Thriving Trans-Caspian Corridor boosts trade ties between Asia and Europe Review by Caliber.Az

In recent years, Azerbaijan and its partners in Central Asian countries, along with the growth of mutual trade turnover, have been actively developing cargo transit from China, mainly through container block trains. Having reached a peak in the summer of 2022, rail transit of cargoes along the Middle Corridor began to gradually decline, and at the end of last year the decline in container transportation reached 40 per cent. Positive trends have emerged only in early 2024: on January 11, a block train sent from China arrived in Baku, and seven container trains are expected to transit Azerbaijan by the end of this month. Interest in the route is high, but Azerbaijan, Kazakhstan and other partners have yet to remove bottlenecks in the corridor's rail and port infrastructure to increase market demand.

By the growth of mutual trade turnover and cargo transit from China to the Middle East and Europe, in recent years the Central Asian countries and Azerbaijan have become involved in a potentially huge transit space originating in China and Southeast Asia and extending to Türkiye and the countries of the Old World. These processes began to intensify five years ago with the launch of the Azerbaijan-Kazakhstan initiative - the Trans-Caspian International Transport Route (TITR), which links the logistics of the Central Asian countries with Türkiye and is actively used by China within the framework of the "One Belt, One Road" project mainly for transshipment of container multimodal block trains. Another East-West route was the Lapis Lazuli route implemented by Azerbaijan, Turkmenistan and Afghanistan since 2019. It is noteworthy that the aforementioned directions, which are part of the Middle Corridor logistics, have acquired a qualitatively different significance in the last two years against the backdrop of the Russian-Ukrainian conflict and the virtually complete breakdown of transportation links between Europe and Russia.

It is pertinent to note here that Baku and Astana view Chinese transit as one of the key elements of filling the Middle Corridor with additional cargo. Since the first China Railway Express container train was launched in 2019, Chinese containerized multimodal transit has now significantly expanded in terms of cargo nomenclature and geography of Chinese shipper cities where block trains are formed. Such trains are in transit for approximately 20-25 days, which is noticeably shorter than transshipment of cargo from China and Southeast Asia by sea through the Suez Canal, which takes on average about 40 days. Not to mention the greater security of the TITR route, especially against the backdrop of the recently intensified military confrontation between the Houthi movement in Yemen and a number of Arab states and Western countries in the Red Sea region.

"The Middle Corridor is an important transit route for a number of the Eurasian region countries: in fact, the route is so crucial that the geopolitical balancing strategies of many countries between regional powers are based on its operation," Matthew Orr, a Eurasia analyst at RANE, believes. According to him, due to their isolation from the world ocean, Central Asian countries are extremely dependent on the operation of the TITR route, as other routes through Russia and Iran, which are under severe sanctions, are unattractive, and Afghanistan is too unstable. In turn, the expert believes that the Middle Corridor provides transit container rail transportation of Chinese cargoes to Türkiye and Europe through the territory of Central Asia and the South Caucasus.

Block trains running along this corridor are capable of delivering cargo from China to Europe in two decades of the month, however, mass transportation can only sustain such rates if the capacity of the entire infrastructure chain of the Trans-Caspian route is further expanded, cross-border procedures are simplified, logistics operations are digitalized and transport tariffs are reduced.

Unfortunately, the TITR route does not yet fully meet the above-mentioned requirements, and as it turned out, the sharp increase in the volume of transit cargoes creates certain problems in terms of the pace of their handling. Thus, in the first half of 2022, the intensity of transshipment of wheeled equipment (heavy-duty camions and trailers), as well as rail wagons traveling from Azerbaijan to the Central Asia region and back, has sharply increased. In the first decade of July 2022, this led to extreme overloading of port and railway infrastructure of our country, including due to lack of loading places on ferries and Ro-Ro vessels. As a result, it turned into a temporary convention ban on ferry transportation of rail cars along the Trans-Caspian route - Alat-Kurik, Alat-Aktau, as well as Alat-Turkmenbashi. This crisis has been overcome, but has reaffirmed the urgency of the rapid expansion of the transportation infrastructure of the Alat port.

Last year, the World Bank (WB) published a special report identifying five major challenges to the effectiveness of the Middle Corridor: according to WB experts, the key problem is related to poor coordination in the management of the corridor, and equally important is the low operational efficiency of ports in the Caspian and Black Seas, as well as shipping services. The TITR route has other bottlenecks: slow rail transport and port operations during ship unloading/loading, delays at border crossings, and lagging digitalization of the route. Accordingly, the WB estimates that on average, cargo transportation along the Middle Corridor in 2022 would take 53 days, which takes twice as long as the northern route alternative.

"At least 18.5 billion euros may be required to develop the transport infrastructure of the TITR, including reconstruction and modernization of railway and road corridors and increasing port capacity," Marco Valentini, editor of the Ship2Shore online magazine, noted not long ago. According to him, despite the attractiveness and demand for the Middle Corridor in the current geopolitical situation, transit volumes through the TITR began to slowly decline by the end of 2022, especially in the rail segment, and this trend continued last year. Including the decline is seen in container rail transportation, which declined by 35-40 per cent across the corridor.

In order to overcome this inertia and further expand the volume of transit freight traffic from China and Central Asian countries through TITR and other routes of the Middle Corridor, modernization of railway and port infrastructure in Kazakhstan, as well as communications laid on the territory of Azerbaijan, is underway. In particular, reconstruction of infrastructure of the Georgian section of Baku-Tbilisi-Kars railway financed by Azerbaijan will be completed in March this year, modernization of the Alat port has been going on for the second year, a bulk cargo terminal has been put into operation, and a container terminal will be expanded in the future. As a result, Baku plans to increase transit freight traffic from the current 10 million to 13 million tons in the next four years.

Kazakhstan has also started work on the creation of a container hub on the basis of the SEZ Seaport Aktau; international consultants and investors, including global container operators such as PSA International, Maersk and MSC, have been involved in this project. Also in Kazakhstan, construction of a second railway track to Caspian seaports and electrification of the Dostyk – Moyinty section of the railroad is planned by 2025.

It is quite obvious that the implementation of the aforementioned infrastructure projects will require some time and considerable funds, but Baku in partnership with Astana, Tbilisi and Ankara is already accelerating work to optimize the movement of rail freight, simplifying customs and cross-border procedures, improving electronic data exchange, etc. The effectiveness of this work is evidenced by the resumption of container transportation intensity along the TITR route: for example, after a long break, a block train with 110 TEU containers loaded with electric cars, construction materials, and industrial products shipped from Chinese Xi'an arrived at the Alat port in early December last year. This trend has only intensified in the new year 2024.

According to Azerbaijan Railways CJSC, a block train with 57 containers (electric cars, construction materials, pipes of different sizes) departed from Xi'an on December 30 and transited through the port of Aktau arrived in Baku port on January 11, having covered the distance of many thousands of kilometers in less than 12 days. According to Azerbaijan Railways’ forecasts, 7 more block-trains with Chinese cargoes will pass through Azerbaijan by the end of January this year, and it is also planned to send two block-trains in transit to Europe.   

The Middle Corridor's cargo carrying capacity will soon increase further, taking into account the realization of a joint project between ADY Container, a subsidiary of Azerbaijan Railways CJSC, and COSCO SHİPPİNG Lines, the world's largest shipping company. In particular, it is about the plans to establish rail-sea container transportation of Chinese cargoes from Kazakhstan and Turkmenistan ports - Aktau and Turkmenbashi, transit through Alat and Batumi ports, and further to the Romanian sea port of Constanta.