Pros and cons of integrating the Middle Corridor into the global economy - ANALYSIS

By Asif Aydinli

Due to the Russian-Ukrainian conflict and the crisis in the Red Sea, the significance of finding alternative international transport routes has increased. In this context, the Trans-Caspian International Transport Route, also known as the Middle Corridor, which was launched in 2018, gains particular importance. This route traverses China, Kazakhstan, the waters of the Caspian Sea, Azerbaijan, Georgia, Turkey, and several European countries. According to 2023 data, over 2.7 million tons of cargo were transported via the Middle Corridor, marking an 86% increase compared to the previous year. It is expected that by 2030, freight through this route will reach 10 million tons per year.

Interests of the project's participating countries

For China, the Middle Corridor offers a shorter and more efficient path to European markets compared to maritime routes, significantly reducing delivery times and strengthening its economic presence in Europe. In 2023, trade between China and the European Union totaled $782.9 billion.

Central Asian countries gain unique opportunities to integrate into the global economy through the Middle Corridor, which fosters the development of their transport infrastructure and strengthens their geopolitical position.

Europe benefits from an alternative and efficient path for importing goods, diversifying trade routes, and reducing dependence on traditional sea routes. This is particularly important in the context of global political and economic instability.

In January of this year, the European Commission and the European Investment Bank expressed their intention to invest 1.5 billion euros in Central Asia's transport capabilities. Additionally, the European Bank for Reconstruction and Development signed an agreement with Kazakhstan to allocate 1.5 billion euros for transport development.

Azerbaijan plays a key role in the Middle Corridor, enhancing its strategic importance in international trade and contributing to the development of its economy and infrastructure. At the World Economic Forum in Davos, Azerbaijani President Ilham Aliyev emphasized the need for closer cooperation among countries along the Middle Corridor to effectively manage customs administration and tariff policy.

Costly but profitable project

The Middle Corridor, although costly, proves to be a profitable project. Spanning several countries, it includes a critical stage at the Caspian Sea where cargo is transferred through the ports of Aktau or Kuryk. The goods are then reloaded onto ferries, transported to Baku, and subsequently moved by rail to Georgian ports or Turkey. From there, they are ferried to countries on the Balkan Peninsula. This multi-stage process involves significant costs.

Despite these expenses, the development of the Middle Corridor is particularly advantageous under the current geopolitical conditions, especially for Azerbaijan and Kazakhstan. Azerbaijan leverages its strategic location and developed infrastructure, serving as a pivotal link between Europe and Asia. The country collaborates actively with financial institutions and utilizes its geographical advantage to enhance the corridor's functionality, thereby expanding transport connections with Central Asian countries. For Azerbaijan, the Middle Corridor not only diversifies trade routes but also establishes the country as a key transit hub in the region, contributing to its economic growth.

Kazakhstan, being landlocked and faced with complex logistical challenges, benefits from direct access to Europe through the development of the Middle Corridor. Its connection to the Chinese rail network and integration into the corridor’s rail line allows Kazakhstan to circumvent reliance on transit routes through Russian territory and to boost its export volumes to European markets.

Expert analysis on the pros and cons of the project

Farhad Kasenov, head of the A+Analytics research center and a noted Kazakh political scientist, highlighted the growing importance of the Middle Corridor following the Russian military actions against Ukraine. He commented, "The imposition of Western sanctions against Russia has complicated the transportation of goods through its territory. Since China maintains active trade relations with the USA and Europe, it seeks routes that avoid sanctions. Thus, the Middle Corridor has become highly relevant under the new geopolitical conditions, benefiting the countries it traverses."

Kasenov also addressed the technical and legislative hurdles faced by the corridor. "The differing railway gauges—1435 mm in China and standard gauges in Kazakhstan, Azerbaijan, and Georgia at 1520 mm—necessitate transshipment at various unloading stations, complicating transportation across the Caspian Sea and through Turkey. These discrepancies create significant logistical challenges," he explained.

Legislative issues also impede the efficiency of the corridor. "As goods transit through the territories of the Eurasian Economic Union and the European Union, extensive customs documentation is required, which prolongs delivery times. Despite advancements in digitalization and cooperation among the participating countries, streamlining these processes remains a challenge," Kasenov added.

Despite these challenges, Kasenov remains optimistic about the corridor's future. "Even with the potential resolution of the Russian-Ukrainian conflict and ongoing sanctions against Russia, the tensions between China and the USA underscore the significance of this project. Given the multi-billion dollar investments from the European Union and China, the Middle Corridor holds promising prospects for all participating countries, including potential gains for Armenia should a peace treaty be signed with Azerbaijan," he concluded.

Rauf Aghamirzayev, an Azerbaijani expert in transport and logistics, believes the Middle Corridor holds significant potential, but its realization demands serious efforts in developing infrastructure, overcoming bureaucratic hurdles, and simplifying customs procedures. He observed, "New geopolitical circumstances, including issues in the Suez Canal and the Red Sea, have enhanced the importance of this route, drawing the attention of major global players, despite its development not yet being complete."

Aghamirzayev highlighted the proactive efforts of Azerbaijan and Kazakhstan in advancing this project. "Kazakhstan is intensively building infrastructure, including a new border checkpoint at the border with China and expanding the port of Kuryk. In Azerbaijan, expansion of the Alat port and modernization of railway and road paths towards Georgia are underway," he reported.

He also noted significant challenges in Georgia, where the railway infrastructure demands considerable investment to boost capacity. "Updating the railway fleet and completing the Anaklia port construction are critical to expanding Georgia's transport capabilities," he explained.

Furthermore, Aghamirzayev pointed out important developments on the Azerbaijani section of the corridor. "Following the liberation of territories, the Azerbaijani government is actively developing infrastructure in the Karabakh region, including constructing roads and a bridge across the Aras River. This will open new transport routes through Iran to Nakhchivan and alleviate pressure on the Georgian route," he added.

Lastly, the expert mentioned significant planned investments in Turkey's railway network, expected to increase its capacity from 38 million to 448 million tons. "This expansion will significantly enhance the overall efficiency of the Middle Corridor," he concluded.

Challenges for the Middle Corridor

The Middle Corridor, spanning strategic regions of Kazakhstan, Azerbaijan, and Georgia, represents a significant trade and transport route that could greatly enhance economic integration between Europe and Asia. However, a World Bank report highlights several serious challenges that must be addressed to realize its full potential.

The corridor suffers from inadequate infrastructure and poor coordination among the participating countries, leading to substantial delays, particularly at border crossings where different railway operators must interact. The efficiency of maritime transport, especially on the Caspian Sea, is currently below optimal levels, complicating logistics and increasing transit times. The absence of a continuous railway line disrupts the smooth movement of goods across the region. Inconsistent use of IT and data exchange systems further complicates integration between the countries involved.

The World Bank suggests that substantial investments, which have already been partially outlined and agreed upon by the countries, are necessary to improve these conditions and enhance the corridor's competitiveness. Special attention should be directed towards: 1) Improving coordination and logistics operations; 2) Implementing advanced digital technologies to boost efficiency.

Should these issues be effectively resolved, the Middle Corridor is poised to not only triple its freight volumes by 2030 but also significantly reduce transit times. This could position it as the preferred route for transcontinental trade, facilitating faster and more efficient connections between Europe and Asia.

News.Az 




News.Az 

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