PERFECT CHOICE

The energy crisis and the breakdown of logistics chains in the Eurasian space over the past two years have significantly increased the demand for alternative transport routes between Europe and Asia. The principal route is the Middle Corridor, traversing the territories of Central Asian countries and Azerbaijan. The Baku-Tbilisi-Kars railway (BTK) and the Baku International Sea Trade Port (BISTP) are pivotal nodes of this transport artery, both undergoing active capacity expansion. The modernization of the BTK is nearing completion, and new facilities are under construction at the Alat port, which recently marked its sixth anniversary.

All routes pass through Azerbaijan

The geopolitical crisis surrounding Ukraine has acted as a catalyst, fundamentally reshaping the transit and logistics map of Eurasia. In the past two years, the Northern Corridor's competitiveness has notably diminished. Since mid-November of the previous year, the Ansar Allah rebel movement in Yemen has initiated attacks with drones and anti-ship missiles on vessels navigating the Red Sea and the Bab el-Mandeb Strait. Consequently, the oil transshipment situation through the Suez Canal is fraught, compelling a significant number of oil tankers, container ships, and dry cargo vessels to circumvent the Red Sea by navigating around the African continent—a lengthy and expensive detour.

Amidst this challenging backdrop, there has been a marked increase in requests from freight forwarders and logistics companies from China, Europe, Türkiye, and Central Asian nations for alternative trans-Caspian routes. In this context, Azerbaijan's role is unparalleled. Baku is a central player in the Europe-Caucasus-Asia transport corridor, initiated by the EU over three decades ago, as well as in the Trans-Caspian International Transport Route (TCITR) and the Lapis Lazuli route, established between 2018 and 2019. Collaborating with Bucharest, Tbilisi, and Ashgabat, Azerbaijan is instrumental in developing the nascent Black Sea-Caspian Sea route.

"Today, Azerbaijan and Kazakhstan, through collaborative efforts, not only bolster their economic growth but have also become pivotal nations for the region and, more broadly, for Eurasia. The infrastructure projects we are jointly advancing—encompassing transport and energy sectors, along with the new and forthcoming transport sector infrastructure—will unveil unparalleled opportunities for numerous countries," stated Ilham Aliyev, President of Azerbaijan.

Looking ahead, the expansion of these routes along the Great Silk Road is set to continue. This is particularly true in light of the European Commission's recent decision to allocate $10 billion for the development of port and railway infrastructure within the Middle Corridor in the Caspian region. This funding also supports the implementation of digital solutions to facilitate seamless cargo transit and the expansion of container and ferry fleets. It is anticipated that the modernization of infrastructure and the digitalization of the route will significantly increase container traffic volumes, potentially reaching up to 600,000 containers annually—nearly a tenfold increase from current capacities.

"In the evolving geopolitical landscape, the roles of Azerbaijan and Kazakhstan in fostering and advancing transcontinental trade have swiftly and markedly grown. Both nations are actively enhancing their transport and logistics capabilities to eventually elevate cargo traffic volumes along the Middle Corridor to 10 million tonnes," remarked Kasym-Jomart Tokayev, President of Kazakhstan. He noted that the burgeoning cargo traffic along the Middle Corridor, which doubled in 2022 and surged by another 65% to 2.7 million tonnes in 2023, is a testament to these positive developments.

Expansion Phase

The anticipated growth in freight traffic along the Middle Corridor necessitates a collaborative effort from Baku and Astana, as well as other TCITR partners, to augment transport and logistics infrastructure. A roadmap for 2022-2027, focusing on the synchronous elimination of bottlenecks and the enhancement of the Middle Corridor, was ratified in Aktau in November 2022. This strategic plan underscores the extensive modernization of seaports along the Caspian coast. In early July 2022, at the zenith of freight movement on the TCITR, severe congestion at the port and railway infrastructure of the Alat port prompted a provisional convention ban on ferry transport of wagons on the Trans-Caspian route. Although all restrictions were lifted starting 1 August and freight operations resumed normally, the expansion of Alat port's transport infrastructure remains a pressing issue. Notably, the BISTP, commemorating its sixth anniversary on March 18, is undergoing a significant long-term overhaul expected to boost its throughput capacity from the present 15 to 25 million tonnes annually. The port's logistical capabilities were considerably enhanced following the inauguration of a terminal for processing and storing mineral fertilizers in October 2023, now capable of handling approximately 2.5-3 million tonnes yearly. It is noteworthy that since July 2022, the Turkish firm Albayrak Group has secured the rights to develop BISTP, assuming control of the Ro-Ro, container, and fertilizer terminals. Concurrently, a new grain terminal is slated to become operational at Alat Port by year's end. Commencing in the latter half of 2024, preliminary construction will start on a new phase of the container terminal, designed to process up to 500,000 TEU containers annually at peak capacity.

