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Home»Finance»Why the Middle Corridor Is a Double-Edged Sword
Finance

Why the Middle Corridor Is a Double-Edged Sword

December 14, 2023No Comments10 Mins Read
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Why the Middle Corridor Is a Double-Edged Sword
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In late November, the World Bank published an economic analysis on the potential of the Middle Corridor to develop over the next decade. The report estimates that by 2030, travel times between the western border of China and Europe will halve, and freight volumes will triple to 11 million tons. This comes on the heels of increased interest by Europe’s leaders in developing the route as an alternative to the Northern Route, which similarly linked European markets via Russia rail and road connections to China but came under scrutiny after the Russian invasion of Ukraine in 2022. 

The Middle Corridor would run from Kazakhstan’s eastern border with China to the port of Aktau, where goods will be transported across the Caspian Sea to Azerbaijan. From there, they would transit the South Caucasus and Black Sea to Europe. The hope of European leaders is not only to revive overland links to China, but also to develop a tool to limit Russia influence in the region.

Despite this optimism, there is some question about the effectiveness of the project in light of Europe’s geoeconomic aims. For one, even under these projections, the route’s capacity would only be about 10 percent of the 100 million ton capacity of the Northern Route. There are numerous logistical challenges across the corridor, which the World Bank report is quick to note, whether digitalization or railways or ports or tariff policies. Overcoming these will be difficult, but by no means insurmountable. The willingness of route participants to address these issues is certainly evidence enough of this fact.

The more fundamental problem lies in Europe’s inability to isolate the benefits of the Middle Corridor. European markets are not the only participants competing for capacity along the corridor’s route. Other countries in the region, like China, Russia, Iran, and Azerbaijan, will almost certainly benefit from the infrastructure associated with Middle Corridor projects. Not only will this create friction with regard to access during relative peace, but it will also make such infrastructure a target for any country seeking to undermine these Eurasian powers and their base of geoeconomic leverage. 

That Europe is a strong supporter of countries like Armenia and Ukraine, which both have incentives to undermine Middle Corridor infrastructure, highlights the difficulty that Europe faces. This will only get worse as Europe simultaneously pursues both the Middle Corridor and solidarity with its Eurasian security partners.

Eastern Kazakhstan

The Middle Corridor begins along the eastern border of Kazakhstan with China. The railways connecting through border crossings like Khorgos and Dostyk will be the primary means by which goods begin their long journey west, especially as plans for an alternative Uzbek route seem to be falling through. These rail crossings are some of the busiest in the entire country, with bulk commodities flowing out of Kazakhstan to China. For this reason, as the World Bank report notes, these lines are nearly at capacity. Any goods traveling west will almost certainly have to compete with trains traveling in the opposite direction.

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As if this busy traffic along the route were not enough, Ukraine’s recent actions in Siberia may complicate the picture considerably. In late November, Ukraine targeted trains moving along the Severonomuisky tunnel and Chertov bridge in two successive attacks. Although the extent of the damage is not entirely clear, it is likely that the Baikal-Amur Mainline will be out of commission at least temporarily. This does not completely isolate Russia from its far eastern provinces; it still can use the trans-Siberian railway south of Lake Baikal. Nonetheless, Ukraine’s commitment to isolating Russia logistically from its far east is a new development. Should Ukraine choose to target the trans-Siberian line, which has numerous bridges and tunnels ideal for sabotage, Russia’s only alternative would be to head south, through Kazakhstan, and across the very same train lines the Middle Corridor currently uses.

Even in the rosiest of scenarios, Europe will be facilitating the goals of two different geopolitical rivals: one will be China, in its bid to make Kazakhstan more economically dependent; the other may very well be Russia, which is either seeking to diversify the routes it uses to reach its far eastern provinces or hoping to use Kazakhstan as a backdoor around international sanctions. Every euro the European Bank for Reconstruction and Development sinks into Kazakh rail projects is one that could benefit Europe’s rivals. 

The new double track to Dostyk, for example, facilitates goods heading west to European markets, but could just as easily facilitate trains heading east, destined for Russia’s far east or the markets of China. The same could be said of another Middle Corridor project, improvements to the rail network around Almaty, which will considerably reduce the transit time of goods flowing toward the Khorgos border crossing in China. In short, Europe’s investment in the Middle Corridor can benefit its rivals, too.

In a far darker scenario, however, Europe is relying on infrastructure that is now in the Ukrainian battlespace. Although Ukraine has not made any attacks outside Russia proper, the fact that one of its goals is to jeopardize Moscow’s rear should worry European policymakers. That Russia may take drastic options in the interim, including securing exclusive right of passage along key Kazakh rail lines, is not entirely unthinkable given how strategically vital rail links to the far east have been in Russian history.

The Caspian Sea

After traversing the steppes of Central Asia, goods bound westward along the Middle Corridor reach the Kazakh Port of Aktau, where they will be transported across the Caspian to the Port of Alat/Baku in Azerbaijan. This is perhaps the biggest bottleneck along the entire route, with waits at both ports being anywhere from three to ten days each, mainly due to poor connections with rail lines. Even with improvements in either port’s transshipment capacity, these two ports are still fundamentally limited by the number of container ships they have: Kazmortransflot, Kazakhstan’s national shipping company, has three, while its counterpart in Azerbaijan has only one. This leads to a total capacity of about 40,000 TEU annually, or about 0.3 percent of the capacity of Rotterdam in 2022. As to tankers, Kazakhstan has three, but two are currently on long-term lease to Russian firms. In order for the entire Middle Corridor to effectively transport both petroleum products and containerized goods, there must be an expansion of the shipping capacity on the Caspian.

