Forging Sustainable Transport Connectivity: Enhancing EU-Central Asia Transportation Through the Trans-Caspian Corridor

The EU-Central Asia Investors Forum 2024 is the latest significant development in the EU's commitment to improve connectivity in Central Asia. Most notably this includes the development of competitive intermodal transport, logistics networks, and to encourage sustainable development initiatives throughout the region. Bringing together high-level leaders and stakeholders from the EU, Central Asian states, the Caucasus, Türkiye, and other international partners, the Forum served as a platform to discuss future prospects for investment and collaboration in various connectivity sectors including digital, energy, and transports. These future investments and collaborations aim to pave the path for innovative methods and strategic partnerships.

The Trans-Caspian International Transport Route (TITR), also called ‘Middle Corridor’, has the potential to significantly improve transport connectivity between the European Union (EU) and Central Asia, paving the way for sustainable and efficient economic growth. The initiative is an essential link in establishing efficient transport and trade connections between the EU and the countries of Central Asia, for which the South Caucasus and particularly Azerbaijan’s strategic geographic location have emerged as a catalyst for bolstering this interregional connectivity.

The Investors Forum for Transport Connectivity between the EU and Central Asia that was held in Brussels on 29-30 January 2024 committed to enable the further development of the Trans-Caspian Transport Corridor Fast Route linking Europe and Central Asia in 15 days or less. To date, the route carries 6 million tonnes of goods a year, including 200,000 containers of energy resources (gas, oil) as well as agricultural and food products destined for Europe. Participating in this first Global Gateway Investors Forum for EU-Central Asia Transport Connectivity, the EU agreed to invest a combined 10 billion EUR in the development of sustainable transport connectivity in Central Asia. The Forum brought together high-level representatives from the European institutions, EU Member States, Central Asia, the Caucasus, Turkey, as well as G7 countries and international financial institutions. Key participants included officials such as the Deputy Chairman of the Cabinet of Ministers of Kyrgyzstan, the Deputy Prime Minister of Uzbekistan, and the Transport Ministers of Kazakhstan and Tajikistan. 

The Forum emanated from the findings of the June 2023 report ‘Sustainable transportation connectivity between Europe and Central Asia.’ The study, launched by the European Commission and carried out by the European Bank for Reconstruction and Development (EBRD) identified 33 hard infrastructure initiatives (including logistics, border crossing, etc.) and seven soft connectivity actions (legal, regulatory, policy, institutional, bilateral, multilateral agreements, and digitization). Implementing these measures would significantly improve the operational efficiency and economic viability of the Trans-Caspian transportation networks. These conclusions were unveiled at the second EU-Central Asia Economic Forum, held in May 2023 in Almaty, Kazakhstan, highlighting the continuity and consistency of initiatives to promote regional integration and development. To reinforce its commitment to enhance connectivity and prosperity in Central Asia, the EU has recently cemented several agreements to promote transportation infrastructure and economic growth in the region, such as the EU-funded Regional Transport Programme and the Coordination Programme. The regional transport programme’s goal is to provide technical support, such as harmonising procedures, norms and standards for uninterrupted transportation, to ensure goods circulation along the corridor for the countries involved (China, Central Asia, South Caucasus, Turkey, and Europe).

The 2024 Investors Forum served as a catalyst to deepen this collaboration and establish direct links with Central Asia via the Black Sea and Caucasus regions. This represents a significant step forward in realising the development of the Middle Corridor and underscores the broader strategic goal of promoting long-term connection through joint initiatives.

Strategic Overview

Amidst the evolving landscape of region-to-region cooperation, a series of agreements have been concluded in line with the objectives set out in the EU Strategy for Central Asia adopted in 2019. This strategy marked a turning point in the diplomatic and economic relations of European and Central Asian countries, initiating a shift toward tighter cooperation. Focusing on trade, energy, security, and connectivity, the plan highlights the significance of creating sustainable transportation connections, boosting regional integration, and supporting economic development and stability in Central Asia. These agreements demonstrate the EU’s ongoing commitment to bridge the gap between its Member States and the nations of Central Asia, ensuring long-term progress and joint advancement towards common goals, such as the need to reduce CO2 emissions in the transport sector and increase connectivity between regional economic hubs. 

