Europe, Asia bet their money on the "Middle Corridor" Another takeaway from Davos

For a year now, the partners of Azerbaijan in the Caspian Sea region, as well as China, Türkiye and EU countries have consistently increased their trans-Caspian trans-shipments. Taking into account the Russian-Ukrainian war and the sanction-based limitations caused by it, the “Middle Corridor” becomes the key transport artery in the vast Eurasian region today. President of Azerbaijan, Ilham Aliyev’s speech at the “Eurasia’s Middle Corridor: From Pathway to Highway” panel session at the World Economic Forum (WEF) in Davos, Switzerland was devoted to the possibilities of this route and the upcoming works on strengthening of its logistics infrastructure.

As the competitiveness of the “Northern Corridor” has weakened, the number of applications from freight forwarders and logistics companies of Europe, Türkiye and Central Asian States has significantly increased, which all fully support the idea of expanding the potential of the “Silk Road” and the similar Chinese initiative of “One Belt, One Road” (OBOR, formally known as “The Belt and Road Initiative”). Against the background of the energy and raw material crisis in the EU throughout the next few years, a tangible growth of freight traffic on the railway-ferry and road routes of the “Middle Corridor” between the ports of the Caspian Sea (TRACECA, TMT, Lapislazuli) can be expected, with the additional option of trans-shipments of transit cargo from China, Japan and other Asian countries. The need for a multimodal, predominantly containerized freight transport is growing rapidly today, among others due to the growing day-to-day needs of the European industry for petrochemical and mineral raw materials, including fertilizers, construction materials, ore concentrates, semi-finished products and other goods.

Today, the “Middle Corridor” is becoming the best option for the organization of sustainable logistics between the East and West, with the logistics tool of this path being the Trans-Caspian International Transport Route (TITR), established in 2018. It is one of the three trade corridors between China and the “Old World”, with a length of 4,256 kilometres by road and rail and 508 kilometres by sea. The standard container block train through this corridor delivers Chinese cargo to Europe within an average of 20 to 25 days, which is considered to be one of its most important logistical advantages. In comparison, the trans-shipment from South-East Asia via the Suez Canal often takes 35 to 40 days. But the alternative in the form of the Trans-Siberian and Baikal-Amur highways is now completely ineffective because of the harsh anti-Russian sanctions in addition to its high time consumption (especially in the winter, when the snow slows down the trains). After the refusal to depend on the European energy security for oil and gas supplies from Russia, Brussels now wants to deprive Moscow of the levers of pressure in the field of transport, developing alternative land trade routes linking the EU with China and the Central Asian countries.

Azerbaijan is certainly a beneficiary of this global transport diversification, as its favourable geographical position at the junction between two continents - Europe and Asia - allows our country to successfully play an important role as an international transport hub. It is obvious, that all this contributes to the growth of the volume of transit cargo through our country: in 2022 such traffic increased by 75% which, correspondingly, also increased the income to the country’s transport structures.

“Being a natural geographical bridge between East and West, we have mainly invested in transportation infrastructure in the previous years. All the necessary infrastructure facilities in Azerbaijan are ready to receive more cargo. We believe that the growth of freight transport will not only allow us to diversify exports, seeing as we will export services, but our position on the ‘Middle Corridor’ and the ‘North-South’ route creates additional opportunities for business in Azerbaijan at the same time”, Azerbaijan’s President Ilham Aliyev said on Thursday, January 19, taking part in the WEF panel meeting devoted to the subject of “Eurasia’s Middle Corridor: From Pathway to Highway”. Talking about opportunities to increase cargo trans-shipment along the corridor, the head of state reminded the participants of the meeting that Azerbaijan owns the largest merchant fleet in the Caspian Sea with 53 ships. At the same time, work is underway to increase the capacity of the Baku International Seaport in Alata from the current 15 million tons of cargo per year capacity to 25 million tons, with budget funds having already been allocated for this purpose.

It is worth mentioning here, that similar projects are being implemented on the east coast of the Caspian Sea: Kazakhstan started work on the creation of a container hub on the basis of the Free Economic Zone “Seaport Aktau” last year, and international consultants and investors have been involved in this project. The Kazakh merchant fleet in the Caspian Sea will soon be replenished by four ferries. By 2025 the building of second tracks and the electrification of a section of the Dostyk – Moyinty railway is also planned. All these undertakings will increase the speed of container trains and multiply the capacity of seaports and the volume of trans-shipment by ferry.

“In turn, China has initiated the implementation of a new project of the China - Kyrgyzstan – Uzbekistan railway, this highway eventually will reach the Caspian Sea and further Azerbaijan. It is also important to not only work on the transportation and advantages of the ‘East-West’ route for the transhipment of goods from China and Central Asia to Europe, but to also expand transportation in the opposite direction - from West to East”, the head of state stressed, talking about the prospects of infrastructure development and expansion of the reverse freight traffic along the “Middle corridor”.

Projects have also intensified in the western segment of the corridor. Azerbaijan and Georgia are connected by roads and railways, including the Baku-Tbilisi-Kars railway (BTK), a strategic transport project for the two countries. “Today, together with Baku, we are implementing a project to modernize the BTK, in order to increase its capacity to 5 million tons of cargo. Recently, Azerbaijan has provided additional funding for this project, which we plan to complete by 2024”, said another participant of the panel, Georgian Prime Minister Irakli Garibashvili.

President Ilham Aliyev emphasized that Azerbaijan maintains excellent relations with its neighbours in the West, Georgia and Türkiye, and in the East with Central Asia, and this promotes joint business ventures. Thus, in 2023 Baku will begin the transit of Kazakhstani oil (transit of oil products and crude oil from Turkmenistan is being carried out for many years), thus the potential of the “Middle Corridor” expands for the supply of energy raw materials as well. “I believe we now need closer cooperation between all the countries involved - Central Asia, Caucasus and Europe - to work actively on customs administration and have more or less a single window approach and tariffs policy. It is necessary to create a kind of steering committee, governing council, including all interested parties, and to jointly increase the commercial attractiveness of this route”, said the head of the Azerbaijani state.

A similar opinion was expressed by another participant of the panel session, the chairman of the Turkish company Limak Holdings, Ebru Özdemir: “ The ‘Middle corridor’ is necessary for the current difficult global situation, it is shorter and more favourable in terms of climate and the countries on the territory of which these routes pass are in friendly relations, they have established active business cooperation, which significantly facilitates the work of the private sector. The most important element of this corridor is the availability of railways which infrastructure can be rapidly and effectively expanded, with the support of the government, and with the participation of the private sector, it will be realized in a very short time”. She also noted that it is necessary to create an operator company to manage the work of the “Middle Corridor”, as well as to accelerate the process of cross-border passage of goods, optimize tariffs and customs procedures.

“The development of the ‘Middle Corridor’ has a huge impact on the economic well-being of the entire region, contributing to peace and stability in the neighbouring countries, and also guarantees the continuity of supply chains to Europe. The EU has a set of instruments for financing projects, we have investment banks, and guarantee schemes. In general, Europe is very interested and determined to develop cooperation in this direction”, said the European Commissioner for Budget and Administration Johannes Hahn, summing up the panel discussion at the WEF forum.