China said on yesterday that this week’s summit of a Central Asian security group will highlight the organisation’s rising stature, but Iran, with its messy nuclear problems, threatens to highlight its limits.

Leaders of the Shanghai Cooperation Organisation’s (SCO) six members – China, Russia, Kazakhstan, Kyrgyzstan, Tajikistan and Uzbekistan – meet in Shanghai on Thursday to plan the future of the five-year-old group, which has been one of China’s first concerted forays into regional diplomacy.

“For China, this is one of the most important diplomatic activities of the year,” Assistant Foreign Minister Li Hui told a news conference in Beijing, adding that it would produce a series of agreements on security and economic cooperation.

“The SCO’s influence is expanding and its international status is rising”. But when the SCO meets, the world’s eyes will also fall on one of group’s four observer states – Iran, whose President Mahmoud Ahmadinejad will be attending. The SCO’s other observer members are India, Pakistan and Mongolia. Afghanistan is a guest participant.

Li said the Shanghai meeting would “discuss and exchange views on regional and international and bilateral issues”, but he declined to specify whether Iran was one of those issues. Iran, the world’s fourth-largest oil producer, says it has a right to a civilian nuclear programme, and denies US accusations it is trying to build an atomic bomb.

Iran is considering a plan drawn up by Britain, France and Germany and approved by the United States, China and Russia. If Iran rejects the package, including incentives and penalties, the Western powers may push for UN-backed sanctions, a step China and Russia have resisted.

Any progress in Shanghai over Iran is likely to happen in informal talks, not at the main meetings, said Guo Xiangang, an expert on China and Iran at the China Institute of International Studies, a government thinktank in Beijing. “China and Russia are leading powers in the Shanghai Cooperation Organisation, and they’ll probably be working on Iran to persuade it the plan is in its interests,” said Guo, a former diplomat who served in Tehran for four years.

“The Shanghai meeting isn’t in a position to make it a central topic. It’s not going to make such a big, complex issue that doesn’t involve a full member a focus”.

China’s long-standing ties and growing trade with Iran give it some leverage in the nuclear dispute, but China depends on Iran for oil imports, constraining that leverage, said John Calabrese of the Middle East Institute in Washington.

Iran is China’s third biggest supplier of crude oil imports – behind Saudi Arabia and Angola – and imports from Iran rose to 1.63 million tonnes in the first four months of this year, a 24.7 per cent rise on the same period last year and 13.6 per cent of China’s total crude imports.

“Iran has come to rely on Moscow and Beijing as political shields,” said Calabrese. “And it’s likely to use Shanghai to remind them of their very important economic links”.