The Global Review - Farid Novin

The 26th Shanghai Cooperation Organization Summit and the War Economy of the Persian Gulf

A G20 Strategic-Economic Assessment of Energy Security, the Iran War, the Strait of Hormuz, and the Emerging Multipolar Order

Farid Novin

Introduction: A Multipolar Order Forged Inside an Active War

The 26th Meeting of the Council of Heads of State of the Shanghai Cooperation Organization, held in Bishkek on September 1, 2026, cannot be read in isolation from the war that has consumed the Persian Gulf for more than six months. Any assessment that treats the SCO summit as a discrete diplomatic event, separable from the military and energy crisis unfolding simultaneously in the Strait of Hormuz, will misjudge both the summit's significance and the trajectory of the global economy it is meant to influence. This revised assessment corrects that error. It restructures the analysis around three interlocking developments that the original draft treated too lightly: the Iran war itself, now in its seventh month; the Strait of Hormuz, whose intermittent closure has become the defining supply-side shock of the 2026 global economy; and the energy-market mechanics through which that shock has propagated into inflation, shipping costs, and sovereign strategy from Doha to Beijing to Ottawa.

The broader historical argument still holds. The collapse of the Soviet Union in 1991 produced an expectation, only partially fulfilled, that globalization would draw China, Russia and the Eurasian periphery into a Western-centred economic order anchored by the dollar and the Bretton Woods institutions. China combined market integration with an increasingly autonomous industrial and financial base. Russia moved from post-Cold War accommodation toward strategic confrontation. Central Asian states pursued multi-vector diplomacy. India maintained strategic autonomy while deepening ties in every direction. The Shanghai Cooperation Organization — founded as the Shanghai Five in 1996, renamed and expanded in 2001, and enlarged through the accessions of India and Pakistan in 2017, Iran in 2023, and Belarus in 2024 — is one institutional expression of that drift toward a polycentric system.

What has changed since the original draft is not the direction of that structural trend but its acceleration under fire. Since February 28, 2026, a shooting war between the United States and Israel on one side and Iran on the other has intermittently closed the world's single most important energy chokepoint, destroyed part of Qatar's LNG export capacity, driven Brent crude from roughly $65 a barrel before the war to a peak above $140 in March and back to the mid-$90s by early September, and triggered a renewed U.S. sanctions campaign — Operation Economic Outcast — explicitly designed to sever Iran from its remaining trading partners. The question for the G20 is no longer only whether the SCO is becoming one of several institutional pillars of a multipolar system. It is also whether that system can absorb a prolonged war fought through the world's most concentrated energy artery without a far more damaging global economic shock than has occurred so far.

I. Bishkek 2026: The SCO Moves from Regional Organization Toward Systemic Actor

The Bishkek summit marked the SCO's twenty-fifth anniversary under the theme "25 Years of the SCO: Together for Sustainable Peace, Development and Prosperity." The organization reaffirmed the UN Charter, sovereignty, territorial integrity, non-interference and a more representative system of global governance, and the Bishkek Declaration again described the SCO as a non-military-political organization rather than an alliance directed against any third country. The official SCO account records that twenty-eight documents were approved at Bishkek, including the Declaration itself and amendments to the organization's Charter.

This self-description is strategically significant, and it becomes more so against the backdrop of a live regional war. The SCO is deliberately not building a NATO-style collective-defence architecture. Its comparative advantage lies in creating a political and economic space in which members can cooperate without accepting a single hegemonic security guarantor — a model that looks considerably more attractive to Persian Gulf-adjacent and Central Asian states in September 2026 than it did a year earlier, precisely because they have spent six months watching what happens to a region when a hegemonic security actor decides unilaterally that a ceasefire is "over."

Describing the SCO as an anti-Western bloc remains analytically misleading. India remains deeply integrated into Western markets. Türkiye remains a NATO member actively supplying Ukraine with defence technology. Kazakhstan sustains extensive ties with Europe, China and Russia simultaneously. The organization's importance continues to derive from its heterogeneity: it demonstrates that states can cooperate institutionally without a common ideology or strategic alignment — including, now, without a common position on how to end the war next door to several of its own members.

II. The Iran War: Chronology of Escalation, Collapse and Renewed Fighting

A rigorous G20 assessment requires a precise chronology, because the war's on-again, off-again character is itself the central strategic fact shaping energy markets and sovereign behaviour. The conflict began on February 28, 2026, when the United States and Israel launched coordinated strikes against Iranian military, government and nuclear-linked infrastructure, killing much of Iran's senior leadership including then-Supreme Leader Ali Khamenei. Iran retaliated with hundreds of missiles and thousands of drones against Israel and against states hosting U.S. forces. Within days, tanker traffic through the Strait of Hormuz collapsed by roughly 86 percent, Brent crude surged from the high-$70s toward $100, and Saudi Aramco was forced to temporarily halt operations at its Ras Tanura refinery after a drone strike. By mid-March, with the IRGC announcing that the strait was closed to shipping bound to or from the United States, Israel and their allies, Brent briefly touched levels above $140, the highest since 2008, prompting the International Energy Agency to coordinate a 400-million-barrel release of strategic stockpiles among its members.

