MARITIME HUB

Geopolitical events of recent years have demonstrated the ineffectiveness of the globalist approach to economic development in a single country. Dependence on external markets, building an extensive process of production chains are good as long as there is peace around the world.

Developing in isolation is not an option either—no country can meet all of its needs 100% from its own resources. Therefore, a regional approach to the development of foreign trade relations has recently become the main trend.

The feasibility of this approach was demonstrated after a three-year pandemic pause at the 2nd Caspian Economic Forum in Moscow.

On water and on land

The Caspian Economic Forum was initiated back in 2018 thanks to the historical Convention on the Legal Status of the Caspian Sea signed by the leaders of the five littoral states. In the post-pandemic period, the forum has become a major platform for discussing urgent issues of trade and economic cooperation between the Caspian states, cooperation in various areas, including transport, logistics, environment, energy, tourism, urban infrastructure, social and humanitarian issues.

But still the most challenging topic amid the present geopolitical agenda is the development of international transport corridors. This is no longer just an economically viable direction, but a necessity.

"As a country situated both on the East-West route (from Azerbaijan’s perspective), the North-South and North-West routes, we understand that these are not competing but complementary routes for our economic actors, for there are existing chains of industrial cooperation, trade relations; these routes diverge in different directions," Azerbaijan’s Minister of Economy Mikayil Jabbarov said at the roundtable discussion.

The new realities created after the liberation of the occupied territories of Azerbaijan, as Prime Minister Ali Asadov said in his speech, make it possible to expand transport routes in the region. And the key link here should be the opening of the Zangezur corridor, which, according to Jabbarov, will be geographically the closest and shortest route. It will complement the traditional and existing routes allowing access to the Black Sea. For example, the North-South route, which connects Russia and Iran.

Prime Minister Asadov said that the development of regional transport and communication projects continues actively, and the opening of the Zangezur corridor is very important in this context.

We can only speculate on the volume of damage that the national economies of all the involved countries suffer from the deliberate protraction of the unblocking of regional transport routes.

There are also problems with the maritime component of these routes: the shoaling of the world's largest locked sea is not only a really big environmental threat but also an obstacle to navigation. Thus, Ali Asadov called on the delegations of Caspian countries to take urgent measures to deepen the Caspian seabed.

According to Asadov, the growing importance of the Caspian region as part of international transport corridors also implies optimising the role of seaports: "The throughput capacity of the Baku seaport is being increased from 15 to 25 million tonnes of cargo annually.”

Despite temporary obstacles, the East-West and North-South corridors are developing successfully, with annual growth in freight traffic through the territory of Azerbaijan. Thus, during the eight months of 2022 transit traffic through Azerbaijan on the East-West and North-South corridors increased by 20% and by 33%, respectively.

According to Russian Prime Minister Mikhail Mishustin, an assessment of the projected freight base for the North-South corridor showed almost double the potential for growth by 2030, compared to around 14 million tonnes in the past. "With this in mind, it is necessary to remove restrictions on the railway network and crossing points. And also to create conditions for launching seamless logistics services," Mishustin added.

Prime Minister of Kazakhstan Alikhan Smailov said that the Caspian Five will develop a road map to expand the region's transit potential.

Keeping up the trend

Development of transport corridors is not only about cargo traffic and transit payments to local budgets. Primarily, it means the growth of intra-regional trade turnover. So far this trend is positive. During the eight months of 2022 the trade turnover of Azerbaijan with the countries of the Caspian region increased by more than 45%, compared to 12.7% in 2021.

However, the neighbouring countries seriously aim to increase these indicators, in particular by creating an association of special economic zones in the region. Russian Minister of Economic Development Maxim Reshetnikov came up with this initiative during a business breakfast with representatives of the Caspian Five. The creation of association will coordinate the efforts of the Caspian special economic zones in the development of industrial cooperation and increase the added value of goods and services of the Caspian region. "Now all the Caspian SEZs are operating in isolation from each other, which may lead to duplication of finished and intermediate goods and services," said the Russian minister.

What does the interaction of SEZs mean and how can this process be facilitated? For example, this can be ensured through optimum support conditions or benefits provided within special economic zones. According to Maxim Reshetnikov, the association can become a platform for exchanging experience on overcoming obstacles challenging the special economic zones in the development process.

"The proposed structure will make it easier and faster for interested companies from any of the Caspian Five countries to obtain resident status in special economic zones throughout the region," Maxim Reshetnikov said.

The Russian side also proposes to harmonise the investment standards of the Caspian countries, to form common rules of interaction between state bodies and businesses in the five Caspian littoral states.

"The creation of a homogeneous and clear investment environment in the Caspian Sea region will ensure the unimpeded movement of capital throughout the sea and increase the level of guarantees for the rights and legitimate interests of investors during project implementation," Reshetnikov explained.

Meanwhile, Iranian First Vice President Mohammad Mohber also proposed at the Caspian Economic Forum to create a common economic zone. "Iran supports comprehensive cooperation with neighbouring countries, especially the Caspian states... In order to use the greatest potential of our states and private sectors of the littoral countries, we suggest a common economic zone in the Caspian region as well as a 'green' customs corridor," Mohber said. He also proposed formulating and implementing a special directive within the framework of monetary, banking and financial development of the Caspian countries.

It is also possible to further develop tourism within regional borders to the extent provided by the unblocking of transport routes and addressing environmental issues. For example, Russia has intended to launch cruise shipping on the Caspian Sea for years, but the idea has never materialised. The current situation contributes to speeding up the implementation of the plan - according to the head of Rostourism, Zarina Doguzova, the first international cruise may take place as early as in 2024.

And the most profitable projects concern energy production. There is also a successful practice of mutually beneficial agreements on the joint use of fields, in particular between Azerbaijan and Turkmenistan in the Dostlug project. Why not continue this experience with other promising structures, taking into account the incredible growth in demand for fuel on world markets?

In other words, there are many issues to discuss and bring statistics on regional economic relations to the desired level. As stated in the final declaration of the forum, all these endeavors will enable the littoral states to jointly offset the negative effects of global economic turbulence.