With its growing thirst for oil to fuel its booming economy, China - the main player in the organization - wants to expand cooperation among nations in Central Asia. Beijing hopes this will eventually translate into oil deals.
Although not a member of the S.C.O., Iran - a major supplier of oil to China - is figuring prominently at this summit, with Iranian President Mahmoud Ahmadinejad appearing as a special guest. In remarks at Thursday's meeting, the Iranian leader called for S.C.O. support against Western nations that oppose his country's nuclear program.
He says that by expanding economic and other ties, S.C.O. states could make the organization more powerful and prevent threats by domineering powers, and what he called their aggressive interference in global affairs.
The Iranian leader also offered to host a meeting in Tehran of oil ministers of S.C.O. nations
The S.C.O.'s stated goals are fighting separatism, terrorism, and extremism. However, the fact that the United States regards Iran as a leading exporter of terrorism does not appear to bear on the S.C.O.'s decision to invite Tehran as an observer. Chinese Foreign Ministry spokesman Liu Jianchao:
"As to how other countries view Iran, I think that is a matter which should be posed to the country concerned," said Liu. "I would not like to comment on that. Accepting Iran as an observer to the Shanghai Cooperation Organization is the consensus reached by the member states of the organization."
The member states include Kazakhstan, Kyrgyzstan, Tajikistan and Uzbekistan, along with China and Russia.
China and Russia have both opposed sanctions against Iran over its nuclear program. Analysts say China's need for oil has been a major factor in Beijing's refusal to support stronger action.
Iran insists its uranium-enrichment program is for peacetime energy purposes. The United States and some European countries believe Tehran plans to make nuclear weapons, and have called for sanctions unless the project is abandoned.
Iran, along with India, Mongolia, and Pakistan, is here as an observer. Some of these want full membership in the organization, something a senior Chinese foreign ministry official this week said would make Beijing "very happy."
Analysts say the United States has reason to watch closely for signs of anti-American sentiments at the S.C.O. Robert Cutler, a senior research fellow at Carlton University in Canada, says the underlying purpose of the organization is for Russia and China to assert their influence in Central Asia. He says this is especially true of China, with its bid to secure energy resources.
"This must be said, that the S.C.O. would not exist without the impetus and the support, both financial and diplomatic, given to it by Chinese diplomacy," said Cutler. "It is very much a tool of Chinese diplomacy to exclude U.S. influence from the region and extend its own economic influence."
Cutler says the S.C.O. maybe able to counterbalance U.S. influence in the region in the long run. He points to the withdrawal last November of U.S. forces from a base in Uzbekistan, and subsequent calls by S.C.O. members for Washington to set a timeline for the departure of remaining American forces in Central Asia. The members meanwhile called for expanded military cooperation among themselves.
Also attending Thursday's meeting, held under tight security, were Pakistani President Pervez Musharraf and Afghan President Hamid Karzai. India sent its oil minister.
The meeting concluded with the signing of agreements to expand security, economic, and educational cooperation.