A first ceasefire, mediated by Pakistan, held from April 8 and was extended indefinitely by President Trump on April 21, even as the United States simultaneously imposed a naval blockade on Iranian ports on April 13. Negotiations over a permanent settlement culminated on June 17, 2026, when Trump and Iranian President Masoud Pezeshkian signed the Islamabad Memorandum — a fourteen-point framework, brokered substantially by Pakistan's army chief and mediated diplomatically through Switzerland, signed by Trump at the Palace of Versailles following the G7 summit and by Pezeshkian in Tehran the following day. The memorandum called for an immediate and permanent end to military operations, a sixty-day period of toll-free commercial passage through Hormuz while Iran negotiated a longer-term maritime framework with Oman and Persian  Gulf states, removal of the U.S. naval blockade within thirty days, sanctions relief and an economic reconstruction package for Iran, and a parallel sixty-day negotiation over the disposition of Iran's stockpile of highly enriched uranium. CENTCOM announced removal of the blockade on June 18, and Chinese purchases of Iranian crude — which the shipping-intelligence firm Windward had put at roughly ninety percent of Iranian exports and more than 150 million barrels en route as of late March — began moving more openly under a general licence issued by the U.S. Treasury.

The truce proved short-lived. On July 7, Iran fired on three commercial vessels transiting Omani waters near the strait after they bypassed an Iranian-mandated vetting route; U.S. Central Command struck Iranian targets in response, and Trump declared the memorandum "over" the following day at the NATO summit in Ankara, resuming an aerial campaign that continued for nearly two weeks while Iran retaliated with missile and drone strikes against U.S.-linked targets in Bahrain and Kuwait. A further pause over the weekend of July 25–28 collapsed within days when Iran launched missiles at U.S. forces in Jordan. Through August, the pattern repeated in miniature: Trump repeatedly claimed a deal was "imminent" — on one occasion crediting intervention by Saudi Arabia, the UAE and Qatar for a paused strike — only for Iranian officials to deny that substantive talks were under way. By late August the Council on Foreign Relations was assessing that the administration had no military path to a decisive outcome and faced a war that had become deeply unpopular domestically even as it lacked an obvious off-ramp.

The most recent escalation is acute. On August 24, Treasury Secretary Scott Bessent announced Operation Economic Outcast, a campaign to close sanctions-evasion channels supporting Iranian oil, shipping, gold and digital-asset revenue. Days later, on August 31, Bahri's Saudi-flagged tanker Sidr was struck while transiting Hormuz, killing two Filipino crew members — the first commercial-shipping fatalities since fighting resumed in July — an attack Saudi Arabia attributed to Iran. The United States conducted further strikes, and on the night of September 2–3, Iran's military claimed missile and drone strikes on Ahmed al-Jaber Air Base in Kuwait and Al Minhad Air Base in the UAE; Kuwait's foreign ministry condemned the attacks as a violation of the UN Charter and of Security Council Resolution 2817, while U.S. officials said the strikes hit no facility housing American forces. Trump stated the United States was prepared to strike again at any time while predicting the renewed exchange would not last long, and separately mused publicly about renaming the waterway. By September 3–4, CENTCOM's cumulative blockade count had reached eighty-seven interdicted vessels, Vice President JD Vance was publicly resisting the word "war" to describe the conflict while declining to predict it would end before the November 3 midterms, and Brent had eased to roughly $95 a barrel after touching a six-week high above $97. As of this writing, no third night of Iranian strikes had followed, and U.S. envoys were reportedly preparing renewed shuttle diplomacy to both Moscow and Kyiv on the separate but increasingly entangled question of Ukraine, even as the Iran track remained without a functioning ceasefire.

III. The Strait of Hormuz: Anatomy of a Global Energy Chokepoint Under Fire

Before the war, roughly twenty percent of the world's seaborne oil trade and a comparable share of global LNG trade transited the Strait of Hormuz, a waterway only thirty-four kilometres wide at its narrowest point between Iran and Oman. The Congressional Research Service's most recent assessment for Congress notes that a sustained disruption of that scale would materially affect global oil supply and could produce rapid price escalation as buyers scrambled for alternative barrels, drew down commercial inventories and waited for tanker and insurance markets to regain confidence — a description that has proved accurate almost to the letter over the past six months.

The strait has not been closed continuously; it has cycled between near-total shutdown and partial, high-risk reopening in step with the war's ceasefire cycle. Traffic collapsed within a day of the February 28 strikes and remained near zero through the U.S. naval blockade of Iranian ports from April 13 to May 29. Following the Islamabad Memorandum, tanker movement resumed rapidly — Kpler recorded at least one Iranian crude-laden tanker transiting the strait daily between June 18 and 22 — before collapsing again after fighting resumed on July 8; CNN reported that the strait had been "impassable" from that date, even though roughly 200 million barrels had moved through during the intervening lull. By late August, U.S. Energy Secretary Chris Wright's public assertion that the strait was open and oil was flowing normally stood in direct contradiction to Iranian statements and to third-party ship-tracking data, which showed roughly half the traffic volume the administration was claiming — a discrepancy that itself illustrates how contested and opaque the state of the waterway has become.

