The Shanghai Cooperation Organization (SCO), often derided in its five-year history as a talk shop of little importance, suddenly seemed to have global significance with the attendance of Iranian President Mahmoud Ahmadinejad.

The official summit involves the leaders of SCO members China, Russia, Kazakhstan, Kyrgyzstan, Tajikistan and Uzbekistan, but the presence of Iran as one of four observer nations has caused consternation in the West.

China, which has promoted the SCO as an important forum for regional security and economic cooperation, has welcomed Ahmadinejad but also seemed wary of the extra attention his attendance has brought to the summit.

"I don't believe having discussion or not having discussion of the Iran nuclear issue is the determinant of the relevance of this conference," Chinese foreign ministry spokesman Liu Jianchao said.

Nevertheless, he said: "Accepting Iran as an observer nation reflects a consensus among all SCO member states."

US Defense Secretary Donald Rumsfeld said this month it was "strange that one would want to bring into an organisation that says it's against terrorism ... one of the leading terrorist nations in the world -- Iran."

Officials in Shanghai emphasized not all would be centered around Iran. Chinese President Hu Jintao was scheduled to meet with his Russian counterpart Vladimir Putin later in the day.

"The bilateral relations between China and Russia are among the most important bilateral relations in the world," Liu said.

But even these talks were considered likely to deal to a large extent with Iran. Putin was also scheduled to hold one-on-one talks with Ahmadinejad before meeting Hu.

China and Russia have significant business interests in Iran, with energy-hungry Beijing in negotiations for a slice of its oil reserves, the world's fourth largest.

Chinese analysts said Ahmadinejad had likely decided to attend the forum as part of Iran's geopolitical maneuverings with the West over its nuclear program.

"Iran is still gambling," said Ji Kaiyun, an expert on Sino-US relations at Southwest University in Chongqing city, southwestern China.

"It hopes to be able to use the SCO to strengthen ties with Central Asia so it can end up serving as a sort of strategic rear area for it."

Nevertheless, observers said the SCO was unlikely to do much about Iran's nuclear program, as it was set up to handle entirely different issues.

The SCO grew out of a regional effort in the mid-1990s to reduce military forces among common borders. It later came to involve anti-terrorism efforts and cooperation in the economic and energy fields.

The SCO is China's most concerted effort at promoting a regional multilateral forum, but some Western critics say it is ultimately aimed at countering US influence in Central Asia.

Ahead of the summit, President Hu oversaw Wednesday the signing of a package of economic deals in bilateral meetings with Tajikistan and Kazakhstan.

Among the agreements was a commercial contract to build a highway in Tajikistan and loans to build two power transmission lines there.

China also agreed to provide loans to build a hydro-power station in Kazahkstan. No figures were provided.

In addition, part of a 900-million-dollar package of concessional loans to SCO members, to which China had previously agreed, was released. The tranche is aimed at re-engineering train carriages to Kazakh specifications.

Apart from Iran, nations with observer status are Pakistan -- represented by President Pervez Musharraf -- India and Mongolia. Afghan President Hamid Karzai is also present as a guest.

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