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After the outbreak of the armed conflict in Ukraine, the issue of developing transport corridors that would not pass through Russian territory became more pressing than ever. In this regard, special attention is paid to the Middle Transport Corridor, which until recently was considered a weak alternative to roads through Russia. Will the new route be able to replace the traditional transport arteries connecting China and Europe?

From first plans to implementation

The Middle Trade and Transport Corridor or Trans-Caspian Transport Route is an infrastructure project through which goods can be delivered from China to Europe through the territories of Kazakhstan, Azerbaijan, Georgia and Turkey, that is, bypassing Russia. The idea of the project was first expressed in 2013, and the first practical steps to create the necessary infrastructure and remove trade barriers between the participating countries began in 2015.

Before the events of February 2022, many experts and politicians were quite skeptical about the idea of a transport corridor, emphasizing the existence of a number of problems, such as opaque pricing and logistical difficulties. But the lack of special interest in this route from China was especially emphasized: “In the absence of China’s geo-economic involvement, the development of the Middle Corridor still has little economic basis.”

Transport corridor in the context of Ukraine

The situation changed greatly after the start of the conflict in Ukraine: business immediately turned its attention to the Trans-Caspian transport corridor.

Thus, according to the International Association TITR, which unites shipping companies and ports, the volume of transportation along this corridor in 2022 increased by 86% and reached 2.8 million tons compared to 1.5 million in 2021 – then 586,000 tons were transported in 2021. According to the World Bank, in 2022 the volume of container traffic on this route increased by 33% compared to 2021

Political interest in expanding freight transport capabilities across Central Asia has also grown markedly: in November 2022, Azerbaijan, Georgia, Kazakhstan and Turkey signed a so-called road map that identifies priority areas for investments and activities needed to improve the Trans-Caucasus Transport Corridor (TCTC). In June 2023, Azerbaijan, Georgia and Kazakhstan agreed to create a single logistics operator.

The importance of the new route was also discussed in Brussels: European officials announced Europe’s intention to abandon the transit of goods through Russia, through which 86% of goods from China passed before the war.

The EU’s interest in the new transport route is expressed not only in words, but also in concrete steps. Thus, in January 2024, the Global Gateway Investors Forum for EU-Central Asia Transport Connectivity was held in Brussels, during which politicians and businessmen made a number of important statements directly related to this project. In particular, it was announced that the forum participants would invest $10 billion in the development of the region’s transport infrastructure.

In addition, the European Commission announced:

● the launch of the EU-funded Regional Transport Programme, which will be adopted in 2025 (Regional Transport Programme). Under this new programme, the EU will offer technical assistance to modernize and maintain transport routes.

● creation of a Coordination Platform to quickly solve current problems that require joint efforts of partners.

● the emergence of new positions in the Ministries of Transport of all five Central Asian countries from 2024, which will directly work on the implementation of the new transport corridor.

For its part, the European Investment Bank (EIB) signed memorandums of understanding totaling €1.47 billion with the governments of Kazakhstan, Kyrgyzstan and Uzbekistan, as well as the Development Bank of Kazakhstan. These loans will be possible thanks to guarantees provided by the European Commission.

Finally, the European Bank for Reconstruction and Development (EBRD) signed a memorandum of understanding with Kazakhstan, with an investment portfolio of €1.5 billion. These funds will be used to implement already selected projects.

Current issues

Despite the fact that in light of the armed conflict between Russia and Ukraine, the transport corridor began to be used more and more often, and European and regional politicians expressed full support for the project, many problems have not been resolved, as World Bank experts write about in a special report dated November 2023 .

“The capacity of the UK was not exhausted, however, problems with border crossing, transshipment and coordination led to very large delays in transportation and a subsequent return to alternative corridors. As a result, the volume of container traffic in 2023 (over 8 months) decreased by 37% compared to the same period in 2022,” the study emphasizes.

What worries business today:

● Cost of transportation. With reference to surveyed transportation participants, World Bank experts state that one of the main problems is the cost of transporting goods, which is comparable to the cost of transportation through Russia, although that route is much faster.

● Transportation time. In 2022, transporting goods from Dostyk or Khorgos to Constanta via the UK took an average of 50-53 days, which is twice the time required when transiting through Russia.

Why is this happening:

● Lack of a single operator who would be responsible for transporting cargo along the entire route. Currently, customers need to track their cargo on the websites of different country operators.

● The second limitation is related to the low operational efficiency of ports on the Caspian and Black Seas, as well as maritime transport in the Caspian Sea.

For example, some ports do not operate when the wind at sea is very strong, which immediately affects the speed of cargo delivery. For example, in September 2023, the president of the NC Aktau International Sea Trade Port, Abay Turikpenbaev, said that their mobile inspection complex cannot operate in strong gusts of wind.