The mine-clearance effort has been a distinct and underreported strand of the campaign. U.S. officials confirmed in late August that the Navy, using underwater drones and private contractors, had identified and dealt with more than one hundred suspected mines along the Hormuz Traffic Separation Scheme since the war began, even as Trump warned that any Iranian vessel laying additional mines would be destroyed. War-risk insurance premiums for vessels transiting or approaching the strait rose sharply through the spring, and very large crude carrier freight rates briefly exceeded $400,000 per day in early March — a fourfold-plus premium over pre-war norms — while LNG tanker rates in both the Atlantic and Pacific basins jumped more than forty percent in the same window, according to contemporaneous market intelligence. Major carriers, including Maersk, suspended Hormuz transits outright at points of acute risk, and marine insurers withdrew coverage for the route entirely during the worst weeks of the crisis.

The human and commercial toll extends beyond the tanker fleet. The UN's International Trade Centre found that combined export volumes across twelve energy- and industry-linked product categories fell fifty-four percent between April 2025 and April 2026, with LNG recording the steepest contraction of any category at ninety-five percent; crude petroleum export volumes fell by roughly twenty-eight million tonnes over the same period, refined petroleum by 7.3 million tonnes, and LNG by 5.5 million tonnes. Casualty figures compiled by open-conflict trackers, while imprecise, place total seafarer deaths attributable to attacks on shipping at roughly twenty, with a further port worker killed and dozens injured — a toll that includes the two Filipino crew members killed aboard the Sidr on August 31, the first commercial-shipping deaths recorded since the July resumption of hostilities.

IV. Oil Markets Under Siege: Price Dynamics and the Policy Response

The oil-price trajectory since February 28 tracks the war's ceasefire cycle almost exactly, which is itself the most important empirical fact for G20 macroeconomic planning: this is not a single supply shock but a repeated one, arriving and receding with the diplomacy. Brent rose roughly eight percent to near $79 on the opening day of the war and continued climbing through March, briefly testing $102 as the new Iranian leadership signalled the strait would remain closed and GCC producers cut output by an estimated ten million barrels per day as storage capacity was exhausted; the IEA characterised the resulting disruption as the largest in the history of the oil market and coordinated the release of 400 million barrels of strategic stockpiles among member states. A further spike carried Brent above $140 in early April on renewed escalation threats before easing as Oman-brokered transit arrangements offered temporary relief.

The U.S. Energy Information Administration's Short-Term Energy Outlook was revised sharply upward as the scale of the disruption became clear: its Brent forecast for 2026 rose from $58 a barrel — the pre-war baseline — to $79 within a single month in early March, alongside an upward revision to expected U.S. crude output, to 13.6 million barrels per day in 2026 and 13.8 million in 2027, reflecting the incentive higher prices created for American producers to fill part of the gap. Brent eased through the June ceasefire toward the mid-$80s, then resumed climbing after the July 8 collapse, moving through the high-$80s and low-$90s over July and August on what analysts described as a stalemate between Washington's claim of "total control" over the strait and Tehran's insistence that it alone would decide the terms of passage. By early September, Brent was trading in the mid-to-high $90s, having touched a six-week high above $97 amid the September 1–3 exchange of strikes, with the world's largest tanker operator, Japan's Mitsui O.S.K. Lines, publicly stating it expected Hormuz disruptions to persist beyond year-end and global fuel prices to remain elevated into 2027 given damaged refining capacity in Persian  Gulf and in Russia and insufficient spare capacity elsewhere to absorb the shortfall. The EIA's own August outlook projected that Middle East oil production would not return to pre-conflict norms until early 2027 and forecast a 2026 Brent average near $87 a barrel — a figure that, if realised, would still represent roughly a fifty percent premium over the pre-war baseline.

For G20 finance ministries, the operative lesson is that oil-price volatility of this magnitude and duration is now a standing input to inflation forecasting rather than a transitory shock to be looked through. Six months of episodic Hormuz disruption have already pushed global food prices to their highest level since 2022 through fertiliser and shipping-cost channels discussed further below, and the persistence of elevated war-risk freight rates means that even a durable ceasefire would not immediately restore pre-war logistics costs.

V. The LNG Shock: Qatar, Ras Laffan, and the Reconfiguration of Global Gas

The natural-gas dimension of the crisis has received less attention than oil but may prove more structurally consequential, because LNG supply chains lack the flexibility of the crude oil market. Iranian drone and missile strikes on Qatar's Ras Laffan and Mesaieed facilities in early and mid-March 2026 damaged two LNG production trains at Ras Laffan — the world's largest LNG export facility — curtailing roughly 12.8 million tonnes of annual capacity, about seventeen percent of Qatar's total LNG exports, and prompted QatarEnergy to declare force majeure on a swath of long-term supply contracts, including a 6.4-billion-cubic-metre annual contract with Italy's Edison that has since seen twenty-one cargoes affected, equivalent to roughly 2.7 billion cubic metres of gas withheld through early September alone.

