As Russia experiences the impact of sanctions and restrictions in trade and economic relations with a number of countries, Central Asian countries and China are exploring new routes to increase their exports to Europe, bypassing Russia.

The Middle Corridor that connects Central Asia to Europe has emerged as an alternative to the Northern Corridor, where Russia plays a key role, as most of it runs through Russian territory, and the conventional sea route through the Indian Ocean

And the route shaves weeks off transit times. If it takes 40 to 60 days to ship cargo from Europe to Asia through the Suez Canal or around Africa, and it takes more than 30 days to deliver cargo from China to Europe using the Northern Corridor, by using the Baku-Tbilisi-Kars railway that is a core part of the Middle Corridor, deliveries from Asia to Turkey via the South Caucasus take only 15 days. And in 2023 Kazakh oil was carried along the Middle Corridor for the first time.

This route is also known as the Trans-Caspian International Transport Route (TITR). The main countries through which the Middle Corridor passes – Azerbaijan, China, Georgia, Kazakhstan and Turkey – are hoping to benefit from the growing international interest in this alternative Eurasian trade route, which circumvents Russia.

Azerbaijan as a Middle Corridor node

In November 2023 President Ilham Aliyev of Azerbaijan approved the "Action Plan for Increasing the Transit Potential of International Transport Corridors Passing Through the Territory of the Republic of Azerbaijan and Stimulating Transit Freight Transportation for 2024-2026." The plan envisages implementing various measures to strengthen and develop the transport-logistics sector and the country's transit potential.

Currently Azerbaijan's priority in this plan is the Middle Corridor, considered the most reliable, stable and secure route for transcontinental logistics across Eurasia.

The Middle Corridor's multi-modal transport infrastructure links the Caspian and Black Sea ferry terminals with the rail systems of China, Kazakhstan, Azerbaijan, Georgia, Turkey, Ukraine and Poland. Trains operating along this corridor deliver cargo from China to Europe on average in 20-25 days.

In early January, the first train of the year from Xi'an, China, arrived at the port of Baku, completing the journey eleven days, though it could have been even faster had there not been stormy conditions.

The opening of the Baku-Tbilisi-Kars (BTK) railway in 2017 was a significant step in implementing the Middle Corridor. Over the years, changing geopolitical conditions have significantly affected the relevance of the BTK, prompting practical measures to expand its capacity, as well as other infrastructures.

Work on developing the Middle Corridor route is ongoing and the completion of several projects is expected in 2024 that will increase the capacity of the route and speed of delivery. All work on the BTK route should be completed in the first quarter of this year. After modernisation and expansion, the BTK route is predicted to handle up to 5mn tonnes of cargo.

The appeal of using Azerbaijan as a transit point is also increased by the Baku International Sea Trade Port, the largest port on the Caspian Sea. Currently the development of the master plan for the construction of the port's second phase is underway. Upon completion, the port's capacity will increase from 15 to 25mn tonnes per year (tpy) of cargo, and the TEU (Twenty-foot Equivalent Unit) trans-shipment capacity will reach 500,000 per year.

Azerbaijan has its own shipbuilding yard. Although the country possesses the largest trading fleet on the Caspian, the construction of new vessels – tankers and dry cargo ships – continues to increase the cargo turnover capabilities of the maritime segment of the multi-modal Middle Corridor. Plans include enhancing the capacities of the Baku shipyard, which will build up to 20 ships a year, considering the growing need for maritime cargo transportation.

Figures and forecasts

The Trans-Caspian International Transport Route handled 2.8mn tonnes of cargo in 2023, an 86% increase on 2022. The target for 2024 is set at approximately 4mn tonnes. In the medium term, these volumes could rise to 10mn tonnes. Currently, a total of 25 railway, transport-logistics, port and shipping companies from eleven countries operate on this route.

Investment co-operation with Azerbaijan will allow the completion of the Marabda-Turkey border section of the Baku-Tbilisi-Kars railway in Georgia soon. Additionally, logistic terminals will be constructed in Akhalkalaki and Kars, which will increase the cargo volumes of the Baku-Tbilisi-Kars railway.

In March-April, Georgia plans to lay the foundation for the deep-water port of Anaklia, designed to handle 100mn tpy of cargo and 1mn TEUs annually. Last year, a Kazakh terminal in Xi'an, China, was opened, and construction began on a terminal at the Georgian port of Poti. These projects are expected to enhance the potential and attractiveness of the Trans-Caspian International Transport Route.