This strategy, which is consistent with the EU’s overall objective of advancing sustainable transport connections between Europe and Central Asia, has played an important role in creating solid criteria for its involvement with Central Asia. It is especially important to highlight the EU’s ongoing support for Kazakhstan’s efforts in constructing the TITR. In line with these policy objectives, EU investments in view of the Trans-Caspian Corridor are set to improve regional connectivity and collaboration. Notably, also through reform and modernisation processes going beyond its mere construction. This support is provided through various instruments such as the Non-State Actors – Local Authorities Programme (NSA-LA) of the Development Cooperation Instrument (DCI) for initiatives proposed by non-state actors and local authorities. However, criticism has been levelled at the EU, particularly involving concerns regarding the effectiveness and impact of these programs, as well as their overall approach towards supporting reform and modernisation, not adequately addressing the specific challenges and needs of the respective countries targeted. The funding of these programmes, focusing on the core concept of ‘connectivity’, is intended not only to strengthen bilateral ties, but also to pave the way for further engagement with Central Asia as a region, in order to achieve the objectives set out in the EU strategy for 2019.

Through the Investors Forum the EU aimed to strengthen its efforts to improve Central Asia’s accessibility and development by promoting several agreements aimed at bolstering the region’s transportation infrastructure and economic growth. One major project launched during the Forum is the EU-funded Regional Transport Programme, representing a significant investment in advancing regional transportation initiatives and to be implemented in 2025. In addition, a coordination platform has been established to track progress and improve collaboration on the Middle Corridor. Furthermore, a Regional Prosperity Programme, led by the International Trade Centre and the OECD, will be launched in 2024 to increase the use of Trans-Caspian transport networks. To support these efforts, the EU is building a high-level resident twinning adviser system, with experts integrated into the five Central Asian nations’ transport ministries starting in 2024. The integration of experts aims to provide high-level advisory support and technical expertise to the Ministries of transport of the Central Asian states. This will facilitate knowledge transfer, capacity building and the sharing of knowledge in the development and management of transport infrastructure and connectivity. 

These agreements demonstrate the EU’s commitment to fostering connectivity and solid growth in Central Asia’s transport sector to fully achieve the region’s economic potential. Given the geopolitical and economic importance of the region, transportation linkages between the EU and Central Asia have become vital alternative routes for the disrupted northern route as a result of Russia’s invasion of Ukraine and the disturbances to maritime trade caused by Houthi attacks in the Red Sea. This emphasises the critical significance of regional connectivity in mitigating geopolitical risks and ensuring continuous trade flows, and hence the growing importance of Central Asia as a connectivity hub.

Source: SWP

The Middle Corridor, a multimodal route connecting China to the EU via Central Asia, the Caucasus, Turkey, and Eastern Europe, serves as an alternative commercial route. For instance, western sanctions on Russia and Iran have effectively curtailed some East-West commerce via the northern route through Russia, resulting in the Middle Corridor emerging as a viable subsidiary trade route. This route is currently considered to be among the sole accessible routes for Europe to trade with the Caspian Sea region and Central Asia. The strategic importance of the Middle Corridor in diversifying transport networks is underlined by the major projects crossing the Caspian Sea (New Baku International Sea Trade Port) and surrounding countries. However, one notable concern is that although goods circulate in the region, they do not necessarily create additional value for the domestic market.

The EU’s key initiatives to strengthen the middle corridor include the formation of a cooperative rail business (a joint logistic operator) between Azerbaijan, Georgia, and Kazakhstan, as well as a substantial natural gas deal with Azerbaijan to replace gas formerly supplied by Russia. The aim of these projects is to facilitate border crossings along the Middle Corridor. However, the project is contingent on the building of infrastructure, the establishment of legal frameworks, and institutional coordination among the economies involved (Azerbaijan, Georgia, Kazakhstan). Yet, the initiative has been encountering a number of challenges. One of its key obstacles is the multimodal nature of transport along the route, which slows down freight hauls and causes logistical issues. Furthermore, the road and rail infrastructure in Kazakhstan and other Central Asian countries has become insufficient to sustain the capacity of the growing traffic. Overall, while the Middle Corridor provides significant prospects for trade and transportation between Asia and Europe, it also poses infrastructure, governance, and geopolitical challenges that must be overcome if the project is to proceed further. There is thus a clear need to address the harmonisation of the digital domain, the improvement of interoperability, and the development of the infrastructure along the Middle Corridor. This could involve the expansion and integration of information and communication technologies (ICTs) in the transport and logistics sectors, as well as the implementation of policy recommendations for institutional development.

The Middle Corridor’s strategic potential is highlighted by significant energy developments in the Caspian Sea region (expansion of port capacities, investments in infrastructure,…). As a key  sector for Europe, energy is affecting both the EU’s economic competitiveness and security as a key component of its agenda for engagement with Central Asia. The EU’s reliance on energy imports, notably from Russia until the start of the war in Ukraine, emphasised the need to diversify its energy supply. The countries of Central Asia and the South Caucasus thereby represent great potential, notably due to their natural resources, for improving energy infrastructure, promoting renewable energy sources and strengthening energy security. By enhancing energy cooperation channels with nations such as Kazakhstan and Turkmenistan, Europe aims to diversify its energy resources and reduce supply risks. 