The physical damage compounded a transit problem that has proved just as persistent as the oil-shipping disruption. Qatari LNG shipments through Hormuz collapsed by roughly ninety-seven percent at the crisis's worst point; a brief reopening in June allowed QatarEnergy to move approximately forty loaded LNG tankers, some 2.8 million tonnes, through the strait before the July 8 collapse reversed the gain, with at least two Qatar-linked LNG carriers documented reversing course near the strait in late June after Iranian forces warned against transit outside an approved corridor. By late August, QatarEnergy was extending force majeure notices into mid-October even as it began notifying buyers that deliveries could resume at roughly fifty percent of contracted annual quantities — a figure that independent analysis from Energy Aspects finds broadly consistent with a full-year 2026 Qatari LNG export forecast of 38.7 million tonnes, roughly half of pre-conflict capacity.

The demand-side consequence is the more novel finding of the crisis. Asian spot LNG prices reached their highest levels in more than three years, with buyers paying as much as twenty-two dollars per million British thermal units through much of July, and the consultancy Gas Strategies now forecasts that global LNG demand could contract eight percent between 2025 and 2026 — the industry's first annual demand decline in more than a decade — as some Asian buyers cut consumption or switch fuels rather than compete for scarce, expensive cargoes, while European buyers have drawn more heavily on storage rather than bid aggressively on the spot market. New supply from the United States, Canada, Australia and Nigeria has replaced perhaps three-quarters of lost Persian Gulf deliveries, but the remaining quarter has had no ready substitute, and analysts at GIS Reports and the Center for Strategic and International Studies both judge that even a durable Hormuz reopening would not restore Qatari output to pre-war levels quickly, given storage-driven upstream production curtailments at Ras Laffan and the multi-year lead times required to rebuild damaged liquefaction capacity. The strategic upshot, in CSIS's own framing, is that Qatar has become either the largest prospective winner or the largest prospective loser of the Iran war, depending on how durably the strait reopens — and that every major LNG buyer is now recalculating the wisdom of dependence on a single, contestable export corridor.

VI. Operation Economic Outcast: The Financial Weaponization Problem Renewed

The latest manifestation of financial statecraft against Iran is Operation Economic Outcast, announced by Treasury Secretary Bessent on August 24 as an effort to close sanctions-evasion channels and impose secondary-sanctions risk on countries and entities sustaining Iran's economy through oil revenue, shipping, gold, digital assets and financial intermediaries. The policy's distinguishing feature, as with the broader financial-weaponization pattern discussed in the original draft, is that Washington is targeting third-party behaviour, not merely Iran directly.

The Associated Press's on-the-ground reporting from Washington on September 2–3 captures the operation's actual scale and its central contradiction. Only a single branch of an Egyptian bank in the United Arab Emirates had been sanctioned under the new campaign as of early September. For the measure to bite in a way that materially reduces Iranian export revenue, sanctions would need to reach Iran's principal trading partners — overwhelmingly China, and to lesser degrees India and Russia — yet the administration has shown open reluctance to target China specifically while preparing to host President Xi Jinping later in September. Hamidreza Azizi of the International Crisis Group characterised the resulting posture as a hybrid of military force, naval blockade and economic pressure that represents the only option realistically available to Washington at this stage of the conflict, precisely because a purely military path to a decisive outcome does not exist and the war has become domestically costly.

Türkiye's experience illustrates how this dynamic collides with the interests of even close U.S. partners. On September 4, 2026, the United States sanctioned Turkey's Golden Global Yatirim Bankasi over alleged facilitation of Iranian oil-related financial flows — a direct demonstration of how U.S. secondary sanctions can strike at the strategic-autonomy objectives of a NATO member in real time. The episode reinforces the central paradox identified in the original draft and sharpened by six months of war: the more aggressively Washington uses financial coercion to compensate for the absence of a decisive military outcome, the stronger the incentive for Iran's remaining partners — and for states caught in the crossfire of secondary sanctions — to build settlement channels that do not depend on U.S.-controlled financial infrastructure.

China's behaviour throughout the war illustrates the limits of that coercive leverage in practice. Shipping-intelligence data from Windward put China's share of Iranian crude exports at roughly ninety percent as early as March, with more than 150 million barrels en route to Chinese ports even before the Treasury's temporary sanctions waiver took effect under the Islamabad Memorandum; commodity analytics firm Kpler subsequently projected that Iranian oil would continue to flow overwhelmingly to China even after the waiver's sixty-day window, given India's continued caution about resuming large-scale Iranian purchases. More recent reporting from CNN in late August found that China's Iranian crude imports, which averaged around 1.4 million barrels per day before the war, had fallen to roughly 700,000 barrels per day amid lower refinery runs and the drawdown of onshore inventories built up during the ceasefire window — evidence that Chinese demand is fluctuating with the war's intensity rather than disappearing, and that Beijing retains substantial discretion over how hard the sanctions regime actually bites.

VII. De-Dollarization Amid War: Real Structural Change, Not Dollar Collapse

The war has not produced the dramatic de-dollarization that some commentary anticipated when Hormuz first closed in late February. The IMF's Currency Composition of Official Foreign Exchange Reserves data show the dollar's share of allocated global reserves at 57.13 percent in the first quarter of 2026, up from 56.42 percent in the fourth quarter of 2025 — an increase, not a decline, driven substantially by the dollar's mild appreciation against major currencies during the quarter rather than by active central-bank reallocation. The euro's reserve share fell slightly over the same period, to 20.03 percent, while the renminbi's share edged up marginally to 1.99 percent. If the war were driving a rapid flight from dollar assets, the reserve data available through the first quarter of active fighting would already show it; they do not.