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Any further investment in the shipping capacity in the Caspian Sea would invariably benefit multiple actors, not just Middle Corridor partners. It would probably go a long way to further facilitate the booming Caspian Sea trade between Iran and Russia. Kazakhstan, for its part, has expressed interest in facilitating maritime connections between the two countries, and has gone so far as to develop a direct shipping line with Iran. At first, this might not seem all that threatening. However, given the importance of the Caspian in helping Russia evade sanctions and transport Shahed drones from Iran, there should perhaps be some greater concern in Europe over what expanded Caspian shipping capacity might actually entail in the region.

It is the use of the Caspian Sea for military purposes, in particular, that is so worrying. In addition to serving as a highway for the export of drones from Iran to Russia, the Caspian Flotilla, Russia’s fleet in the region, has played a key role in launching missile strikes against targets in Ukraine. It is perhaps for this reason that Ukraine previously sought to target the region, with several drones being shot down over Astrakhan, Russia’s port on the Caspian, earlier this year. That Ukraine is not afraid to target waters where European commerce might be transiting is a fairly well-established phenomena, as demonstrated by their August attack on Novorossiysk, from which Kazakh shipments of oil to Germany are made. By relying on infrastructure and transit routes that are also important to Ukraine’s rivals, Europe risks exposing the Middle Corridor to crossfire in the Ukraine War.

The South Caucasus

After being unloaded at the Port of Baku/Alat, goods traversing the Middle Corridor make their final journey along the Baku-Tbilisi rail link before either heading on to Turkey via Kars or traveling further on to the Georgia ports of Poti and Batumi on the Black Sea. As the World Bank report noted, the key bottleneck in this section is the border crossing near the Georgian town of Gardabani, with delays often exceeding three days. 

In order to expedite train crossings here, not only will road connections need to be built, but the outdated system of electrification along the Baku-Tbilisi line will almost certainly need to be overhauled. In order to facilitate this, Azerbaijan has announced a $100 million investment to increase connectivity with Tbilisi and Kars. The Middle Corridor has few alternatives to this route: The train line along the Araxes, which passes through the hotly-contested Zangezur Corridor, has been closed since the fall of the Soviet Union. Thus, without this investment in the Baku-Tbilisi line, the Middle Corridor will suffer delays as goods transit the South Caucasus.

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As with the other bottlenecks along this route, investment in capacity here will probably not just benefit Europe, but regional actors as well. One such beneficiary will be Iran. With the announcement of the construction of a railway going from Rasht on the Caspian Sea to Astara on the Azeri border with Iran, along with the completion next year of the rail link connecting the Port of Chabahar to Zahedan in southeastern Iran, Iran will finally have completed the International North-South Transportation Corridor (INSTC), linking it (along with India) to Russia and Europe. Participants in this project will likely benefit from increased capacity along the Baku-Tbilisi line, as they have expressed interest in linking themselves to Georgia ports on the Black Sea. Additionally, the link will strengthen Azerbaijan’s hand, too. Not only will it facilitate trade along the Baku-Tbilisi-Kars line, but it will also increase Baku’s ability to access its exclave in Nakhchivan, especially if the proposed rail link between Turkey and the exclave is built.

On the surface, this might appear to actually be in Europe’s interest, tamping down on Azerbaijan’s demands for access to the exclave via Armenia and completing a project, the INSTC, that stands to link Europe to Iran and India. Yet, expanding the Baku-Tbilisi significantly weakens and isolates Armenia, a country Europe seems committed to support. An important piece of leverage Armenia had in the Nagorno-Karabakh conflict was its importance to regional transit initiatives, especially the INSTC. By supporting infrastructure initiatives in the region that facilitate transportation alternatives to Armenia’s role in the INSTC, Europe risks alienating Armenia from its traditional allies, like Iran and India. 

Moreover, it gives Azerbaijan leverage over Europe, leverage Baku would be keen to use. During the 2020 Nagorno-Karabakh conflict, it was hardly a coincidence that Baku launched the war shortly after completing the Southern Gas Corridor, Europe’s first new natural gas supply in decades. Baku could very easily take advantage of its leverage over Europe and the isolation of Armenia to demand access to the Zangezur Corridor.

Conclusion

Beyond the technical difficulties of the Middle Corridor, beyond the fact that it cannot really supplement the old Northern Corridor, even if Europe and its partners are wildly successful in the development of the project, Europe risks being a victim of its own success. In ideal circumstances, the completion of the Middle Corridor would facilitate the geoeconomic ambitions of rivals like China, Russia, Iran, and Azerbaijan. In doing so, however, it would also serve as a target for attack by regimes like Armenia and Ukraine, which Europe has offered its support. At best, Europe tacitly is advancing the ambitions of regimes that do not share its interests, and at worst, the Middle Corridor is incongruous with the security policy of most European countries.

Corridor DoubleEdged Middle Sword
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