Caspian Connectivity and the Ukraine Conflict: An Outlook for 2023
Jan 9, 2023
As the war in Ukraine enters its second year and shows no signs of ending anytime soon, the prolonged conflict has presented both significant challenges and opportunities for the Caspian region. On the one hand, Caspian countries have faced substantial difficulties associated with the war, including rising inflation and economic pressures, as well as an increasingly complex security environment in their near abroad. On the other hand, the disruption in economic links between Russia and the West and the strategic location of Caspian states like Azerbaijan, Kazakhstan, and Turkmenistan have highlighted the importance of such countries to connectivity pursuits within Eurasia, including in critical fields like energy and transport.
This dichotomy between conflict and connectivity will be a key feature of this coming year, as Caspian states seek to mitigate regional pressures and build upon significant progress made in further developing the ‘Middle Corridor’, a trade and infrastructure route between Europe and China which transits through the Caspian region and circumvents Russia. Further development and expansion of this route would not only strengthen Europe’s economic diversification from Russia as Moscow doubles down on its war in Ukraine, but it could also contribute to greater resilience throughout the Eurasian landmass and well beyond. However, the viability and sustainability of such Caspian connectivity projects will in large part depend on external support, and the West can play a particularly important role in this regard.
To determine the most effective and impactful way in which Caspian connectivity can be enhanced in the future, it is important to first review the progress that has already been made over the past year. Since Russia’s invasion of Ukraine in February 2022, there has been much advancement concerning the Middle Corridor route, also known as the Trans-Caspian International Transport Route (TITR). In July, the EU reached an agreement to increase natura- gas imports from Azerbaijan, and Kazakhstan and Azerbaijan signed an Memorandum of Understanding on new bilateral natural-gas projects the following month. Beyond energy flows, Kazakhstan increased uranium exports all the way to Canada via the Middle Corridor last year. Overall, the transit of goods via the Middle Corridor tripled in volume in the first nine months of 2022, year on year.
However, there have also been many challenges associated with the Middle Corridor route. There are functional limitations for the Middle Corridor, including inadequate infrastructure and limited capacity, as well as customs barriers between the various Caspian states. While those can ostensibly be overcome with the necessary financing and regulatory changes, there are also more deeply ingrained political hurdles. Moscow has made no secret of its displeasure with infrastructure routes that bypass Russia, and each of the Caspian states must weigh its relations with Moscow carefully before moving forward with major infrastructure projects. After all, Kazakhstan is a member of the Russia-led Eurasian Economic Union and Collective Security Treaty Organization, while Azerbaijan and Türkiye both have nuanced relationships with Moscow, and these countries cannot be expected to abandon their ties with Russia entirely.
Despite these challenges, there are nevertheless ambitious plans for the Middle Corridor route in the coming years. In November 2022, the heads of the transport and foreign ministries of Azerbaijan, Georgia, Kazakhstan, and Türkiye agreed to a $7.5 billion roadmap for bottleneck removal to facilitate the Middle Corridor over the course of 2022-2027. The EU expects to double its imports of Azerbaijani gas to 20 billion cubic meters per year by 2027 via the Southern Gas Corridor, while Türkiye has become increasingly vocal about the need to develop infrastructure for bringing Turkmen gas to Europe via the Middle Corridor.
For such plans to be truly viable, they will need external economic and political support, and the United States and EU have both a lot to offer and a lot to gain in supporting Caspian connectivity efforts. Further development of energy and transit infrastructure along the Middle Corridor would challenge Russia as an energy player and Moscow’s primary source of funding for its war in Ukraine. Strengthening connections among the Caspian states themselves could also help to build their economies and provide for greater stability in an otherwise volatile neighborhood.
In order to best support Caspian connectivity, Washington and Brussels need to be pragmatic as well as practical in their approach. In terms of pragmatism, the United States and EU must realize that Caspian states will not completely shift their orientation toward the West, but rather seek a multi-vectoral foreign policy that takes into account their proximity to and economic linkages with Russia and China. However, this does not preclude meaningful cooperation with the West, especially if the United States and EU can offer tangible incentives that allow for connectivity diversification from the likes of Moscow and Beijing in a gradual and sensible way.
In terms of practicality, rather than competing with China’s strategy of state-driven, large-scale infrastructure investment or Russia’s top-down approach, the United States and EU can focus on niche areas like sustainable, high-tech projects with private-sector participation to complement traditional infrastructure projects. The West can also partner with other players like Japan, India, and Singapore to help strengthen existing connectivity initiatives in a collaborative way. It would also benefit the United States in particular to be more visible diplomatically in the region, including high-level official visits and organizing multilateral summits with Caspian states.
Such support would go a long way to enable the further development of Caspian connectivity, which is in keeping with the ambitious strategies laid out by the United States in its most recent National Security Strategy to compete with global challengers like Russia and China. Of course, connectivity efforts in the Caspian will continue to face various challenges, most notably from Moscow. The Middle Corridor will be directly shaped by the evolution of the Ukraine conflict, which could see greater progress by Ukrainian forces in the coming year. Sanctions against Russia are likely to remain for the foreseeable future, making the development of the route all the more important.
Thus, the outlook for Caspian connectivity for 2023 has much promise but also much uncertainty. However, if there can be a pragmatic and collaborative approach between the Unite States, EU, and the Caspian states themselves, these connectivity efforts can be strengthened and accelerated. For the West, it is therefore vital to approach this region proactively and pragmatically, with the benefits of such an approach applying to the Caspian and well beyond.