The correct framing, as in the original draft, is de-dollarization at the margin rather than de-dollarization as a discrete event. The dollar's structural advantages — the depth and liquidity of U.S. Treasury markets, the international reach of U.S. banks, the dollar's continued dominance in commodity invoicing — remain intact even amid an active war centred on the world's most important energy chokepoint. What has changed is the intensity with which states exposed to secondary sanctions, from China's oil-trading networks to Turkish banks now directly targeted under Operation Economic Outcast, are building and using settlement channels that do not require Western correspondent-banking access. That behaviour is best understood as the purchase of an insurance policy against financial coercion, exercised at the margin, rather than a wholesale abandonment of dollar-denominated trade and reserves.

VIII. The Emerging Alternative Payment Architecture

Russia's reported reliance on non-dollar settlement provides the clearest empirical evidence of margin-level diversification accelerating under sanctions pressure, and it connects directly to the SCO's own institutional agenda. Russia reported on September 2 that approximately ninety-six percent of Russian-Indian bilateral trade is now settled in rupees and rubles, a figure that demonstrates adaptation to Western financial restrictions rather than a collapse of the underlying trade relationship. China's Cross-Border Interbank Payment System has continued to expand its capacity to process renminbi-denominated international payments, and the Bank for International Settlements confirmed that Project mBridge — the multi-central-bank digital-currency settlement platform involving China, among others — reached minimum viable product status in 2024 and has since been formally concluded as a BIS Innovation Hub project. It remains, as the original draft correctly noted, a demonstration of technical feasibility rather than an operational SCO-wide payment system, but the direction of travel — declining technological barriers to alternative cross-border settlement — is unmistakable and is being reinforced in real time by the Türkiye sanctions episode and by the broader Operation Economic Outcast campaign.

On the institutional side, SCO economic infrastructure continued to develop through the war rather than being derailed by it. Consultations on an SCO Development Bank continued in Bishkek in May 2026, building on the 2025 decision to pursue such an institution, and SCO energy ministers convened in Bishkek in June to advance cooperation on energy security, infrastructure protection and efficiency, and progress toward an eventual energy consortium — an agenda that acquired obvious urgency given that one SCO member, Iran, has spent the intervening months at the centre of the most severe energy-supply disruption of the decade. None of this constitutes a unified alternative global economy: the SCO possesses no common currency, central bank, fiscal authority or integrated capital market, and an SCO Development Bank would initially complement rather than displace the World Bank, the Asian Development Bank and the AIIB. The correct description remains financial redundancy rather than financial displacement — but redundancy that a live war has made considerably more attractive to build.

IX. India: The Most Important Swing Player

India's position, underweighted in the original draft, deserves the most attention of any SCO member precisely because it sits at the intersection of every strand of this crisis: energy dependence, sanctions exposure, and mediating diplomacy. India does not want a Russian defeat that destabilises the European security balance, a prolonged Iran war that keeps energy and food prices elevated indefinitely, or a security order in Eurasia dominated by either Washington or Beijing. Its strategy is best described as strategic autonomy through diversified interdependence, and the evidence from the Bishkek period is unusually clear on this point.

On August 31, Prime Minister Narendra Modi told Vladimir Putin directly that the war in Ukraine must end; Putin's response was positive in tone if not in substance. Separately, and just as significantly for this paper's focus, Russia's September 2 disclosure that ninety-six percent of Russian-Indian bilateral trade is now settled in rupees and rubles demonstrates that India is simultaneously deepening non-dollar economic ties with Moscow while pushing it toward negotiation — a combination that gives New Delhi real leverage precisely because it is not purely oppositional. On the Iran-Hormuz file specifically, India's behaviour has been one of calculated caution: it largely refrained from stepping up Iranian crude purchases even when a temporary U.S. sanctions waiver created room to do so during the Islamabad Memorandum window, a restraint that commodity analysts attribute to India's preference for demonstrating distance from sanctioned Russian oil through non-Iranian Persian Gulf and Middle Eastern supply rather than compounding its sanctions exposure on two fronts simultaneously.

X. Kazakhstan: The Central Asian Hedge Against Permanent War

Kazakhstan's calculus is more important than its economic size suggests, and the Iran war has sharpened rather than altered it. President Kassym-Jomart Tokayev has publicly urged Russia and Ukraine to freeze the conflict and resume negotiations, arguing in July, alongside Putin, that a settlement could follow a freeze in hostilities. Kazakhstan's incentive structure is straightforward: it shares a long border and deep economic ties with Russia, seeks to expand relations with China and Europe, and above all wants to prevent Central Asia from becoming a permanent theatre of confrontation — an objective that a six-month war centred on a Middle Eastern energy chokepoint, with its attendant global price shocks, only reinforces. Kazakhstan's objective is not Russia's defeat; it is preventing indefinite conflict, wherever it occurs, from becoming the structural default of the region it inhabits.