The Middle Corridor is emerging as a key factor of the trade flows between Asia and Europe, with the South Caucasus and Azerbaijan assuming a pivotal role in facilitating the connectivity between the European Union and Central Asia. Furthermore, it offers economic growth prospects and enhanced collaboration beyond transportation, forging stronger ties between the participating countries.  

Regional Integration Initiatives along the Middle Corridor

Promoting enhanced connectivity and peaceful ties between its main stakeholders, the Middle Corridor not only represents a major achievement but also acts as a solid foundation for enhanced economic growth and cooperation between regions. Its strategic significance makes it a ‘peace corridor’ in an era of heightened geopolitical uncertainty. Moreover, the inclusive nature of connecting various transport links, such as the invitation to Armenia to participate, is in line with the EU’s support for collaborative initiatives. Investments in Azerbaijan and the development of transport links along the Middle Corridor with Kazakhstan are key drivers for foreign policy coordination.

Central Asian representatives see the opportunity to connect the landlocked region to the global economy, and regional leaders are beginning to capitalise on this potential. Uzbekistan has actively participated in these efforts, demonstrating the region’s growing understanding of the benefits of expanded connectivity. This realisation has resulted in several economic and infrastructure developments in the region, including potential gas contracts with Azerbaijan, such as collaboration on the Dostlug offshore oil and gas field in the Caspian Sea, which aims to facilitate gas exports to European countries via the Trans-Caspian underwater gas pipeline. Azerbaijan, Georgia, Kazakhstan, and Uzbekistan are developing their economic and political activities along the Middle Corridor. For instance, the Georgian Prime Minister’s visit to Uzbekistan and Kazakhstan in July 2023 was aimed at establishing closer political ties and facilitating infrastructure construction.  

The improvement of Eurasian connectivity benefits Central Asian nations, the EU, Azerbaijan, Georgia and Turkey by promoting peace and prosperity in the South Caucasus and Central Asia while counterbalancing Russia’s, China’s, and Iran’s influence in the region. The EU also sees the Middle Corridor as a more direct and efficient commercial route to Central Asia, lowering transportation costs and transit times, compared to the Northern Corridor. The Middle Corridor, through funds of the European Investment Bank (EIB) and the EBRD, represents an important cooperation for the EU. Its member States intend to modernise electricity power distribution and build connections to increase regional and interregional electricity trade. This effort is consistent with Europe’s rules-based approach to connectivity, which prioritises ecological and social sustainability. Europe’s focus on environmental sustainability and infrastructure development criteria may, however, hinder its capacity to compete with Chinese investment in the region without (or at least limited) political conditions. The EBRD study on Central Asia and the EU’s Global Gateway Strategy highlights the importance of sustainability criteria, including environmental, socio-economic, political, financial, and fiscal aspects, in the planning and development of transport infrastructure in Central Asia. This focus on sustainability is in line with the EU’s commitment to promoting sustainable global connectivity through its Global Gateway strategy.

Moreover, Chinese investment in the region is often accompanied by less political and environmental requirements, allowing for infrastructure projects to be implemented more quickly. This can give China a competitive advantage in the region, particularly in countries where the demand for infrastructure development and economic development is significant. Improved access to the EU’s single market via the Corridor offers Central Asian countries greater options for infrastructural development. Initiatives such as regional trade zones, notably the emerging alliance between Azerbaijan, Turkey, Kazakhstan and Uzbekistan, indicate a strengthening of intergovernmental discussion channels. These initiatives highlight the region’s economic development and integration potential. However, successful implementation of these projects necessitates the active participation of local stakeholders along with effective coordination between central and local administrations.

Despite the positive overall prospects, a number of challenges and issues will need to be addressed to ensure the long-term sustainability of the Middle Corridor and remove potential obstacles.

Policy Evolution for the Middle Corridor

Amidst the aspirations to make the Middle Corridor a more commercial and solid transport route, several challenges and considerations will thus need to be addressed to ensure its viability and sustainability. First and foremost, there are concerns regarding infrastructure and political instability in the region. Infrastructure challenges are essentially related to the restricted capacity and quality of service provided to meet the growing demands of  freight transportation. The resolution of the border conflict between Armenia and Azerbaijan could, for instance, contribute to the emergence of a new regional status quo, creating economic benefits along the corridor. Further to security and viability challenges, environmental concerns such as Caspian Sea pollution (including the water level) present obstacles to the European Union’s sustainable development agenda under the Green Deal and the SDGs, demonstrating the delicate balance between economic growth and environmental concerns, also along the corridor. Moreover, Central Asian nations experience great complexity in customs rules, requiring harmonisation and digitisation of the procedures. Streamlining these processes can drastically increase efficiency and reduce the time necessary to conduct trade and freight movements along the route.

