional caution. Adding to the complexity is Nepal’s own border dispute. The India-China agreement to resume trade through Lipulekh has heightened public concern.
Prime Minister K P Oli has raised the matter with Chinese and Indian leaders during the bilateral meeting held with President Xi Jinping on the sideline of the SCO Summit. Silence could risk weakening Nepal’s sovereignty narrative. In this wider geopolitical game, Nepal has the chance to project itself not as a “strategic playground” for rival powers but as a “strategic bridge” between them. Achieving this will require a careful balance: sustaining historic and cultural ties with India, seizing economic openings with China and continuing cooperation with Western partners. Thus, the SCO Summit is not just about Nepal’s membership status. It is about defining its diplomatic vision. Oli must clearly articulate Nepal’s priorities—trade diversification, investment attraction, hydropower exports and stronger regional cooperation—while firmly upholding territorial sovereignty. Ultimately, Nepal’s challenge is to balance opportunity with prudence. If guided by long-term vision rather than short-term gain, SCO engagement could become not just a symbolic gesture but a strategic instrument for Nepal’s development and security. Oli’s visit to Tianjin may prove to be a critical test of whether Nepal is ready to play that larger role.