XI. Türkiye: The Eurasian Mediator Under Direct Sanctions Pressure

Türkiye occupies an unusual position that the Iran war has made considerably more precarious. It is a NATO member, maintains extensive economic relations with Russia, supplies Ukraine with defence technology, controls the Turkish Straits, and has repeatedly attempted to mediate between Moscow and Kyiv. President Erdoğan stated in April that Türkiye was working to revive Russia-Ukraine negotiations, and after Bishkek he again emphasised peaceful resolution while proposing mechanisms to protect Black Sea maritime security and commercial shipping. Erdoğan has explicitly rejected the notion that closer relations with Russia and China represent a Turkish pivot away from the West.

But the September 4 U.S. sanctioning of Golden Global Yatirim Bankasi over alleged Iranian oil-related financial flows demonstrates that Türkiye's bridge-power role now carries direct financial cost. Türkiye is not merely balancing between Moscow and the West on Ukraine; it is simultaneously navigating U.S. secondary-sanctions risk arising from its financial and energy relationships in Persian Gulf, precisely because Operation Economic Outcast targets exactly the kind of intermediary banking relationships a mediator power like Türkiye is structurally likely to maintain. This is the clearest available illustration of the strategic paradox running through this entire paper: financial coercion aimed at isolating Iran increasingly falls on U.S. allies and partners who are, in other contexts, indispensable to Washington's own diplomatic objectives.

XII. North Korea: A Strategic Multiplier, Not a Mediator

North Korea's relevance to this assessment runs in the opposite direction from India, Kazakhstan and Türkiye: rather than raising Russia's diplomatic cost of continuing the Ukraine war, it lowers Russia's military cost of doing so, and it is worth noting for the G20 precisely because it shows how conflicts in the Middle East and in Ukraine are becoming linked through shared logistics of sanctions evasion and military-industrial cooperation even though they remain geographically and causally distinct. Defence reporting in August 2026 placed the number of North Korean soldiers deployed to Russia at approximately 14,000 to 15,000, based on Ukrainian and South Korean estimates, with Russia and North Korea both acknowledging North Korean participation in combat operations around Kursk. South Korea's National Intelligence Service assessed in September that the probability of a further large-scale deployment was low, while North Korean officials denied Ukrainian claims of a proposed additional 50,000 troops — an uncertainty that is itself strategically significant, since it leaves open how much further North Korea's manpower and munitions support might extend Russia's willingness to sustain the Ukraine conflict, with knock-on consequences for the broader multipolar bargaining environment this paper describes.

XIII. The Black Sea and the Global Food-Energy Nexus

The Iran war and the Ukraine war are increasingly transmitting into the same global commodity channels, and this convergence is now visible in the data. The FAO's global Food Price Index rose to 133.3 in August 2026, its highest level since late 2022, with conflict, adverse weather and trade disruption all cited as contributing factors — a rise that reflects both Black Sea shipping disruption and the fertiliser- and energy-cost pass-through from the Hormuz crisis documented in the UN Trade Centre data above. Recent attacks on commercial shipping in the Black Sea have sharply raised risk to Ukrainian and Russian grain exports at precisely the moment global energy and shipping costs are already elevated by the Persian Gulf conflict. Ukraine, Iran, the Strait of Hormuz and the Black Sea should not be treated by G20 policymakers as separate regional crises; they now function as an interconnected global commodity-security system in which a shock in one theatre raises the baseline vulnerability of the others.

XIV. The SCO and the G20: Competition, Complementarity and Institutional Fragmentation

It remains premature to describe the SCO as a shadow G20; the G20 remains far broader institutionally and economically, encompassing the United States, the European Union, Japan, Canada, Australia, Brazil, Mexico, South Africa and other major economies that sit outside the SCO framework entirely. But the SCO's development, and the war centred on one of its own members, changes the G20's internal bargaining environment. Several G20 members — India, China, Russia, and Türkiye as a close external partner — now hold strategic relationships and direct sanctions exposure spanning both Western and non-Western institutional networks simultaneously. The G20 can no longer be assumed to operate on a simple Western-led consensus; it increasingly functions as a negotiating arena between overlapping coalitions with materially different exposure to a war that most of its members did not choose and cannot end.

XV. A Bayesian Game-Theoretic Interpretation

The SCO's evolution, and the Iran war layered on top of it, can be understood as a repeated Bayesian game among players holding incomplete information about one another's willingness to bear economic and geopolitical costs. Before roughly 2012, Western policymakers could reasonably assign low probability to the emergence of a coherent alternative financial architecture. The 2022 invasion of Ukraine and the freezing of Russian sovereign reserves changed the informational environment for every state holding reserves in Western jurisdictions, by demonstrating that those reserves could become instruments of geopolitical coercion. The Iran war has now supplied a second, distinct Bayesian update, and a more acute one: it has demonstrated that a hegemonic security guarantor can declare a signed, mediator-brokered ceasefire "over" unilaterally, twice, within a single year, and that the reopening of a chokepoint carrying a fifth of world oil and gas trade can depend on the diplomatic mood of a single administration rather than on durable multilateral guarantees.

