The Middle Corridor Across Eurasia — A Strategic and Commercial Alternative Transport Route
On July 6, a test rail shipment arrived from China in Baku, Azerbaijan — the latest in a number of such tests showing the viability of the new Middle Corridor transport route across Eurasia. This route, the product of hundreds of millions of dollars in investments and expenditures by Azerbaijan, Kazakhstan, and other countries in addition to China, provides a land/sea surface route connecting China and western Europe that avoids crossing either Russia or Iran. The Middle Corridor, which stretches from Turkey and Georgia across Azerbaijan, then crosses the Caspian to ports and rail connections in Kazakhstan and Turkmenistan to China, Afghanistan, and on into Pakistan and India is a core element Eurasia’s evolving economic and transport infrastructure, i.e., the New Silk Road or Belt and Road Initiative. Besides offering new, faster surface connections — 10 to 15 days as opposed to 45 days by sea between China and western Europe’s ports — the new rail, road, and trans-Caspian shipping infrastructure can boost trade and economic prosperity within the Greater Caspian Region, that is the Caucasus and Central Asia including Afghanistan. There are 130 million people living within a 1,000 km (621 miles) radius of the new Caspian port at Alat, just south of Baku; 400 million live within a 5,000 km (3,106 miles) radius. Just as the historic Silk Road was a network of cities where value was added and goods were created as well as transshipped, the Middle Corridor of the New Silk Road can increase connectivity among the countries of the region — the level of trade among those countries is one of the world’s lowest — and so boost prosperity and well-being throughout the region. A visit to the region at the beginning of July showed continued focus and progress on realizing the Middle Corridor. There have been test shipments from China, Vietnam, Japan, and the Republic of Korea showing the viability of the new surface route. Immediately after our visit to Alat on July 7, a Chinese delegation met with the port’s leadership and toured the facilities. In addition to the new Baku-Tbilisi-Kars railway inaugurated in October 2017, there are two roll-on/roll-off ships crossing between Alat and Caspian ports in Kazakhstan and Turkmenistan as well as two ships designed for transporting railcars across the Caspian. In 2018, Azerbaijan’s parliament passed the “Alat Free Market Zone” bill. In setting up the free market around Alat, designed to make it a production center as well as a transportation hub, the act provides for separate legal regimes based on international practices to encourage businesses to start, settle, or grow there. The act also provides for a new Free Zone authority which will create the new laws and systems. Those developing Alat are also in contact with the developers of Georgia’s new deep-water port and free trade zone at Anaklia on the Black Sea. These developments are important for the United States. At one level, they expand on the Northern Distribution Network which NATO has used as an alternative to crossing Pakistan for access to Afghanistan. The new routes also provide that country needed routes to transport legitimate goods west as part of its efforts to boost its economy and increase its stability. Likewise, it provides a shipping route that cannot be interdicted by Russia or Iran, the importance of which is once again underlined by Russia’s recent decisions to halt civil air connections with Georgia. This geopolitical advantage is important to Ukraine, Poland, and other U.S. partners. And again, it can increase trade among the Central Eurasian countries, furthering regional stability as well as helping boost their trade, prosperity, and independence. At the end of the day, however, its attractiveness to business is what is going to determine the level of success that the Middle Corridor achieves. While there can be political or other problems shipping through Russia — for example, the first stage for modernizing the Trans-Siberian and Baikal-Amur Mainline (BAM) routes might not be completed by 2020 as planned, meaning capacity problems for rail shipments on those routes between China and western Europe — there is a tendency for companies to continue to go with what they know and have previously used. Moreover, Belarus’, Russia’s, and Kazakhstan’s membership in the Eurasian Economic Union has served to facilitate their systems as a trans-Eurasian route. Initial analysis suggests that to realize the Middle Corridor’s full potential it is critical that governments and others in the region make highly visible steps to attract international business attention. Competitive terms and conditions are essential along with an eye to building long-term business arrangements. Those in the region developing the Middle Corridor need to reach out to companies showing that the route is faster, cheaper, and just as if not more secure than what they have been using to move goods. Ideally, there might be a single operator for the Corridor offering a single price. Customs and other necessary procedures need to be streamlined, transparent, and predictable. Reports of corruption need to be addressed. Blockchain or other new technologies may be utilized in the new Middle Corridor to boost its competitiveness. Taking a “proof of principle” approach, companies may respond by shipping small amounts as a sort of test with the idea of seeing whether bigger shipments using the route would make sense. As with other aspects of the Greater Caspian Region’s development, governments’ dialogue with business and adopting a more cooperative approach with each other not only makes sense but are essential to realizing what each of these governments hope to achieve.