One of the main factors to address is the need to reduce red tape and tariff barriers between the different countries in order to facilitate the operation of the Middle Corridor. The importance lies in harmonising customs procedures, digitising processes, and overcoming bureaucratic hurdles to ensure the smooth flow of goods. In the fight against corruption, increasing the efficiency and integrity of central and local agencies operating along the corridor will be essential. These can create bottlenecks and hinder trade, while reducing the speed and efficiency of the trading channel. Also inadequate tracking and the level of transparency will need to be tackled at different levels. The necessity for innovative solutions is therefore emphasised. For instance, the use of blockchain technology to minimise currency fluctuations, as well as the engagement of the private sector in process management, are highlighted as viable methods to combat corruption and inefficiency in customs operations.

As highlighted above, the Middle Corridor also faces logistical challenges, particularly in terms of transshipment, leading to higher transport costs, as is the case for the shipping route from Kazakhstan to Poland. Indeed, one of the logistical obstacles of exporting products from Poland to Kazakhstan is the lack of maritime connections in landlocked Kazakhstan, apart from the crossing of the Caspian Sea, which limits the viability of sea transport alternatives. This implies that freight must be transported over land for the majority of the route. Furthermore, the restricted availability of air freight in both countries implies that air transport is not a common or efficient way to transfer products between Poland and Kazakhstan. Through the improvement of corridor operations and the development of anti-corruption regulations, the region is showing a united commitment to promoting commerce and economic progress along the Middle Corridor. Optimising the financial requirements for investment and attracting investment funds to the region will also be crucial to its long-term development and stability.

The EU’s Global Gateway initiative, which seeks to achieve strategic objectives and strengthen global economic ties through enhanced infrastructure connectivity and coordinated investments, aligns closely with the  EU’s Neighbourhood Policy and two of its crucial programs, namely the 1999 Partnership and Cooperation Agreement (PCA) with Azerbaijan and the EU Strategy for the South Caucasus, as part of its Eastern Partnership initiative. These EU initiatives highlight the increased importance of the South Caucasus and Azerbaijan in particular as the nodal connectivity hub in bridging the EU via the Mediterranean to Central Asia. Enhancing the EU’s cooperation with the countries in the South Caucasus region in the field of sustainable transport, logistic and energy infrastructure connectivity will therefore be fundamental for the EU to further differentiate its access to Central Asia and the Middle Corridor. 

Prospects for the EU-Central Asia Summit in Samarkand, 2024

In conclusion, the “Global Gateway Investors Forum for transport connections between the EU and Central Asia” demonstrates the readiness to boost economic cooperation and connectivity between the European Union and Central Asian countries along the Middle Corridor. Increased infrastructure investment is clearly envisaged, creating new prospects for cross-border collaboration and regional economic growth. Yet, challenges regarding profitability and effective functioning of the Middle Corridor will need to be addressed (i.e. bureaucracy, technical and structural challenges related to infrastructure, strengthening coordination and cooperation between transit countries), including a swift mobilisation of resources towards the benefit of the landlocked region. Central Asian countries such as Kazakhstan, Uzbekistan, and Turkmenistan, as well as Azerbaijan in the South Caucasus, serve as important economic and connectivity hubs with significant potential for growth and efforts to modernise the local transport systems. As infrastructure improves, prospects for enhanced trade and collaboration will further expand, in support of regional economic growth.

Looking ahead to the EU-Central Asia Summit in Samarkand in April 2024, transport connectivity and commercial facilitation will need to continue to be prioritised. The summit will provide an appropriate platform for reinforcing the investors’ forum’s pledges, exploring new paths of collaboration, and shaping the future of transport connectivity between the EU and Central Asia. This summit could indeed offer promising prospects in terms of initiatives. The European Union underlined its desire to deepen strategic cooperation with the countries of Central Asia and to provide ongoing support to the region. The investment in the Trans-Caspian Transport Corridor, with commitments from the European Commission and international partners, demonstrates a concrete initiative to develop sustainable transport connectivity in Central Asia. At the summit, the focus will likely be on cooperation to develop the partnerships signed at the last investors’ forum, in key areas such as transport and economic development, as well as on further regional integration and enhanced cooperation with the EU in trade, investment, security, governance, migration and climate change mitigation. 

Author: Rania Mrini, EIAS Junior Researcher

Photo Credits: Wikimedia Commons