That update changes the expected payoff of energy-supply diversification in the same way the reserve freeze changed the expected payoff of reserve diversification. States dependent on Hormuz-transiting energy — and states, like Qatar, dependent on Hormuz for export revenue — now have direct evidence that a single bilateral relationship can determine whether their energy trade functions at all. The rational response is not necessarily to abandon existing suppliers or routes, but to purchase insurance: alternative pipelines, alternative LNG contracts with destination flexibility, larger strategic reserves, and — for producers and consumers alike — greater institutional investment in exactly the kind of Eurasian energy-security cooperation the SCO's energy ministers have been pursuing since well before the war began.

The resulting 2026 equilibrium involves four principal strategic postures. The United States seeks to preserve dollar-centred financial dominance while using both military force and financial access as instruments of strategic influence over Iran specifically and the broader region generally. China seeks increased strategic and energy autonomy while avoiding a premature rupture with Washington that would jeopardise its own export and financial interests — a calculus visible in its reluctance to be drawn fully into the Iran conflict's sanctions dynamics even as it remains Iran's dominant oil customer. Iran seeks economic and political survival under sustained military and financial pressure, using control over the Hormuz chokepoint as its principal source of asymmetric leverage. Middle powers — India, Kazakhstan, Türkiye and Persian Gulf states most exposed to shipping disruption — seek to maximise strategic autonomy and minimise their own exposure by maintaining multiple outside options. This is not bipolarity. It is competitive multipolarity operating, for the first time in this analytical series, under conditions of live regional war rather than sanctions-driven rivalry alone.

XVI. Five-Year Bayesian Projection: 2027–2031

A five-year forecast should be read as a distribution of competing scenarios to be updated as evidence arrives, not as a deterministic prediction. The active, unresolved state of the Iran war as of September 4, 2026 — with no functioning ceasefire, an active sanctions campaign, and CENTCOM's blockade count still climbing — materially shifts the probability weights assigned in earlier iterations of this analysis toward continued volatility in the near term, even as the underlying multipolar trend remains intact over the full five-year horizon.

Scenario One — Managed Multipolarity with Episodic Persian Gulf Disruption, approximately forty percent. 

The most probable path involves continued coexistence between the dollar-centred financial system and increasingly sophisticated regional alternatives, combined with a Hormuz corridor that cycles between partial reopening and renewed closure in step with intermittent U.S.-Iran diplomacy, roughly as it has done since February. The SCO deepens cooperation in transportation, energy, development finance and payments without becoming a unified bloc. Washington remains the dominant financial and military actor in Persian Gulf but becomes progressively more selective in how it applies both military force and secondary sanctions, because six months of experience has demonstrated the costs each imposes on U.S. partners and allies as much as on Iran. Under this scenario, energy markets settle into an elevated but bounded price range — Brent in the high-$80s to mid-$90s — and the G20 remains the indispensable forum precisely because no single actor can impose a durable regional settlement.

Scenario Two — Escalation to a Durable Closure or a Decisive Military Outcome, approximately twenty-five percent. 

This scenario involves either a sustained, effectively permanent closure of Hormuz driven by continued Iranian mining and shipping attacks, or a decisive U.S.-Israeli military campaign aimed at ending Iranian resistance capacity outright, as some administration rhetoric has suggested may still be contemplated. Either path would produce a more severe and lasting energy shock than anything recorded so far, given that Qatari LNG capacity remains only partially restored and Persian Gulf oil production has not returned to pre-war levels. This scenario carries the highest expected economic damage of any considered here, including a plausible re-test of the March 2026 price peaks and a much deeper contraction in global LNG availability.

Scenario Three — Negotiated De-escalation and Institutionalised Maritime Security, approximately twenty percent. 

A revived, more durable version of the Islamabad Memorandum framework — potentially incorporating the Persian Gulf Strait Authority concept and formal Omani mediation over long-term administration of the strait — could stabilise Hormuz transit even without a full political resolution of the underlying U.S.-Iran dispute. This would not reverse multipolarity but would shift Persian Gulf-adjacent SCO cooperation from a sanctions-resilience footing toward infrastructure and development, echoing the SCO Development Bank and energy-consortium agenda already under discussion at Bishkek.

Scenario Four — Broader Regional and Financial Contagion, approximately fifteen percent. 

The most dangerous scenario combines continued Persian Gulf war with expanded secondary sanctions against Chinese or Turkish financial institutions, renewed Black Sea disruption, intensified Russia-North Korea military cooperation, and a simultaneous stagflationary shock across food, energy and shipping markets. Its probability is lower than the managed-multipolarity or negotiated-de-escalation paths, but its expected damage — a compounding of the Hormuz, Ukraine and Black Sea shocks into a single global commodity crisis — is substantially larger than any other scenario considered.

