Digitalisation and tariff reduction – Middle Corridor drivers Analysis by Caliber.Az

The Ukraine war, which has been going on for almost a year, has increased the strategic importance of transport routes between Europe and Asia passing through Azerbaijan. Today, China, Türkiye, the European Union [EU] and Central Asian (CA) countries are accelerating the Middle Corridor's development in every possible way, including by strengthening its commercial and logistical attractiveness. To this end, the participating countries of the Europe-Caucasus–Asia corridor have agreed to establish a working group on the digitalisation of cargo transportation by TRACECA. At the same time, measures have been taken to reduce the cost of transportation on the Baku-Turkmenbashi line: from March 1, 2023, Azerbaijan Caspian Shipping Company (ASCO) CJSC introduces tariff discounts for road transportation in both directions.

For three decades, Azerbaijan has been an active participant in the EU-initiated Europe–Caucasus-Asia transport corridor (TRACECA), and in recent years it has been one of the initiators of the Middle Corridor's other two routes. This is the Trans-Caspian International Transport Route (TITR) to a large extent tailored for the maintenance of transit of Chinese and Turkish container block trains, as well as Lapis Lazuli - the transport component of China's One Belt, One Way initiative. And in the future, Baku, together with Bucharest, Tbilisi and Ashgabat, plans to form a promising Black Sea - Caspian Sea route.

Most of these initiatives are supported by the EU. In the future, these trends will only intensify, taking into account the plans of the European Union to minimise cargo transportation along the Northern Corridor passing through Russia and expand cooperation with the Eastern European and Asian TRACECA member states within the Trans-European Transport Network (TEN-T). In particular, we are talking about the integration of the states of the Black Sea-Caspian region into the TEN-T system with the creation of a South-Eastern axis to increase multimodal transport, and, of course, all these initiatives will also cover the countries adjacent to the EU. Nevertheless, integration into the TEN-T system is considered a project designed for the long term (2030), and the medium-term task is the development of infrastructure, simplification of cross-border customs procedures and reduction of tariffs within the routes connecting Azerbaijan with the Central Asian countries in the east and with Georgia and Türkiye in the west.

Work in this direction started back in 2018, when, on the initiative of Ankara, Baku, Tbilisi and Astana, the TITR route was launched, the advantages of which include geographical factors - a relatively shorter distance, which accelerates the movement of goods, as well as milder climatic conditions in winter, making this way all-season for cargo carriers. A standard container block train passing along the TITR route delivers Chinese goods to Europe in an average of 20-25 days, which is significantly less than the transhipment of goods from China and Southeast Asia through the Suez Canal, which takes about 40 days on average.

To successfully operate the main route of the Middle Corridor - TITR, steps are needed to strengthen its logistics infrastructure, reduce tariff costs, simplify cross-border procedures and accelerate cargo handling at ports and railway junctions. "I think that now we need closer cooperation between all the countries involved - in Central Asia, the South Caucasus and Europe for active work on customs administration, achieving common approaches on the 'single window' and tariff policy. It is necessary to create a kind of steering committee, a governing council, including all interested parties, and jointly increase the commercial attractiveness of the Middle Corridor," Azerbaijani President Ilham Aliyev said during the panel session "Eurasia's Middle Corridor: from Pathway to Highway" held in January at the World Economic Forum (WEF).

In this regard, Azerbaijan, together with partner countries within the framework of the Middle Corridor, has been working since last year to create an operator company to manage integration work, as well as the processes of the cross-border passage of goods, optimisation of tariff policy, customs procedures, as well as digitalisation of all cargo transhipment processes.

In particular, TRACECA member countries recently approved the decision to create a working group on the digitalisation of the Europe-Caucasus–Asia corridor: the key goal of this initiative is the introduction of unified IT mechanisms in the field of logistics and the expansion of multimodal transportation, including through the formation of a unified statistical database on cargo transhipment, digitalisation of all border crossing procedures, customs control. The key goal of TRACECA countries is the digitalisation of multimodal transport corridors in Eurasia, ensuring contactless, paperless sustainable transit by converting all checkpoints to digital format, as well as digitalisation of the entire transportation process. It is planned to ensure these tasks throughout the corridor through the implementation of the project "Concepts of the Global Transit Document" (GTrD), a universal solution based on blockchain technology, presented back in June 2021.

The efforts of TRACECA participants in the field of digitalisation are defined as the basic ones for the agreement on visa-free cargo transportation, as well as the signing of a multilateral agreement on the simplification of navigation and cargo transportation between the Caspian Sea ports. At the same time, at the TRACECA intergovernmental commission meeting in December last year and in February this year, program documents were adopted aimed at accelerating the digitalisation of cross-border container transportation by rail, increasing the share of multimodal cargo. It should be noted here that the listed tasks are designated as the main goal of Azerbaijan Railways CJSC for 2023: the department has launched the digitalisation of operational and management processes in order to transform into a modern and integrated structure providing high-quality market services.


All the above tasks will also be solved within the framework of the Lapis Lazuli route launched in December 2018 and initiated by Baku and Ashgabat, which strengthened cooperation between the ports of Turkmenbashi and Alat. Uniting the transport lines of Afghanistan, Turkmenistan, Azerbaijan, Georgia and Türkiye, this route is also mainly focused on the transhipment of non-oil cargoes - mineral raw materials, building materials, fertilizers, textiles, dried fruits and other agricultural products, various container cargoes with a multimodal transportation scheme, including those handled by heavy trucks.

Azerbaijan has repeatedly taken various initiatives to simplify cross-border procedures within the Lapis Lazuli project and, in general, to introduce tariffs in the framework of cargo transhipment between the main commercial ports of Azerbaijan and Turkmenistan. The next step in this direction was the decision of the Azerbaijan Caspian Shipping Company CJSC, which reduced tariffs for the sea transportation of trucks in both directions on the Baku–Turkmenbashi-Baku line from March 1, 2023. The tariff for transportation in one direction (Baku - Turkmenbashi or Turkmenbashi - Baku) of a road train consisting of a tractor-trailer and a semi-trailer (16.5 m) is set at $1,000, having decreased by $72, or almost 7 per cent. If the transportation is paid in advance both ways, the fare will be $1,600, and not $1,716 as previously. According to ASCO, tariffs for the transportation of wheeled vehicles with a length of more or less than 16.5 metres will be determined in proportion to the length of this equipment. It should also be noted that since February of this year, the sea transportation of passenger cars on the Baku – Turkmenbashi - Baku route has been carried out with a significant discount: $200 instead of $325, which is 38.5 per cent less than the previous tariff. Thus, ASCO's tariff reduction policy is aimed at creating favourable conditions for road transportation across the Caspian Sea in the direction of Turkmenistan.