30 October 2020

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SYNERGY OF POTENTIALS

Azerbaijan proposed to unify freight tariffs to increase cargo shipment along the East-West corridor

Author:

01.08.2020

The global recession caused by the decline in oil prices and lockdown restrictions had the least effect on cargo transportation. For example, the volume of cargo transportation by the Baku-Tbilisi-Kars route has grown multiple times.

Azerbaijan and its partners on the Trans-Caspian International Transport Route (TCITR) and the Lapis Lazuli corridor intend to optimise tariff policies and attract new shippers to increase the volume of transit for commodities from China, Central Asia, Afghanistan to Turkey and Europe.

 

Railway routes are a priority

Created more than 20 years ago, the international Transport Corridor Europe-Caucasus-Asia (TRACECA) contributed to the maximum disclosure of the transit potential of South Caucasusian and Central Asian states, attracting billions of investments in a radical upgrade of maritime, port and railway infrastructure of these countries. Initially, the main objective of TRACECA was the fast and safe shipment of hydrocarbons from the Caspian region to Europe. In the following stages, Azerbaijan and its partners from TCITR and Lapis Lazuli, set up under TRACECA, began to dynamically increase the shipment of non-oil cargo along the route. Such diversification played an invaluable role in maintaining the overall dynamics of cargo shipment during the global energy crisis of 2014-2016. Today, it helps harness the potential for transit of non-oil cargo, thereby mitigating the effects of the current crisis, which has reduced tanker shipment in the Caspian.

The statistical data provided by the State Statistics Committee of Azerbaijan most clearly shows the current situation on the routes between Europe, Caucasus and Asia. In January-April 2020, over 15.9 million tons of cargo passed through the TRACECA corridor, which is 5.9% less than last year. However, this decline was mainly due to road transportation, which accounted for 62.2% of the total cargo transit along the corridor. In fact, automobile freight transportation became the most vulnerable sector due to the coronavirus pandemic, as many countries have tightened quarantine and sanitary rules for border crossings, and in some cases they forbade the movement of TIRs at all, which resulted in a 9% decline in this segment.

The collapse of the global oil market in early March with terminal facilities and oil storage tanks full with oil negatively affected the intensity of tanker transportation in the Caspian. As a result, the indicators of maritime cargo shipment (about 1.7 million tons) declined by 2.8% during the reported period.

A fundamentally different situation was in railway transport, which in four months accounted for more than 4.3 million tons of cargo. Despite the global recession and all the negative effects of the pandemic, it was possible to avoid a negative scenario and ensure growth of 0.7%. Moreover, the joint operation of railways, ferry and feeder vessels, increased the volume of transit cargo during the reporting period by 5.1% (3 million tons).

This mechanism was most effectively used between Azerbaijan and Kazakhstan: despite the global crisis and quarantine, it was possible to maintain the normal shipment of railway wagons and containers by ferries and feeder vessels along the Aktau-Baku line. According to Kazakh estimates, based on the indicators of 1H2020, it is forecasted to bring bilateral shipment of goods to 1 million tons, which is 17% higher than in the same period of 2019.

Remarkably, the attractiveness of the Baku-Tbilisi-Kars railway corridor for freight forwarders also contributes to maintaining high intensity rates in rail transportation.

“In the first half of 2020, the volume of cargo transportation on the BTK increased by 3.7 times compared to the same period last year,” President of Azerbaijan Ilham Aliyev said during a recent video conference with the presidents of Afghanistan and Turkmenistan, Mohammad Ashraf Ghani and Gurbanguly Berdimuhamedow.

According to Mr. Aliyev, thanks to large investments in the transport sector, a modern transport and logistics infrastructure has been created in the country. “At the end of 2017, the Baku-Tbilisi-Kars railway was commissioned; in 2018, we launched the Alat International Sea Trade Port with a cargo potential of 15 million tons and 100 thousand containers. In the future, the port's throughput capacity can be increased to 25 million tons of cargo and 1 million containers. Azerbaijan also has the largest fleet in the Caspian, consisting of 260 vessels,” Ilham Aliyev said. He believes that this potential has turned the country into a new and important transport and logistics hub in Eurasia.

 

The aim is to increase freight traffic

The development of transport infrastructure and fundamental regulatory agreements create unique opportunities for expanding the transit shipment of commodities between Azerbaijan, Afghanistan and Turkmenistan within the East-West transport corridor. So far the outcome of activities in this direction is very successful. In 1H2020, over 1.5 million tons of cargo passed through the port in Alat between Azerbaijan and Turkmenistan, which is 28% higher than in the same period last year. The volume of dry cargo increased by 7.7 times reaching more than 370,000 tons. Moreover, Turkmenistan is invited to participate in the consortium, which will be created to manage the future fertiliser terminal at the Alat port.