According to a trade model of the Middle Corridor developed by the International Bank for Reconstruction and Development (IBRD), a 30% increase in trade between China and the European Union is predicted by 2030, mainly due to flows through the Middle Corridor, expected to account for 62% of the total trade volume. Trade growth for Azerbaijan, Georgia and Kazakhstan is projected to rise by 37%, with the total trade volume between these countries and the EU growing by 28%.

The World Bank forecasts that cargo volumes on the Middle Corridor could triple by 2030 compared to 2021, reaching 11mn tonnes. Container traffic is anticipated to reach 4.074mn tonnes (35.8% of the total freight flow) by 2030, 2.5 times higher than the 2021 figure. Oil and oil product transportation will amount to 3.553mn tonnes (31.2% of the total volume), 3.2 times higher than the 2021 figure.

To achieve these figures, several issues need to be addressed. Apart from bottlenecks on the BTK route in Georgia, there are also problems with rail transport in Turkey, where the capacity is very low – up to 700,000 tpy – forcing cargo to be transferred to road transport, which increases delivery time and leads to additional costs. Constructing a railway from Ankara to the border with Georgia would make the Middle Corridor an indispensable route, and the delivery time of goods through Turkey would be reduced from eight days to just two.

Projects and finance

Kazakhstan, Azerbaijan and Georgia have agreed on a five-year roadmap for the development of the Trans-Caspian International Transport Corridor until 2027. This marks the creation of the largest joint logistics company in the history of these countries. The new structure will focus on standardising tariffs and processing all goods transiting through the Middle Corridor.

The primary goal of the company is to facilitate cargo transportation between China and Europe. The participating countries are committed to simplifying all processes significantly and reducing cargo delivery times. Initially, the transit time along the Middle Corridor route was 53 days; it has now been reduced to 18-23 days, and the activities of the new company are expected to further decrease this to 18, and eventually to 10-15 days.

The "roadmap" adopted by the three countries aims to expand cargo transportation through the Middle Corridor to 10mn tpy by 2025, up from 6mn tpy.

China has shown great interest in implementing the Middle Corridor. Previously, the Chairman of the People's Republic of China noted that China would participate in the creation of this route. Recently, a delegation from the Chinese port of Qingdao visited the Baku International Sea Trade Port, where collaboration in the development of port infrastructure and increasing the volume of cargo transported through Azerbaijan were discussed. Last year, a memorandum of understanding (MoU) was signed between the Port of Baku and the Port of Qingdao.

It has recently been announced that European and international financial institutions plan to allocate €10bn for the development of transport communication in Central Asia. Valdis Dombrovskis, the Executive Vice-President of the European Commission, stated that international partners are committed to providing €10bn in investments for the development of sustainable transport communication in Central Asia, including new commitments from the European Commission and the European Investment Bank amounting to €1.5bn. The EC press release highlights that investments in the Trans-Caspian International Transport Route are necessary to develop it into a "multimodal, modern, competitive, sustainable, predictable, smart and high-speed route connecting Europe with Central Asia in 15 days or less."

World Bank recommendations

In November last year, the World Bank issued a report titled "The Middle Trade and Transport Corridor" which highlights priority measures that could assist Kazakhstan, Azerbaijan and Georgia in transforming this multimodal rail-maritime corridor into a significant and reliable transcontinental trade route.

The report identifies key strategic decisions and investments necessary to meet the demand for transport services and support economic development in Kazakhstan, Azerbaijan and Georgia. These include: providing logistical solutions along the entire corridor to ensure smooth operation; reforming and simplifying processes and procedures; synchronising digital solutions; enhancing operational efficiency in transportation across the Caspian and Black Seas; and aligning a unified system of investment prioritisation.

The World Bank also identified five main factors limiting the capacity of the Middle Corridor and its bottlenecks. These are: coordination and management of the corridor, bottlenecks in ports and maritime services, on the railway and at border crossing points, all of which are related to issues in data and information exchange. According to World Bank experts, resolving these issues will require significant investment. However, it should be taken into account that improving efficiency can yield substantial and immediate benefits.

It seems that the Middle Corridor has good prospects. As the World Bank notes, substantial and immediate benefits from the operation of the route depend on the diligence and perseverance of the countries in the region. To maintain interest in the Middle Corridor, it must be maximally efficient. And there is still work to be done on this.