15 Apr 2024
Cargo container ship top view carrying container

Trans-Caspian International Transport Route

Amangeldy Mussayev
By Amangeldy Mussayev

Partner, Strategy and Transactions, Head of SaT Quality & Risk Management in Caucasus and Central Asia

Strategic leader in corporate growth, merging expertise in professional services and financial management to drive value in business deals and beyond.

15 Apr 2024
Related topics Mergers and acquisitions Strategy by EY-Parthenon
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The Trans-Caspian International Transport Route (TITR) is an integral component of the Belt and Road Initiative, established to create a direct transportation link from Asia to Europe.

The Trans-Caspian International Transport Route starts from Southeast Asia and China, runs through Kazakhstan, the Caspian sea, Azerbaijan, Georgia and further to European countries. It aims to facilitate trade and economic cooperation by connecting major economic regions through a network of railways, highways, and maritime routes.

Source: https://middlecorridor.com/en/route

The Middle Corridor faces challenges in terms of cost and efficiency, with longer transit times compared to the Northern route

Trade Volume

  • The current potential of the Middle Corridor equaled to 80,000 twenty-foot equivalent (TEU)
  • The volume of container traffic was 33,000 TEU containers in 2022
  • According to European Bank for Reconstruction and Development (EBRD) analysis, the transit container volume could rise to 130,000 TEUs in 2040 with related infrastructure investments

Infrastructure Investment

  • EBRD estimates that approximately 18.5 billion euros in investment is needed for the projects in Central Asia, highlighting the significant scale and potential impact

Cost Efficiency

  • According the World Bank analysis, the price for transportation of one FEU container between China and Europe via the Middle Corridor can vary from US$2,500 to US$3,250
  • It’s less competitive than the Eurasian Northern Corridor via Russia where transport costs are presently about US$2,599 eastbound and US$3,121 westbound
  • In comparison, the Maritime route would be the cheapest, ranging from $1,500 to $2,000 but the most time consuming logistic chain with the average time of 28 to 40 days

Transit Time

  • The transit time along the TITR was reduced from 38-53 days to 18–23 days. It is planning to reduce this period to 14–18 days in 2024, including within the territory of Kazakhstan — from 6 to 5 days
  • The greatest delays in the route are associated with intermodal transfers of goods in ports and insufficient capacity on specific railway sections
  • In comparison, the Eurasian Northern route, which includes the Trans-Siberian Railway as part of its route, requires approximately 19 days to traverse between East Asia and Europe

Strategic investments and international cooperation are key to unlocking the Middle corridor's full potential

Strengths

Strategic Location: Serves as a bridge between Asia and Europe, providing an important link for international trade

Diversification: Offers an alternative route for businesses looking to reduce dependency on traditional routes through Russia, enhancing resilience in supply chains

Growing Market: Benefits from the rising trade volumes between Asia and Europe

Support from Governments: Receives strong political and financial backing from the countries involved                                                                         

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Weaknesses

Complex Logistics: The requirement for multimodal transfers can add layers of complexity and potential delays

Infrastructure Limitations: Existing infrastructure may need upgrading or expansion to handle increased traffic efficiently

Regulatory Hurdles: Varied legal and administrative frameworks across countries can complicate operations

Financial Constraints: High initial investment costs for infrastructure development could be a barrier

Operational Efficiency: Differences in railway gauge sizes and customs procedures can reduce the speed of cargo transit

Opportunities

Infrastructure Development: Scope for significant investments in rail, road, and port infrastructure to improve capacity and efficiency

Trade Growth: Increasing demand for faster and more reliable trade routes between Asia and Europe

Economic Initiatives: Potential to align with economic development initiatives in participant countries, attracting further investments

Shift in Trade Patterns: Geopolitical shifts and the need for supply chain diversification post-pandemic may increase the route’s relevance

Threats

Geopolitical Tensions: Political instability in the region could jeopardize the safety and continuity of operations

Competition: Other routes, particularly the Northern Corridor, remain strong competitors

Economic Fluctuations: Global economic downturns could reduce trade volumes, affecting the corridor's viability

Environmental Concerns: Increasing scrutiny on transportation’s environmental impact could lead to stricter regulations and additional operational costs

Kazakhstan Stakeholder Map of the Middle Corridor

  • Governmental Bodies

    Regulatory Agencies responsible for safety, standardization, and regulatory compliance, ensuring that the corridor operates within the legal frameworks of the respective countries.