XVII. Bayesian Updating Indicators, 2027–2031

The probabilities above are not fixed and should be revised continuously against the following indicators. First, whether the current September exchange of strikes produces a third consecutive night of Iranian attacks or subsides, and whether any durable ceasefire mechanism replaces the collapsed Islamabad Memorandum. Second, whether CENTCOM's interdicted-vessel count continues rising or stabilises, and whether Hormuz tanker and LNG-carrier traffic trends back toward pre-war volumes or toward renewed near-zero levels. Third, whether Operation Economic Outcast expands beyond a single sanctioned bank branch to reach Iran's principal Chinese trading counterparties, and how Beijing responds if it does. Fourth, whether Qatar's LNG export capacity recovers toward its pre-war baseline or remains structurally impaired by upstream production curtailment at Ras Laffan. Fifth, whether India, Kazakhstan and Türkiye continue to press for de-escalation on both the Ukraine and Iran tracks simultaneously, or whether their positions diverge as the two conflicts' economic effects compound. Sixth, whether Washington's coming engagement with Beijing — including the planned Trump-Xi meeting later in September — produces any explicit understanding on Iranian oil purchases, given the administration's evident reluctance to jeopardise that relationship over Iran-related sanctions enforcement. Seventh, whether the dollar's COFER reserve share, next reported for the second quarter of 2026, continues its recent modest increase or begins to reflect active portfolio diversification away from dollar assets. Eighth, whether alternative payment infrastructure — CIPS volumes, rupee-ruble settlement shares, and any successor efforts building on the technical lessons of Project mBridge — moves from bilateral experimentation toward genuinely large-scale multilateral settlement.

XVIII. Implications for the 2026 G20 Summit

The appropriate G20 response is not an attempt to suppress the SCO or to prevent the development of alternative financial and energy-security arrangements; such an effort would likely accelerate the fragmentation it seeks to avoid, and it would in any case do nothing to resolve the underlying driver of the current crisis, which is a live war over control of a single chokepoint. The G20 should instead pursue interoperability and de-escalation on parallel tracks, organised around five priorities that this revision updates to reflect the current state of the conflict.

First, the G20 should press, through whatever diplomatic channels its members retain with both Washington and Tehran, for a maritime security arrangement covering Hormuz that survives changes in the broader political relationship — precisely the kind of durable, multilaterally guaranteed framework that the collapsed Islamabad Memorandum was not. Second, it should establish clearer multilateral norms governing the use of sovereign reserves and secondary sanctions as instruments of coercion, given that both the Ukraine-related reserve freeze and the Iran-related Operation Economic Outcast campaign have now demonstrated how readily financial infrastructure becomes a battlefield in its own right, with costs that fall on bystander economies like Türkiye's banking sector as much as on the intended target. Third, it should strengthen food- and energy-security mechanisms, since the Hormuz and Black Sea shocks are now transmitting through the same global fertiliser, shipping and price channels, as the August 2026 FAO Food Price Index makes concrete. Fourth, it should support diplomatic mechanisms that engage middle powers — India, Türkiye, Kazakhstan, Oman and Persian  Gulf states — as principals in Hormuz security arrangements rather than as bystanders to a bilateral U.S.-Iran negotiation, since Oman in particular has already served as the operational mediator for whatever transit arrangements have functioned at all. Fifth, it should recognise that the SCO's energy-consortium and development-bank initiatives are not temporary deviations from globalization but permanent components of its new institutional geography — components that a war centred on an SCO member state has, if anything, accelerated rather than discredited.

Conclusion: From Unipolarity to Competitive Multipolarity, Tested by War

The 26th SCO Summit in Bishkek does not mark the birth of a new anti-Western bloc, and six months of war have not produced the rapid dollar collapse or the wholesale displacement of Western financial institutions that some early commentary anticipated when the Strait of Hormuz first closed in February. Both conclusions from the original draft survive this revision. What the war has done is stress-test the multipolar system this paper describes under conditions no previous SCO-era analysis in this series had to confront: a live shooting war, fought through the world's most concentrated energy corridor, between a G20 member's principal security guarantor and a member of the very organization whose institutional development this paper tracks.

The system has so far absorbed that stress without a catastrophic global economic outcome, but not without cost: a Brent price band that remains roughly thirty to fifty percent above pre-war levels seven months in, a global LNG market facing its first demand contraction in a decade, a food-price index at its highest level since 2022, and a sanctions campaign that is now falling as heavily on U.S. partners like Türkiye as on Iran itself. China wants greater financial and energy autonomy and is exercising it through continued, if fluctuating, Iranian crude purchases. Russia requires sanctions resilience and is finding it partly through rupee-ruble trade with India. India seeks diversified strategic partnerships while avoiding compounding its own sanctions exposure. Türkiye seeks room to manoeuvre between competing centres of power and is now paying a direct financial price for that position. Kazakhstan seeks insulation from great-power confrontation wherever it occurs. Iran seeks survival under simultaneous military and financial pressure. The United States seeks to preserve both its financial dominance and, increasingly, direct control over a physical chokepoint it does not itself border. Europe seeks security without losing economic stability, even as it absorbs Qatari LNG shortfalls through its own storage drawdowns.

These objectives overlap in places and collide in others, and the resulting system is neither the old unipolar order nor a new bipolar Cold War. It is an increasingly Bayesian multipolar system, now visibly operating under conditions of incomplete information, strategic hedging and repeated bargaining that a live war has made concrete rather than theoretical. For the G20, the strategic imperative remains what the original draft concluded: not to restore a vanished unipolarity, but to prevent multipolarity from degenerating into systemic fragmentation. What this revision adds is the recognition that, as of September 2026, the test of that imperative is no longer hypothetical. It is being conducted in real time, in the Strait of Hormuz, with the world's energy supply as the stake.

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