The volume of cargo transportation along the Trans-Caspian International Transport Corridor (TITC) continues to grow. If last year the indicators increased by 65%, then only at the end of eight months of this year they increased by 69%.

As a rule, when it comes to transportation along the TITC, which is also called the Middle corridor, most people perceive it as an alternative route for Kazakhstan’s oil exports. This is partly true, since today about half of the cargoes shipped via this route are hydrocarbons produced at the fields of Atyrau and Mangistau regions. However, hundreds of thousands of tons of other cargoes are transported along the Trans-Caspian route – grain, oil products, non-ferrous and ferrous metals, chemicals, coal, uranium, construction materials and other goods. Most importantly, the TITC is not only an export route, but also a transit transport corridor, and as such it can bring much more benefit to Kazakhstan. According to a study by the European Bank for Reconstruction and Development (EBRD), commissioned by the European Commission, by 2040 transit flows along the Middle Corridor could grow to 865,000 twenty-foot containers per year, i.e. more than 40 times higher than in 2023.

Oil through the Caspian

The Middle corridor route starts in China, passes through Kazakhstan, the Caspian Sea, Azerbaijan, Georgia, Turkey and goes on to Europe. TICC is a multimodal route with a length of over 11,000 km, involving two modes of transportation: rail and sea. First, cargo is delivered by train from China to the Kazakh ports of Kuryk and Aktau on the Caspian Sea, from where containers are transported by ship to the Azerbaijani ports of Baku and Alyat, and then the cargo is transported by rail to the Georgian ports of Batumi and Poti on the Black Sea. The route started operating in 2017. The creation of the Trans-Caspian International Transport Route was announced back in November 2013, when the heads of the companies Kazakhstan Temir Zholy, Azerbaijan Railways and Georgian Railways signed an agreement on the establishment of the Coordination Committee for the development of TITC within the framework of the New Silk Road Forum in Astana.

Further, the parties adopted comprehensive rates for container transportation, preferential tariffs for the transportation of fuel oil, gasoil, grain, approved technologies of interaction between transport companies for the passage of container trains in the communication China – Kazakhstan – Azerbaijan – Georgia – Turkey with the participation of rail and sea transport. At the end of 2016, the International Association “Trans-Caspian International Transport Route” was established, which started its activities in February next year. If in 2017 9 thousand TEU containers (twenty-foot equivalent) were transported along the Trans-Caspian corridor, in 2022 already 33.6 thousand (see Table No. 1).

Nevertheless, the growth in the importance of TMTM occurred after Russia started its military aggression against Ukraine. Due to frequent disruptions in the operation of the Caspian Pipeline Consortium (CPC) oil pipeline system, the leadership of Kazakhstan instructed the national company KazMunaiGas (KMG) to make the Trans-Caspian route a priority for oil exports. Thus, in 2022, Kazakh companies resumed oil exports through the Baku-Tbilisi-Ceyhan pipeline (BTC), which stopped in 2016, and shipped 250,000 tons of oil through it during the year. And already in 2023, they increased this figure more than 5.5 times – up to 1.4 million tons.

Over the past two years, the republic has done a lot of work to expand oil export opportunities for TITC. KMG through its subsidiary Kazmortransflot established a joint venture with Emirates Abu Dhabi Ports. Last year, the joint venture purchased two new tankers with deadweight of 8,000 tons each. A new agreement was signed between KMG and Azerbaijan’s SOCAR on a phased increase in the volume of transit of Kazakh oil through Azerbaijan along the route Aktau – Baku – Tbilisi – Ceyhan up to 2.2 million tons per year. The previous agreement, signed in November 2022, provided for annual transit of 1.5 million tons of oil.

Previously, the capacity of Aktau port was at 9.6 million tons of oil per year. According to the assessment of the Ministry of Energy of the Republic of Kazakhstan, at the beginning of last year the port’s crude oil shipment capacity was already 7.5 million tons per year. The last time the highest figure of Kazakhstan’s oil pumping through BTC was reached in 2014 – 2.4 million tons.

However, as in any business, this route has its own difficulties. First, to further increase the flow of Kazakh oil through BTC, the consent of the pipeline’s shareholders is needed. Secondly, it is necessary to expand the marine infrastructure and dredging. Thirdly, BTC is still longer and more expensive than CPC, and loses to the latter in terms of transportation costs.

Kuanysh Keskinbayev, deputy general director for commercial issues at KMG Kashagan B.V., a subsidiary of KMG, said during a panel session at the KIOGE conference on September 26 that the company is also diversifying its export supplies. Whereas previously it shipped oil entirely through the CPC, since July this year it has begun pumping through the Druzhba pipeline to Germany and plans to ship through BTC soon. The total volume of oil, which the company has – about 3 million tons per year.

According to him, the route Aktau – Baku – Tbilisi – Ceyhan is complicated, as it is multimodal. First, oil is delivered by rail to the port of Aktau, where it is transshipped to small tankers and transported to the port of Baku, from there it is pumped through the BTC pipeline, which goes to the Mediterranean Sea.

