Middle Corridor in the Context of Post-Pandemic Geopolitical Shifts – An Analysis

In the aftermath of the COVID-19 pandemic and amid rising geopolitical tensions and sanctions that have disrupted traditional shipping and logistics chains, the need to develop alternative trade routes has gained significant importance. One such route is the Middle Corridor, or Trans-Caspian International Transport Route (TITR), which has emerged as a priority project for Kazakhstan and its neighboring countries. This comprehensive analysis explores the prospects and strategic significance of this multi-modal transnational route.

The Middle Corridor: An Overview

The Middle Corridor, also known as the Trans-Caspian International Transport Route (TITR), begins in China and traverses Kazakhstan, the Caspian Sea, Azerbaijan, Georgia, and Türkiye before reaching Europe. In 2023, more than 2.7 million tons of cargo were transported along this route, marking an 86% increase from 2022. Projections for 2024 suggest that the route could handle up to 4 million tons of cargo.

Drivers of Growth

The substantial growth in cargo volumes along the TITR can be attributed to several key factors:

1. Geopolitical Shifts: The ongoing conflict in Ukraine and the associated restrictions on transporting goods through Russia, which previously served as the main land route between East and West, have driven a shift towards alternative routes. In 2022, container traffic via the TITR grew by 33% year-on-year.
2. Suez Canal and Red Sea Instability: Geopolitical tensions affecting the Suez Canal and the Red Sea have led many shipping companies to reroute around the southern tip of Africa, significantly increasing delivery times and costs. Attacks by Houthi rebels in the region reduced the number of container ships passing through the Suez Canal by 67% in 2023, according to the UN.
3. Cost Efficiency: According to the UN Conference on Trade and Development, the cost of shipping goods from Shanghai to Europe by sea roughly tripled in 2022. In contrast, rail transport from inland Chongqing to Europe became a third cheaper than sea transport. Over the past decade, rail transport costs between China and Europe have fallen by 30%, enhancing the attractiveness of the TITR.

Collaborative Efforts Among Middle Corridor Countries

To ensure safe and uninterrupted exports and attract more cargo flows, countries along the TITR are implementing several measures:

1. Strategic Initiatives: The route is considered a strategic initiative for regional transport development. During a visit to Azerbaijan, Kazakh President Kassym-Jomart Tokayev projected that the volume of cargo transported via the TITR could increase to 10 million tons, facilitated by existing demand and technological advancements.
2. Infrastructure Roadmap: A roadmap for 2022-2027 was signed to address bottlenecks along the route in Kazakhstan, Azerbaijan, and Turkey. Additionally, a joint venture named Middle Corridor Multimodal Ltd was created by railway administrations in Kazakhstan, Azerbaijan, and Georgia, allowing for a streamlined “Single Window” approach.
3. Regional Cooperation: At the “New Silk Way” VI International Transport and Logistics Business Forum in Astana in 2023, Turkey’s Transport and Infrastructure Minister, Abdulkadir Uraloglu, reaffirmed Turkey’s commitment to developing the Middle Corridor. Projects like the Turkey-Iraq Development Road, a transport corridor to the Persian Gulf, are expected to boost cargo flows along the corridor.
4. Investment Plans: Over the next five years, Middle Corridor countries plan to invest approximately 6 billion euros in infrastructure projects. These investments will focus on both physical infrastructure and soft infrastructure, including operating models and digitization.

Interest and Strategic Importance

The Middle Corridor holds significant interest for both China and Europe:

1. China’s Perspective: For China, the TITR offers a diversified transport route to European markets, particularly important given the unpredictable geopolitical situation in the Middle East and the South China Sea.
2. Europe’s Perspective: European interest in the TITR primarily centers on the speed of delivery. Initially skeptical, European countries have begun to reconsider their position due to recent global and regional events. The European Bank for Reconstruction and Development projects that by 2030-2035, the TITR could handle 1.0-1.5 thousand TEUs per year.
3. World Bank Report: A World Bank report from November 2023 highlighted priority measures to transform the TITR into a reliable trade route. The report suggested that with proper investments and policies, the corridor could halve cargo transport times and triple freight volumes by 2030, potentially handling 11 million tons of cargo.

Challenges and Recommendations

Despite its potential, the TITR faces several challenges:

1. Transport Time and Costs: The time and cost of transporting goods along the TITR remain significant barriers.
2. Coordination and Management: A lack of coordination and efficient management along the corridor hinders its development.
3. Infrastructure Efficiency: The efficiency of ports in the Caspian and Black seas, as well as maritime transport in the Caspian Sea, needs improvement.
4. Digital Integration: There is a lack of uniformity and integration of digital solutions used by the Middle Corridor countries.

The World Bank report recommends logistics solutions that cover the entire corridor, optimizing procedures and necessary documents, and further developing digital processes and infrastructure.

Environmental Concerns

Falling water levels in the Caspian Sea pose a risk to the transport of goods along key segments of the route. Kazakhstan plans to address this through dredging at the Kuryk and Aktau ports and by implementing several infrastructure projects to increase port capacity.

Global Partnerships and Future Outlook

Kazakhstan is leveraging global expertise by partnering with companies like DP World, Lianyungang Port, and PSA International. These collaborations aim to boost trade flows, develop digital technology, and improve cargo transport efficiency.

The involvement of global transport giants and the support of international financial institutions underscore the viability and importance of the Middle Corridor. As geopolitical shifts continue to reshape global trade routes, the TITR stands out as a crucial alternative, promising economic growth and enhanced connectivity for the countries along its path. With continued investment and collaboration, the Middle Corridor is poised to become a key player in international trade logistics.