The surge in transit cargo from China and various other Asian nations over the past two years has highlighted the urgency to address logistical "bottlenecks," as well as the railway and port infrastructure constraints in Kazakhstan. To tackle this challenge, efforts are underway to establish a container hub at the Aktau Seaport FEZ. This initiative has garnered the involvement of international consultants and investors, including prominent container operators like PSA International, Maersk, and MSC. In the foreseeable future, Kazakhstan's merchant fleet on the Caspian Sea will be bolstered by the addition of four ferries. Moreover, the construction of secondary tracks and the electrification of the Dostyk-Moyinty railway segment are projected for completion between 2022 and 2025. These measures are primarily directed at accelerating container train velocities and amplifying the cargo handling capacities of seaports, encompassing ferry, dry cargo ship, and feeder vessel operations.

The expansion of logistics capabilities and the modernization of railway infrastructure in Kazakhstan and Azerbaijan are pivotal to the development of the Middle Corridor. As delineated in the roadmap, Kazakhstan, Azerbaijan, and Georgia have concurred on amplifying cargo transshipment volumes through the formation of a joint venture, Middle CorridorMultimodal Ltd. This entity is poised to offer comprehensive services to TCITR partners, leveraging cutting-edge digital technologies. To this end, the partners have enlisted the expertise of PSA, a global Singaporean firm renowned for crafting a seamless digital corridor, and are actively collaborating with leading industry specialists such as Huawei, Wabtec, and Alstom to deploy innovative solutions. In a bid to enhance TCITR functionalities, Kazakhstan has set forth plans to refurbish 11,000 and construct over 5,000 kilometres of new steel highways by the year 2030.

Responsiveness and Speed

In this regard, Azerbaijan has expedited its railway infrastructure expansion efforts, swiftly completing the modernization of the Georgian section of the BTK corridor. "The commencement of the Baku-Tbilisi-Kars railway's expanded operations in just a few months stands as a significant accomplishment," declared President Ilham Aliyev. He emphasized that the BTK's capacity will surge from 1 to 5 million tonnes, presenting highly appealing prospects for numerous regional countries.

The 826-kilometer BTK line became operational on October 30, 2017. The Turkish Ministry of Transport reports that from the line's inception until May 2023, the cumulative freight volume approximated 2.4 million tonnes. With an average annual transshipment of around half a million tonnes over five and a half years, the pace has been deemed insufficient. Furthermore, the transit time from Baku to Kars typically exceeded 70 hours, with even longer durations during winter months. To hasten train speeds in Georgia, it was imperative to finalize the construction of track, energy, security, and other infrastructures along the Marabda-Türkiye border segment. Initiated last year and funded by Baku, these works are projected to conclude by early May of this year. The extensive improvements made to the road infrastructure on the Marabda-Kartsakhi section over the past year are particularly noteworthy, considering the challenging mountainous and forested terrain. Several sections now feature overhead lines, and signalling, centralisation, and interlocking systems have been activated. Comprehensive enhancements have been made to various railway stations and passenger platforms, including the installation of snow fences, construction of tunnels, and establishment of traction substations. Presently, repairs are underway on four snow protection galleries along the Tsalka-Akhalkalaki line. The full completion of all planned works on these segments of the BTK, inclusive of the 110-hectare Akhalkalaki complex, is anticipated by the onset of summer.

"Approximately 95% of the modernisation work on the BTK railway line and the enhancement of its throughput capacity has been accomplished: out of five sections undergoing reconstruction, three have been fully completed, and the entirety of the project activities is scheduled for completion within the next two months," stated Rovshan Rustamov, chairman of Azerbaijan Railways CJSC, in March.

As per the relevant Azerbaijani-Georgian intergovernmental agreement, it is also planned to set up a joint venture to oversee the BTK line. The necessary regulatory acts are in place, and the signing of an agreement to establish a joint venture, with equal equity participation from both parties, is anticipated shortly. This joint venture will regulate freight transport tariffs, attract potential transit operators and new cargo, and ensure the efficient management of all BTK operations.

In essence, each segment of the current routes is abuzz with activity, striving to rectify gaps and deficiencies to emerge as a truly alternative and impeccable option for regional trade turnover.