The SCO’s Quiet Revolution: A Challenge to US Dominance and a Lifeline for Iran
By Mohamad Hammoud
Lebanon – For over seventy years, the United States has maintained its position as a dominant force in the global order through military power, the dollar and institutions such as the IMF and World Bank. However, this dominance is no longer guaranteed. The Shanghai Cooperation Organization [SCO]—a bloc led by China and Russia and joined by India, Turkey and Iran—is quietly building a parallel system that threatens to erode US economic and strategic primacy. What began as a modest security forum in Central Asia has evolved into a powerful coalition that combines population size, energy resources, and financial innovation, becoming something the West can no longer overlook.
A Parallel Operating System
Unlike NATO, the SCO is not a military alliance. Its focus is economic and strategic: new payment systems, energy contracts outside the dollar, and development finance immune to US sanctions give member states a way to operate independently of Washington. This approach does not seek direct confrontation but offers a deliberate alternative to the existing system.
The impact of this shift is most evident in trade flows. Russia now prices much of its energy exports to India and China in non-dollar currencies. Since joining in 2022, Iran has linked its banks with Russia's SPFS and China's CIPS, alternatives to SWIFT that already facilitate tens of billions of dollars in trade. While this network is not yet a reserve currency, it functions as a rival clearing system, gradually diminishing the reach of US sanctions.
These financial innovations naturally reinforce SCO influence over energy markets, where the stakes are even higher. The organization’s control over nearly half of the world’s gas reserves and a fifth of its oil gives it leverage far beyond trade settlements. This power is visible in yuan-based sales of Iran’s South Pars gas and Russia’s Yamal LNG, which steadily put downward pressure on the Brent benchmark. A 27-year Chinese contract to purchase Iranian LNG in yuan underscores how these moves are beginning to challenge the petrodollar system that Washington has relied on since the 1980s.
Iran: From Sanctioned to Strategic Pivot
No country has more to gain than Iran. Before 2022, its non-oil exports averaged $13 billion annually. In the year after joining the SCO, non-oil exports to member states alone reached $11.7 billion, much of it comprising petrochemicals shipped via the INSTC corridor to Russia and India. Iranian banks, which were once locked out of dollar clearing, are now being courted by Moscow and Beijing for joint ventures. US Treasury officials estimate a sanctions “leakage rate” of 30–35%, which is sufficient to dilute leverage over Iran's nuclear policy.
Equally significant is psychology. For decades, Tehran was excluded; now it sits at a table with China, Russia and India, securing loans in hard currency without Western conditions. This is not just economic relief but strategic breathing space.
The US Dilemma
For Washington, even small shifts away from dollar dominance carry real consequences. Treasury officials warn that the SCO trade could reduce annual dollar-denominated volumes by 0.3–0.5 percentage points by 2030—roughly $100–$150 billion less daily demand for dollar liquidity—resulting in higher borrowing costs and greater difficulty in financing US deficits.
But the challenge is not only economic. SCO influence extends into security and diplomacy, a subtler yet equally consequential front. The organization is not NATO, but it conducts joint drills and recently showcased drones and missiles in Beijing. Its real leverage lies in diplomacy: the charter rejects “politicization of energy cooperation,” a thinly veiled promise of deals free from human-rights or non-proliferation strings. For many in the Global South, the appeal is unmistakable: ports built without IMF austerity, LNG contracts without democracy clauses.
Scenarios for the 2030s
The most plausible trajectory is fragmented globalization, where the world splits into two trading spheres: a dollar-euro zone built around US and EU regulatory standards, and a yuan-ruble zone anchored by the SCO. Commodities would clear in both, but technology, data, and finance would flow in separate pipes. Iran would emerge as a swing supplier, able to arbitrage between blocs and resist coercion.
Another possibility is energy price bifurcation. If enough LNG and crude contracts migrate to yuan pricing, Brent could lose its role as the global benchmark, replaced by a Shanghai-based “SCO Basket.” A dual-price regime would raise hedging costs for Western refiners and airlines, effectively acting as a tax on US consumers.
The World Ahead
The SCO is not about dramatic declarations or wars. Its revolution is quiet, systemic, and potentially more corrosive to US dominance than open confrontation. Creating parallel financial and energy structures makes US economic statecraft optional rather than obligatory.
For Iran, the story is the opposite: a regime long cornered finds itself with room to maneuver, partners to trade with, and a voice in shaping future rules. That alone marks a geopolitical shift. The SCO may not yet be a household acronym in America. Still, if its trajectory holds, it will redefine how power, money, and energy flow across the globe—and how much longer US dominance can be taken for granted.
