How are rising stakes increasing geopolitical importance of Trans-Caspian route?
Bridging new ideas

ANALYTICS  14 July 2023 - 16:45

The ongoing Russo-Ukraine war has distorted trade routes across the Eurasian continent in the last half a year. China and other Far Eastern exporters that previously sent goods via Russia’s railways to Europe are looking for alternative routes not compromised by sanctions.

European countries are importing gas from Azerbaijan and North Africa and liquefied natural gas (LNG) from the US as they seek to free themselves from dependence on Russia fully. For Russia itself, sanctions have necessitated finding new sources of imports, especially those critical for its manufacturing industries, as well as a pivot to Asia, particularly China, after European sanctions restricted its Westward oil and gas exports.

The global energy deficit and supply chain disruption swiftly revived the interest of Western countries in alternative trade routes, namely the Trans-Caspian trade route. The idea of a Trans-Caspian corridor that connects Central Asia with the Caucasus and then across the Black Sea to south-eastern Europe is not new, and all regional states supported the idea as a viable option to boost interregional trade relations.

Moreover, Kazakhstan and the Caucasus nations have been looking at the Trans-Caspian transportation corridor as a key project with long-term economic and political dividends.

Moreover, what makes the Middle Corridor most attractive for Western countries is its safe accessibility since it is not subject to any international limitations compared to other routes traversing other sets of countries. However, some analysts argued that the project still has several problems, such as the need to coordinate customs regulations and infrastructure.

According to the general idea, regional states, such as Kazakhstan and Georgia, need to catch up in terms of critical infrastructure. Such perspectives rightfully raised questions in the West as to whether the Trans-Caspian Corridor can meet Western companies' main expectations amid the global logistics crisis.

Considering such allegations, the European Union (EU) and the European Bank of Reconstruction (EBRD) conducted a comprehensive study on sustainable transport connections with Central Asia, which concluded that the Trans-Caspian route provides the “most sustainable transport connections between Europe and Central Asia,” particularly when a “two-layer catchment” area that spans 300 km north and 600 km south of the core route — hereby touching on all five Central Asia states.

The study contends that the proposed route will foster the positive trade dynamics of Europe with Central Asia since 2012. Total trade between the EU and Central Asia has grown by 38.8 per cent in the last decade, from €34.2 billion in 2012 to €47.5 billion in 2022, with two-thirds of total trade being imports to the EU.

Notwithstanding, the study also highlights the existing problems with the corridor, such as frequent disruptions to operations, delays (mostly related to crossing the Caspian and Black Seas), and multiple international border-crossing points with unaligned transit procedures preclude container transportation and resulting in the transportation of mostly time-insensitive commodities on the Central Asian corridors.

According to Kazakh Railways, traffic along the Trans-Caspian International Transport Route increased 2.5-fold on the year in 2022, reaching 1.5 million tons. However, this massive volume increase also exposed significant connectivity issues, bottlenecks and capacity shortages along the route, increasing transaction costs and preventing the realisation of expected container cargo growth.

To tackle such problems, Kazakhstan and Azerbaijan established a very intensive bilateral cooperation format in 2021 to solve infrastructure problems and to develop a new tanker fleet to move energy commodities from Kazakhstan’s Aktau port to Baku. Also, in 2023 an agreement was reached with Azerbaijani, Georgian, and Turkish partners to create a joint venture within the Trans-Caspian International Transport Route (TITR) framework.

In the last two years, Kazakhstan, Azerbaijan, and Georgia invested a lot to develop critically essential infrastructure problems within the TITR framework, though how much can be achieved to transform the Caucasus into an actual corridor remains to be seen. In terms of political cooperation, the relations seem very smooth and pragmatic, but more harmony and cooperation between the Caucasus states, including Türkiye, to make the transfer of containers at the border faster to reduce waiting times is needed.

More importantly, the study notes that it became clear during its implementation that, in many cases, the key issues of transport connections in the region were not about financing or the lack of existing infrastructure but soft connectivity challenges. As such, the increased traffic volume has led to transport times extending up to 40 days and, in some cases, even significantly beyond that.

The associated delays jeopardise the time advantage over the sea route. Nonetheless, the conducted European study is yet another sign of the EU's interest in the Trans-Caspian route despite the existing postures and difficulties, as the project possesses significant geopolitical importance for all participating actors.

Caliber.Az