    •  National government of Kazakhstan
    • The Ministry of Trade and Integration and the Transport Committee of Kazakhstan

  • Commercial Entities

    Commercial entities are mostly represented by the logistics companies that will facilitate transportation services along the corridor, including rail, road, and maritime logistics.

    • NC Kazakhstan Temir Zholy JSC
    • Aktau Sea Port
    • Quryq Porty LLP
    • NMSK Kazmortransflot LLP
    • Kascor-Transservis JSC

  • Civil Society and NGOs

    Civil Society and NGOs primary purpose will be to advocate for sustainable practices and assess the environmental impact of corridor operations. Trade Associations represent the interests of businesses using the corridor for freight movement, promoting trade facilitation and efficiency.

    •  Central Asia Regional Economic Cooperation (CAREC)
    • The Trans-Caspian International Transport Route Association (TITRA)
    • The United Nations Economic Commission for Europe(UNECE)

  • Financial Institutions

    Financial institutions are represented by the banks and investment funds, which  provide the necessary capital for infrastructure development and operational expansion, including public-private partnership projects.

    • European Bank for Reconstruction and Development (EBRD)
    • Asian Development Bank (ADB)
    • European Investment Bank (EIB)
    • The World Bank

  • End Users

    The end users of the Corridor are the businesses like manufacturers, exporters, and importers in Asia and Europe who benefit from reduced transit times and diversified logistics options. And consumers who ultimately benefit from the efficiency and reliability of the supply chain.

    • Italian-Swiss MSC
    • Denmark’s Maersk
    • France’s CMA CGM
    • China’s COSCO
    • CEVA Logistics launched a service from China to Germany
    • DHL, a leader in courier services
Authors:
  • Amangeldy Mussayev, Partner, Strategy & Transactions
  • Zhansaya Ichshanova, Manager, Strategy & Transactions

  • Show sources of information#Close sources of information

    • The official website of the Middle Corridor: https://middlecorridor.com/en/
    • OECD (2023), Realising the Potential of the Middle Corridor, OECD Publishing, Paris.
    • Poplawski, Kondrad. “The Middle Corridor A Eurasian Alternative to Russia.” OSW, Jan. 2024.
    • “Cargo Transportation Along Middle Corridor Soars 88%, Reaches 2 Million Tons in 2023”. The Astana Times, Dec. 2023
    • European Bank for Reconstruction and Development: https://ecepp.ebrd.com/
    • “Middle Trade and Transport Corridor”, the World Bank, Nov. 2023

Summary

Trans-Caspian International Transport Route (The Middle Corridor) presents a significant opportunity for enhancing trade between Asia and Europe. However, its success depends on the collaborative efforts of the countries involved, infrastructure development, and the ability to overcome logistical and geopolitical challenges. Stakeholder map provides a foundational understanding of the diverse interests and contributions necessary to develop the Middle Corridor. Unlocking the full potential of the Middle Corridor requires strategic collaboration among key stakeholders.

About this article

Amangeldy Mussayev
By Amangeldy Mussayev

Partner, Strategy and Transactions, Head of SaT Quality & Risk Management in Caucasus and Central Asia

Strategic leader in corporate growth, merging expertise in professional services and financial management to drive value in business deals and beyond.

Related topics Mergers and acquisitions Strategy by EY-Parthenon
Upvote