Middle Corridor can be more than a land bridge from East to West Article by Emerging Europe

The UK-based analytical website Emerging Europe has published an article about perspectives of the Middle Corridor. Caliber.Az reprints the article.

Russia’s war on Ukraine brought a new perspective for the Middle Corridor, but policy shifts and investment are needed to respond to the new demand and to support economic development in Kazakhstan, Azerbaijan and Georgia.

With the right policies, the Middle Corridor linking Chinese and European markets via Central Asia and the Caucasus can invigorate regional trade and boost connectivity for countries along the route, according to a new report.

The corridor can also provide resilience and route diversification for the China-Europe container trade, shielding countries and supply chains from geopolitical shocks, the report notes.

The Middle Trade and Transport Corridor—Policies and Investments to Triple Freight Volumes and Halve Travel Time by 2030, which focuses on Kazakhstan, Azerbaijan, and Georgia, identifies priority measures that can transform this multimodal rail and maritime corridor into a vital and dependable trade route.

The report adds that with the right investments and policies, the Middle Corridor could triple trade volumes while halving travel time along the route by 2030. This would benefit local and regional economies and broader communities, creating employment opportunities, spurring demand for supporting industries and attracting businesses.

“Our new data confirms that the Middle Corridor is not only viable but can also become essential to the economies of countries along the route,” says Antonella Bassani, the World Bank’s Vice President for Europe and Central Asia.

“Azerbaijan, Georgia, and Kazakhstan, together with other countries, have made considerable progress in aligning their vision and moving this corridor forward.”

The Middle Corridor, also known as the Trans-Caspian International Transport Route, is a multimodal transport corridor connecting China to Europe, which has been receiving elevated attention following Russia’s invasion of Ukraine.

It links China and Kazakhstan by rail through Dostyk or Khorgos/Altynkol, crosses Kazakhstan by rail to the port of Aktau, crosses the Caspian Sea to Baku/Alyat, and Azerbaijan and Georgia by rail to then either continues by rail to Europe through Turkey or crossing the Black Sea.

Due to inefficiencies and infrastructure gaps in Turkey, the Black Sea route is currently preferred by operators.

The Middle Corridor, with its numerous border crossings, transshipments between modes and operational inefficiencies, takes three times longer than the Northern route (via Russia) and is comparable in duration to the maritime route. As a result, it has consequently held a lower priority for long-distance trade.

The impact of Russia’s war on Ukraine

Russia’s war on Ukraine brought a new perspective for the Middle Corridor, however, as an alternative trade route and as a means of building economic resilience, decreasing dependency on corridors through Russia. Container traffic on the Middle Corridor increased by 33 per cent in 2022 compared to 2021.

However, as shippers shifted unprecedented volumes to the Middle Corridor in the immediate aftermath of the Russian invasion, the limits of the Corridor were quickly apparent.

While the Middle Corridor’s technical operational capacity was not reached, border crossings, transshipment and coordination issues led to very high transport delays and a shift back to alternative corridors, leading to a 37 per cent decrease in container traffic in the first eight months of 2023 compared to the same period in 2022.

Aware of these challenges and the Middle Corridor’s potential, improving its efficiency has become imperative for Azerbaijan, Georgia, and Kazakhstan (as well as Turkey), with strong support from the international community.

In November 2022, a so-called ‘roadmap’ was signed between Azerbaijan, Georgia, Kazakhstan, and Turkey listing priority investments and actions needed to improve the Middle Corridor. In June 2023, Azerbaijan, Georgia and Kazakhstan agreed on the creation of a joint logistics operator.

Not merely a land bridge from East to West

The World Bank’s new report suggests that the Middle Corridor’s time has indeed come. Besides its significance as a land bridge between China and Europe, additional strengths lie in the benefits it can bring as an intraregional trade corridor.

Increased trade between Azerbaijan, Georgia, and Kazakhstan and Europe are the key drivers of demand: including a 37 per cent increase in intra-region trade and a 28 per cent increase in trade between these countries and the European Union.

The report identifies key policies and investments needed to respond to the demand for transport and to support economic development in Kazakhstan, Azerbaijan and Georgia.

These include providing corridor-length logistics solutions to ensure seamless operations along the corridor, and reforming and simplifying processes and procedures, particularly at border crossings, to smooth out exchanges of traffic, data, and characteristics of multimodal corridors.

Coordinating digitalisation to increase tracking and reduce delays at borders and operational interfaces will also be needed. A unified, interoperable framework can facilitate the digital transformation of processes and activities in the corridor, the report suggests.

Improving performance at the Caspian and Black Sea crossings, with a focus on removing bottlenecks to vessel availability and improving port productivity is equally important, as is agreeing on a uniform investment prioritising system. The report identifies a number of investment opportunities that should be further evaluated and prioritised.

The time is now

What’s certain, however, it that the time to make the Middle Corridor work better has arrived.

“Now is an opportune moment to make the Middle Corridor more competitive, expand its capacity, address inefficiencies, and reduce costs,” says Charles Cormier, the World Bank’s Regional Infrastructure Director for Europe and Central Asia.

“A combination of short-term gains in efficiency through institutional and operational measures along with medium-term investments will strengthen the functioning of the Middle Corridor and catalyse its potential.”