Azerbaijan is also increasing cooperation in the transport sector with Afghanistan. In particular, the first experimental cargo train was launched on the BTK corridor after it was connected with the Lapis Lazuli route in December 2018. Subsequently, the flow of goods between our countries gradually increased. For example, in January-May 2020, Azerbaijan and Afghanistan exchanged 55,500 tons of cargo.

According to President Ghani, in order to increase trade cooperation, it is necessary to expand the transit of Afghan goods through the railway systems and ports of Turkmenistan and Azerbaijan. It is therefore necessary to optimise freight tariffs and customs duties and speed up cross-border procedures.

Supporting this initiative, President Ilham Aliyev proposed to unify tariffs to optimise freight transportation along the East-West transport corridor, noting that there is an increasing interest in this route in the EU. “We must make efforts to expand the transportation of goods along the East-West corridor. To optimise freight traffic, it is important to unify tariffs. I propose to hold a working group meeting with the participation of representatives of transport bodies of our countries,” Mr. Aliyev said during a video conference. He emphasised that since 2019, 8.7 million tons of cargo were transported along the East-West corridor, and about 3 million tons were transported in January-April 2020. The expansion of cooperation between Azerbaijan, Afghanistan and Turkmenistan will have a positive impact on the increase in freight traffic along the corridor.

 

Simplification to Single Window Principle

The unification of tariffs and customs policies is extremely important, but at the same time, the TRACECA countries are actively working to simplify border crossing procedures by increasing the throughput of border points, reducing the time of cross-border procedures and introducing information technologies into these processes. This work was carried out in Azerbaijan and Kazakhstan (in the ports of Alat and Aktau), as well as at the Sarpi checkpoint on the Georgian-Turkish border.

To reduce the time for processing ferry cargo  between Kazakhstan and Azerbaijan ports, a new procedure for processing transportation documents on the basis of the ‘single window principle’ was introduced last year. As a result, crossing time was reduced from 10-12 hours to an average of four hours, and customs and border authorities, temporary storage warehouses operate around the clock.

“The principles of the Single Window, as well as risk assessment systems, electronic information and pre-declaration, an online payment system and many more have been introduced at the borders of the TRACECA countries. This significantly reduces time required for customs clearance,” Aset Asavbayev, Secretary General of the TRACECA IPC Permanent Secretariat, said. He noted that the Permanent Secretariat continues to work on the assessment of bottlenecks at border crossings to further harmonise the activities of checkpoints along the entire corridor. To expand automobile freight traffic, it is planned to introduce a mechanism for a single electronic transit permit. This issue is currently under consideration by the participating states, and its adoption will increase automobile traffic along the corridor and attract additional freight traffic.

According to Mr. Asavbayev, another important area contributing to the expansion of transit traffic between Europe and Asia is the organisation of regular container trains, which could contribute to the establishment of a competitive and sustainable service. One of the first steps in this area was the launch of the China Railway Express container train from China to Europe in November 2019. The train loaded with 42 containers with electronics proceeded from China to the Czech Republic in transit through the territories of Kazakhstan, Azerbaijan, Georgia, Turkey, Bulgaria, Serbia, Hungary and Slovakia. This made it possible to achieve a twofold increase in the volume of cargo transported by container trains: from 15,000 containers in 2018 to 30,000 in 2019.

The frequency of container trains is gradually increasing. Recently, a train of 43 forty-foot containers with electronics and other commodities passed through the territory of Azerbaijan enroute from Chinese Xian through the Kazakh port of Aktau to the port of Yeni Baky on the feeder ship Becket-Ata. In the Alat port, the containers were quickly loaded onto the railway platform and in just 14 hours delivered the cargo to the Boyuk Kasik station of Azerbaijan. Further, the cargo passed through Georgia via BTK railway to Turkey, and the container train crossed the Turkish part of the route in 50 hours, that is, 70 hours ahead of schedule. Despite the difficulties due to the quarantine measures, the transportation of goods along the TCITR route continues uninterruptedly and ahead of schedule, which is an additional bonus for attracting shippers.

This is the second container caravan dispatched along the Xian-Istanbul route, and the Xian Free Trade Port Construction and Operations logistics platform plans to arrange regular transportation of goods from China to Turkey via this line. The company responsible for the delivery is the Azerbaijani company ADY Konteyner LLC, which, together with ADY Express, is a subsidiary of Azerbaijan Railways CJSC and an active participant of the TCITR route. According to the experts of ADY Konteyner LLC and ADY Express, the creation of Free Economic Zone (FEZ) in the Alat port will further expand rail and container multimodal transport in the Caspian region. With the increasing volume of freight traffic in the region, the cargo will be delivered by ferries and feeder vessels through ports in Kuryk, Aktau and Turkmenbashi to the logistics centre in the Alat Free Economic Zone, from where they will be transported to Europe via the BTK railway line. Thus, the transit potential of Azerbaijan for Europe, China, Turkey, Iran, Russia, Central Asia and the Middle East will increase significantly, and Azerbaijan will further strengthen its status as a key transport hub in the region.



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