● The third limiting factor is the lack of end-to-end rail infrastructure, which causes delays when cargo needs to be moved from rail to sea.

● Delays at border crossing points due to the lack of a single operator.

● Integration of document flow (each country has its own documents, forms, etc.).

Future prospects

According to World Bank analysts, the overall increase in trade turnover between China and the EU will increase by about 30% by 2030, and the volume of cargo transported along this route will increase 3 times. However, if measures to improve the operation of the Trans-Caspian Corridor are not implemented, then demand for transportation will be 35% lower than the projected increase.

At the same time, as World Bank experts predict, even with the successful implementation of all infrastructure projects, this route will play a more important role in regional rather than transcontinental trade: by 2030, trade between Europe and China will account for less than 40% of the volume of transported cargo.

In any case, in the context of deteriorating relations between Russia and Europe, the EU is extremely interested in expanding the capabilities of the Trans-Caspian corridor, so it will invest material, technical and political resources in this project.

At the beginning of 2023, Russia announced the construction of two new transport corridors from China towards Europe, bypassing Kazakhstan. The first is through Kyrgyzstan, Uzbekistan to Turkmenistan, and then through the Caspian Sea to Astrakhan (South transport corridor). The second is the continuation of the new Moscow-Kazan highway to Novosibirsk, and then through the Altai Republic or Mongolia to China. Experts also add to this list the North-South route through Azerbaijan (restoration of railway infrastructure. Russian investments are estimated at $1.3 billion). In recent months these projects have generated a wave of discussions about the allegedly growing tension in Russian-Kazakh relations.

South transport corridor – A memorandum on its formation and development of the southern transport corridor was signed in November 2023 by participants in the first SCO transport forum in Tashkent (Uzbekistan).

The first route is more the interest of Kyrgyzstan. Bishkek intends to create an opportunity to enter the Russian market, bypassing the territory of Kazakhstan. Among the reasons cited is the need to bypass queues at the Kazakh-Kyrgyz border. But it is obvious that it is not the point. Kyrgyz businesses are the transit of Chinese goods to the territory of the EAEU. And not so long ago, Kazakhstan detained a shipment of drones to Russia. Theoretically, there is no customs border between the EAEU countries and transport with drones should not have been stopped. However, the Kazakh side is in control of the situation. Kazakhstan is the only country in the region that has placed exports and re-exports to and from Russia under the control of American structures. It seems that in Kazakhstan the fear of secondary sanctions from the USA significantly outweighs its own interests, primarily economic ones. Kazakhstan’s position raises many questions about its fulfillment of its obligations within the EAEU and the CIS free trade zone.

The project of creating a route through Uzbekistan, Turkmenistan and further by sea has little economic feasibility, since goods will leave the EAEU zone and then cross the border again, which will obviously lead to higher prices for supplies. There is an opinion that the talks about the Southern transport corridor is aimed to put pressure on Kazakhstan to remove restrictions on the border for transit cargo. Real steps to implement this route will challenge Kazakhstan’s participation in the North-South corridor project. It connects Russia and India and passes through Azerbaijan, Iran, Kazakhstan, and Turkmenistan. Many experts note that the removal of restrictions on the Kazakh-Kyrgyz border and the Russian-Kazakh border on the part of Kazakhstan can at least slow down the implementation of this project.

In the transport corridors under consideration, problems on the border of Kyrgyzstan and Tajikistan fade into the background since interaction goes through Uzbekistan. On the other hand, we witnessed some major changes on their 972 km long common border. The work of the intergovernmental commission has continued since last year, and to date the parties have agreed on approximately 889 km of the state border out of 972 km. Even if the corridor is not supposed to lead across their border, it helps stability in the region and, theoretically, this could create an alternative to existing corridors or those under construction.

The implementation of these projects will be significantly influenced by Kazakhstan’s activity in attempts to comply with sanctions and the development of routes bypassing Russia. Now Russia is not very serious about Kazakhstan’s attempts to develop the Kazakhstan-Azerbaijan route, since its capacity is limited.

The transport industry of Kazakhstan provides about 9% of GDP, which is quite a large amount. According to the Ministry of Industry and Infrastructure Development of the Republic of Kazakhstan, 13 international transport corridors pass through the country. Among them, it is worth highlighting the Trans-Asian Railway (TAR), TRACECA and North-South, all of which in one way or another connect Asia with Europe.

As we know, there have been or are attempts to bypass Kazakhstan due to its control of border crossings. However, since Kazakhstan’s dependence on China is high, the likelihood of a deterioration in relations due to the construction of new corridors is low. Kazakhstan will remain a significant transit partner for China.