Now the route is economically inferior to the CPC. If we compare the cost of transportation along the two routes, “the difference is tangible”. But at the same time BTC goes to the Mediterranean Sea and CPC to the Black Sea, and access to markets from Novorossiysk is more expensive than from Ceyhan, plus the cost of Azeri Light is higher than CPC Blend. And all this partially covers the spread between CPC and BTC, says KMG Kashagan representative.

It should also be considered that field operators need to constantly sell the oil they produce, because there is nowhere to store such volumes. If we must choose between reducing or stopping production, in case the CPC operation is limited, and exporting via BTC, the choice is, of course, in favor of the Trans-Caspian route. Since the other route will be more expensive.

Besides, today the Black Sea is included by the International Negotiations Forum (IBF) into the list of high-risk zones for shipping, and the neighboring Azov Sea and Kerch Strait are classified as war zones.

Further development of the Trans-Caspian route, according to Keskinbayev, depends on the understanding of the importance of this issue on the part of each market participant.

When asked about the need to build the Kashagan-Kuryk oil pipeline to reduce the cost of oil transportation, he replied that this is a large infrastructure project that requires the involvement of not only Kashagan participants, but also other oil producing companies, that “this issue is more political, and the national interests of our country.” “If there is such an initiative, of course, we will take part,” he said.

Meanwhile, the construction of additional infrastructure is necessary if we are to increase the transit capacity of TMTM. Aidar Orzhanov, General Director of LLP “NMSC ‘Kazmortransflot’ says that new vessels are needed to increase the volume of transportation, and it is necessary to solve this issue now, as the construction of vessels on average takes from 18 months to 2 years. In addition, we need guarantees from shippers about deliveries. Because a carrier cannot make large investments in infrastructure that will remain unclaimed in the future if the political situation in the world changes. It is also necessary to know what size ships are needed. Will they be 12 thousand tons or higher. Considering the decline in the level of the Caspian Sea, it is desirable to build terminals with outriggers, and they need large volumes of oil – from 10 million tons per year and higher.

“Now the issue of fleet renewal is acute. The vessels we had in 2005-2006 are already 18-19 years old. The requirement of major oil companies is up to 20 years. After 20 years we need additional inspections, checks, capital investments in vessels, which will make transportation even more expensive,” he says.

One of the session participants noted that the cost of chartering ships to transport cargoes across the Caspian Sea (in different years it was from $80 per 1 ton to reach about 450 km from Aktau to Baku) takes a significant share in the cost of transportation along the TITC.

Orzhanov replied that if they could use deep-water vessels, the cost could be reduced. But since the level of the Caspian Sea is falling (by 15 centimeters per year according to the forecast), the company does not have such an opportunity. If prices are lowered, the quality of transportation services may deteriorate. Nevertheless, the issue of building new vessels for both oil and container transportation is now being discussed with the shareholders.

Chinese transit

One party interested in increasing flows through the TITC is the PRC. It would like to establish an efficient, alternative maritime route to the European Union (EU), which is the country’s second largest trading partner after members of the Association of Southeast Asian Nations (ASEAN). Last year, China’s trade with the EU totaled $783 billion (exports $501 billion, imports $282 billion).

Until recently, there was no significant growth in transit flows of Chinese cargo along the Middle Corridor. But thanks to the launch of the Kazakh Chinese terminal in Xi’an (PRC) at the beginning of this year, container transit from China through TMTM increased 11 times to 11 thousand TEU (1 thousand TEU in 2023), according to the Ministry of Transport of Kazakhstan.

At the same time, over the last three years there has been an increase in cargo transportation through the Caspian Sea. If in 2021 more than 586 thousand tons of cargo, including 25.3 thousand TEU containers, were shipped through the Middle Corridor, in 2022 this figure reached 1 million 485 thousand tons, increasing 1.5 times. The number of shipped containers reached 33.6 thousand TEU – an increase of 33%.

Last year, total cargo traffic grew by another 65% to 2 million 764 thousand tons. At the same time, container transportation decreased by 39% to 20.5 thousand TEU. According to the Ministry’s information, mainly grain, oil products, non-ferrous and ferrous metals, chemicals and soda, coal, oil and construction materials are now transported via TITC.

In 2023, out of more than 2.7 million tons of cargo that passed through Kazakhstan along the Middle Corridor, the country’s exports amounted to 2.2 million tons or 80% of the total turnover, while imports of 380,500 tons accounted for 13.7%. The share of transit cargo was at 177.1 thousand tons or 6.3%.

Half of all exports by TITC was oil – 1 million 134.5 thousand tons, followed by oil products – 538 thousand tons. The third largest type of cargo was non-ferrous metals – 351 thousand tons (see Table 2).

According to the Ministry of Transport, today the throughput capacity of TITC is 6 million tons per year, including 100 thousand containers in TEU. The length of the route is 6,180 kilometers, if you count from Altynkol station in Almaty region near the border with China to the Georgian port of Poti on the Black Sea. It is planned to increase the capacity of the route to 10 million tons per year by 2027. The transit time of cargo through TMTM is 12-15 days, of which 5 days through the territory of Kazakhstan, considering all port operations.

