On Thursday, members of the Shanghai Cooperation Organization (SCO) are gathering for their fifth annual meeting at the birthplace of the Eurasian bloc -- Shanghai. Since its modest economic beginnings, SCO has become a leading Eurasian economic and military bloc. Unfortunately, it is also increasingly anti-American.

This year, the guest of honor is Iranian President Mahmoud Ahmadinejad, who will push for the Islamic Republic's full membership. Iran is an observer, together with Indian, Pakistan and Mongolia. Belarus' President Alexander Lukashenko is knocking on SCO doors, to gain leverage against its only patron, Russia.

Moscow sources are saying the full membership may not be in the cards for either the Slavic dictatorship or the Shi'ite theocracy. Mr. Ahmadinejad, however, will have one-on-one meetings with President Hu Jintao of China and Russian President Vladimir Putin. And the Russian Foreign Minister Sergey Lavrov promised the Iranian nuclear issue will not be discussed at the summit.

The United States should watch out for such coziness, as it may indicate growing diplomatic coordination between Moscow, Beijing and Tehran. Moscow's interest to expand nuclear reactor and weapons sales, and Chinese mammoth deals to import oil and natural gas to the tune of more than $100 billion over 30 years, are widely known.

The Shanghai summit has also become a venue for anti-U.S. moves. Last year SCO, encouraged by Russia and China, passed the resolution demanding U.S. withdrawal from the air force base in Karshi Khanabad, Uzbekistan. This year, Russia has dictated Kyrgyzstan terms and conditions for hosting the only remaining major U.S. air base at the Manas airport in the capital Bishkek. Moscow demanded to cease all reconnaissance flights and limit the base to resupply mission in Afghanistan only. It also encouraged Kyrgyz President Kurmanbek Bakiev to demand $100 million in aid and increase rent for the base by sixfold.

There is also good news. The U.S. is realizing its Eurasian presence is under threat. It is expanding it ties with Kazakhstan -- a major oil producer with the region's most liberal economic policy. During the May visit to Kazakhstan, Vice President Dick Cheney praised President Nursultan Nazarbaev, who runs a state sandwiched between two giants with imperialist histories, Russia and China.

Kazakhstan achieved independence overcoming multiple challenges. These included creating a nation-state from two diverse groups: Muslim Turk (Kazakh) and a Christian Orthodox Russian-speaking minority; and managing transition to markets after decades of central planning. Kazakhstan also committed military engineers to Iraq and Afghanistan, and sent more than 3,000 of its best and brightest to study in the West.

SCO members also are in dire need of political modernization and economic development. Here, Kazakhstan can be a role model. It plans to join WTO and become one of the top 50 most competitive states. Almaty, the business capital, boasts a construction boom, glittering shopping malls and plenty of new cars. And oil exports are scheduled to reach 3.5 million barrels a day by 2012 -- more than Iran.

Understandably, Mr. Nazarbaev is engaged in a balancing act between the Bear, the Dragon and the far-away American Eagle. He recently sent a letter to the Iranian president hailing Kazakhstan's abandonment of the world's fourth-largest nuclear arsenal after the Soviet Union's collapse. He is expanding an oil pipeline to the Russian port of Novorossiysk, built an oil pipeline to China and is negotiating a trans-Caspian pipeline to connect to the Baku-Ceyhan pipeline from Azerbaijan to the Mediterranean.

So, what can the U.S. do to counter the rise of the SCO? First, Washington should recognize that great powers -- China and Russia -- have a history, a present and a future in this strategic area. They are extremely sensitive to the U.S.-proclaimed interests and do not view "the new kid on the bloc" kindly. Washington should have nuanced diplomatic messages to all.

Second, the longer-term problems with a radical Iran need to be on the mind of the Shanghai summiteers. The United States should convince Beijing that Russia is dragging it into the anti-American bloc, which is against China's long-term interests. If not restrained and contained, Iran is likely to drive world oil prices even higher as it pursues its aggressive, terror-enhancing policy, supporting jihadi Islamists and challenging moderate Sunni regimes from the Gulf to Morocco.

Herein lies the geoeconomic conflict between Russia and China. Russia is a high-cost oil producer. It is interested in the Middle Eastern instability to keep oil prices high and its budget revenues higher. A senior Putin foreign policy adviser told me Russia will quietly cheer more Middle East instability as oil prices may climb to $90 a barrel or higher. China, on the other hand, is an energy-starving economic powerhouse that depends on Middle East oil remaining as cheap as possible.

Washington should focus Moscow's attention at the geopolitical repercussions of an aggressive, nuclear armed Iran, which is likely to throw its weight around Russia's southern "soft underbelly." Iran was behind a Sunni Islamist opposition in the Tajik civil war in the early 1990s, and is making inroads into Azerbaijan. Iran is likely to challenge Russia's support for the authoritarian and secular post-Soviet rulers in the Caucasus and Central Asia.

America should build up its relationship with Kazakhstan and warmly greet President Nazarbaev when he visits in September. The U.S. should encourage democratization, property rights protection and free market economic policies in Kazakhstan and, as much as possible, in other SCO countries, especially Kyrgyzstan and Tajikistan.

Kazakhstan's wealth creation and education strategy will go a long way to stem the rise of radical Islam. Kazakhstan's ethnic and religious harmony should be promoted in Central Asia and around the world.

As America pursues its "long war" on jihadi terrorism and ideology, it can ill-afford a conflict with Russia and China in Eurasia. Thus, Washington must explore ways to establish a dialogue with SCO on its fifth anniversary, or risk yet another humiliation at the hands of Moscow and Beijing.

Ariel Cohen is research fellow for Russian and Eurasian studies at the Kathryn and Shelby Cullom Davis Institute for International Studies at the Heritage Foundation and author of "Eurasia in Balance" (Ashgate, 2005) and "Russia-Kazakhstan Energy Cooperation" (GMB Publishing, 2006).