Generally, it is unlikely that the development of alternative transport projects will cause any serious political tension in the region. In bilateral relations between Russia and Kazakhstan or between Kazakhstan and other Central Asian countries, transport transit issues are significant but not the most important ones. In the context of geopolitical changes, when regionalization processes became more important than globalization, relations with neighboring countries will become more and more important.

Finally, we can add that a major change for Kazakhstan will be the successful construction of the railway China – Kyrgyzstan – Uzbekistan. Kazakhstan could probably suffer significant losses in the event of the combined implementation of projects on the southern transport corridor and the China-Kyrgyzstan-Uzbekistan railway. Until recently, these were hypothetical planes, but in the last days we come to know that the construction of the railway can begin as early as the end of 2024.

There have been several attempts to find a transport corridor that would bypass a certain country. The reasons for bypassing a country in the transportation of goods can vary, from political and security concerns to high fees. In this article we take a look on a route bypassing Kazakhstan – a major player in transport in Central Asia.

The idea of building the railway between China – Kyrgyzstan – Uzbekistan appeared in 1996, when China announced the start of construction of the South Xinjiang railway (Korla-Kashgar section). A year later, participants signed in Tashkent (Uzbekistan) and Bishkek (Kyrgyzstan) a memorandum of cooperation on the construction of the Kashgar-Osh-Andijan railway and the protocol of the first meeting of the joint working commission.

In 2002, the Chinese government allocated a technical grant (20 million yuan) to Kyrgyzstan to study the future highway, after which both sides chose the northern route, although China benefited from the southern option.

In June 2020 opening of railway trade route between China and Uzbekistan took place. The section passing through Kyrgyzstan is unfinished.

Issues causing disagreement among countries include route determination, railway track selection, financing sources, national security, environmental impact, geopolitical considerations, and more. For instance, China and Uzbekistan may prioritise a shorter and more economical transit route to Europe and the Middle East. On the other hand, Kyrgyzstan might advocate for a longer route that fosters connectivity between the northern and southern regions of the country.

In Kyrgyzstan there is a problem of different railway gauge widths (remained from Soviet times), which significantly complicates the project – it is necessary to build a station where wagons will be moved from track to track.

China’s interest in the route through Kyrgyzstan also lies in the presence of a large number of gold deposits in the country. More than ten years ago, the Kyrgyz government offered to pay China for the construction of the railway with gold mining rights. The status of this proposal is currently unclear.

As of 2023, according to the Ministry of Investment, Industry and Trade of Uzbekistan, the parties have previously agreed on a northern 450-kilometer route passing through Kashgar, Torugart, Arpa, Makmal and Jalalabad. The proposed route will pass through rugged mountainous terrain, but if successfully built, it is expected to cut delivery times to Europe by one week or more.

Companies responsible for the implementation of the project are State Enterprise “NC” Kyrgyz Temir Zholu” and JSC “Uzbekistan Temir Yollari”.

The first option of the road after the feasibility study cost $1.5 billion, during the discussion by 2020 the amount increased to $4.5 billion (up $6,5 billion according to different sources). As for the beginning of 2024 the final costs is unknown, but each country should finance at least 30% of its cost.

Kyrgyzstan is not likely to finance the construction of the project on its own. It is not yet clear what could become a source of funding. the growing level of authoritarianism in the country reduces the possibility of receiving investment from Europe. On the other hand, attempts to pull Kyrgyzstan away from Russia from the West may also include investments in transport infrastructure.

In Kyrgyzstan, a limit has been established according to which one creditor can account for no more than 45% of the total external debt. However, the country’s debt to China currently amounts to 39% of its total external debt, which is close to this limit.

According to Beijing, in 2022, Chinese exports to Kyrgyzstan amounted to $15.42 billion, while only $4.07 billion worth of goods were registered in Kyrgyzstan, which indirectly indicates that most of the trade between China and Kyrgyzstan consists of contraband goods.

The main beneficiary is China. The railway will allow increasing the volume of transportation, the dependence of which on weather conditions is minimal. The benefit to Uzbekistan and Kyrgyzstan is not obvious. On the one hand, this should stimulate the development of infrastructure and industrial production along the railway. On the other hand, the frequent changes of politicians and the high level of corruption in the countries will obviously not allow the full potential of the project to be realised.

The implementation of this route is unlikely to have an impact on transit on the territory of Kazakhstan, since the main goal does not bypass Kazakhstan, but the growth of Chinese imports in general. Any transports corridors along the Central Asian route are considered by China as an additional opportunity to supply its goods to Europe.