To further develop the Middle Corridor, the parties are jointly implementing the Road Map to 2027, have established a joint venture Middle corridor multimodal Ltd. to improve the quality of services, are implementing the DTC Global digital platform to simplify procedures along the route, and want to ensure guaranteed time (from 18-23 to 10-15 days) and cost of cargo delivery.

A few railway projects with a total length of 1,300 km are now underway on the Kazakhstan section of the route. These include the construction of second railroad tracks of the Dostyk – Moyinty section, Bakhty – Ayagoz, Almaty bypass railroad, new line Darbaza – Maktaral between Kazakhstan and Uzbekistan.

A “Container hub” will be built in the port of Aktau, which is expected to increase the volume of transportation up to 300 thousand TEU per year. A grain terminal will be launched in the port of Kuryk. Together with Aby Dhabi Ports, construction of a multifunctional terminal “Sarzha” is underway.

Considering the decline in the level of the Caspian Sea, dredging will be carried out near the ports of Aktau and Kuryk by the end of 2024 to ensure sufficient depth for ships to enter at 6 meters.

In September last year began construction of a Kazakh terminal since the Georgian port of Poti with an annual capacity of 80 thousand containers TEU, which is scheduled to be put into operation by the end of this year.

September 25 in the Ministry of Transport held the first meeting of the Working Group on transportation of goods on TITC between Kazakhstan and the PRC. The parties agreed on the projected volumes of cargo traffic on TMTM from China to Europe and in the opposite direction until the end of 2029. The parties want to make efforts to increase the volume of transportation in 2025 -2026 to 600 container trains per year, in 2027 to 1000, and in 2029 – to 2000.

Judging by the plans of the route participants, the TITC will soon become one of the main transportation arteries between Asia and Europe. Nevertheless, there are skeptics who point out the disadvantages of the Middle Corridor. Thus, the Russian Eurasian Rail Alliance Index writes that in terms of cargo delivery time TITC is inferior to the Eurasian route (Dostyk / Altynkol – Brest / Bruzgi / Svisloch / Kaliningrad), on which transit time in communication China – Europe – China is from 5 to 7 days. During the same time via TITC cargoes from China will be delivered only to Azerbaijan. Multimodal transportation with the change of modes of transportation between rail, road and ferry leads to an increase in costs, risks and security of cargo, as well as slows down its processing, compared to rail only, according to ERAI.

According to experts, the continued attractiveness of TITC for China stems from its desire to develop its western provinces and provide them with access to regional markets. China is focused on this route provided it is economically efficient. The EU countries are now extremely interested in the development of the route, as they view this corridor as one of the main corridors for cargo delivery from China, as it bypasses Russia.

“The development of this route is constrained by two main factors: infrastructure bottlenecks and many border crossings with changing modes of transportation, which leads to delays and increases the cost of transportation,” the Eurasian Development Bank wrote in a report published in March this year.

In turn, the European Commission conducted a study of sustainable transport corridors connecting Europe with Central Asia (CA) between November 2021 and June 2023. The analysis identified key priority infrastructure investment needs in all five CA countries (Kazakhstan, Kyrgyzstan, Uzbekistan, Turkmenistan, Tajikistan). Investments totaling €18.5 billion are needed to significantly improve the network. These funds need to be invested in rehabilitation and modernization of rail and road networks, expansion of rolling stock, increased port capacity, improved border crossing points, and multimodal logistics centers in all five countries. In the “business as usual” scenario, the volume of transit containers along the Trans-Caspian route may increase from 18,000 TEU in 2022 (according to EU data) to 130,000 TEU in 2040. If projects and measures are implemented that will reduce the time of cargo delivery to 13 days, the volume of transit containers may increase to 865 thousand TEU by 2040. And if freight traffic also increases in Central Asia itself, in addition to the above-mentioned indicators, the regional volume of container traffic in the network could reach 470 thousand TEU by 2040.

According to the data of the Kazakh government, at the end of 2022, the trade turnover between the CA countries and the EU increased by 61% and amounted to $49 billion, of which $40 billion (+38%) fell to the share of Kazakhstan.

Table 1. TITC cargo flow for 2017-2023

	2017	2018	2019	2020	2021	2022	2023
Thousand. TEU	9	15,2	26	21	25,3	33,6	20,5
Source: trans.info, Ministry of Transport of the Republic of Kazakhstan.

Table No. 2. Cargo turnover by TITC for 2023, thousand tons

	Export	Import
Oil	1134,5
Petroleum products	538	10
Colored metal	351
Chemicals and sodium carbonate	43,8	35,6
Iron material	28,9	34,5
Grain	24
Miscellaneous	74,3
Consumer goods		240
Iron oxide		41,6
Nonferrous		13,4
Construction goods		5,9

Source: Ministry of Transport of the Republic of Kazakhstan.