An ambitious new trade link between China and Europe is quickly nearing completion. The Trans-Caspian International Transport Route (TITR) is a 4766km-long multimodal route connecting China, Kazakhstan, Azerbaijan, Georgia and Turkey, and reaching Europe as its final destination.
The envisioned scale and capabilities of this route are impressive: with an annual capacity of 27.5m tons of containerized cargo, TITR is estimated to transport up to 300,000 TEU by 2020, as president of Kazakhstan Temir Zholy (KTZ) Askar Mamin forecasted earlier this year.
To finalise the route, which runs 4256km by rail and 508km by sea, a flawless, fully co-ordinated land and maritime operation needs to be perfected across the territories of host countries. The project’s member states are therefore directing considerable funds towards rail and port infrastructure projects across their territories.
The pay-off, however, is promising: in the first few years, TITR member states are promised a net profit of $1bn, a sum only bound to increase over time, according to Akif Mustafayev, national secretary of the Europe-Caucasus-Asia transport cooperation program in Azerbaijan.
The initial concept of TITR dates back to 1993, at the root of an international cooperation program between the EU and countries in Eastern Europe, South Caucasus and Central Asia. The program overseeing the delivery of TITR, now known as TRACECA (Transport Corridor Europe Caucasus Asia), originally set out to develop a West-East transport corridor going from Europe across the Black Sea, through the South Caucasus and the Caspian Sea.
The distribution of subsidies could influence rail efficiency.
The partnership was ratified through the Basic Multilateral Agreement in September 1998 and, over time, the framework was developed for a new freight transport market across rail, road and sea. Today, TRACECA is made up of Azerbaijan, Bulgaria, Although Europe still describes TRACECA as a priority program, Mustafayev recently suggested that some member countries have recently fallen foul with the European Commission due to what they perceived as a lack of interest and support from their EU counterpart.
“The European Commission has recently weakened its attention to TRACECA,” Mustafayev said in an interview with news agency Trend. “We spoke with representatives of the European Commission on this subject and pointed out that if they aren’t interested in cooperation, we will work with the East… However, in response to it, the European Commission always replies that TRACECA is a priority and a strategic program for them, but we don’t see it in practice.”
As Mustafayev pointed out, the progress of TRACECA’s projects, including TITR, has little to do with European support, and relies almost solely on the financial efforts and political cooperation between its member states. The Coordinating Committee of the TITR, established in October 2013, includes Kazakhstan Railways, Azerbaijan Railways, Azerbaijan’s State Caspian Sea Shipping Company and Baku International Sea Trade Port as the responsible bodies for the project’s implementation.
First container train on TITR welcomed by delegates
The project is indeed moving forward rapidly. On 3 August, delegates from member states welcomed the Nomad Express, the first container train to complete a journey leg of over 4,000km along the TITR corridor. Loaded with 82 containers of caustic soda, the train departed from the city of Shihezi, northern China, and six days later arrived at Baku International Sea Trade Port in Alyat, Azerbaijan, with a stop at Aktau, Kazakhstan, along the way. The journey, which also involved crossing the Caspian Sea by ferry, was hailed as a remarkable achievement during its welcoming ceremony.
“The train has arrived from China to Azerbaijan, but it is necessary that this route gets extended through Georgia and Turkey, and then further to Europe,” Mustafayev said. “Work is currently underway in this regard, and the arrival of the first train gives hope that the work will be completed in the near future.”
President of Kazakhstan Railways Askar Mamin expressed confidence that “[TITR] will serve to develop and enhance the competitiveness of our economies and the development of transit potential.”
Indeed, the freight transit route is rife with potential: at present China and Europe trade goods worth over €1bn every day, according to the European Commission. Commenting on the further expansion of trade volume, Chi Fulin, president of the China-based think-tank Institute for Reform and Development, forecasted a possible $1 trillion in trade volume by 2020. Accommodating this volume on their territory is expected to pump great transit profits into the economies of the countries involved.
Azerbaijan: the biggest beneficiary of TITR
With “hundreds of millions in revenues” expected to enter the country’s economy via TITR’s transit, Azerbaijan is seen as arguably the biggest beneficiary of this line. Azerbaijan Railways could gain profits worth $600-700m from transit traffic alone by 2020, according to Mamin.
The Baku – Tbilisi – Kars rail line between Azerbaijan, Georgia and Turkey is considered a vital backbone to the project. Out of a total of 826km, 721km will run across Azerbaijan’s territory between the cities of Baku and Tbilisi, and up to Akhalkalaki in Georgia. The line will facilitate both passenger and freight transportation, with a focus on oil.
Under a 2007 Bilateral Agreement between Azerbaijan’s and Georgia’s governments, as well as state-owned company Marabda-Karsi Railroad LLC, Azerbaijan has provided a $220m soft loan to Georgia for the construction of their part of the line. The loan is repayable in 25 years with an annual interest rate of 1%. The first instalment of the loan, worth $50m, was allocated in 2007 by the State Oil Fund of Azerbaijan.
In the beginning, the line is expected to carry 6.5 million tonnes in volume, rising to 17 million tonnes of cargo by 2030. After repeat delays in 2013 and 2014, the line is now expected to be fully commissioned by the end of 2015.
Kazakhstan’s profitable stake in transit operations
Kazakhstan has equally high stakes in the rail operation of TITR. During his official speech at the ceremony in Baku, Mamin stressed the country’s key role as a transit route between Europe and Asia, saying: “Putting Kars-Akhalkalaki railway, the important part of trans-Caspian route, into operation will bring a tremendous impulse to the development of freight traffic.”
A 2014 document published by the Kazakh Ministry of Investments and Development specifies that the aim is to attract 8% of the EU-China freight traffic between now and 2020, equivalent to 15 million tons of cargo, according to their calculations.
“The volume of trade operations between adjacent regions will grow by 1.5 times and will reach $1 trillion by 2020 that creates transit potential through Kazakhstan,” the document reads. Transit along Kazakhstan’s corridors is estimated at 30 million tonnes by 2020. The country’s government included TITR as one of the main objects in their ‘100 concrete steps’ transport program, officially launched by President Nursultan Nazarbayev in May 2015.
Speaking at a government meeting that month, Nazarbayev said: “A multi-modal, high-speed ‘Eurasian transcontinental corridor must be created… In the framework of the project, it is necessary to build a new railway line across the whole territory of Kazakhstan to Aktau sea port.”
The focus falls specifically on the Zhezkazgan-Beineu rail line, which would be used in conjunction with the Baku-Tbilisi-Kars rail line and would facilitate container shipment up to Aktau port. The line’s full integration and into the TITR framework was discussed in more detail during the first meeting of the TITR Committee, held in Baku in January 2015.
An economic newsletter published by the Kazakh embassy shortly after the meeting specifies that representatives agreed to use the Zhezkazgan-Beineu railway, the seaport of Aktau and Ahalkalaki-Kars railway as part of the transportation of goods along the China-Kazakhstan-Azerbaijan-Georgia-Turkey route.
Georgia’s strategic position and future ambitions
As the shortest route between Europe and Asia, Georgia is fully aware of its strategic position in the transit link.
The finalisation of Georgia’s 29km of the Baku-Tbilisi-Kars rail line is a key step in strengthening their position, and the Georgian Ministry of Economic Development contributed over $79m towards the project’s construction.
In September, Indonesia dealt a blow to China and Japan, when it decided to drop the idea of a high-speed rail link.
A wider-ranging railway modernisation program is also undergoing, with a final date set in November 2019. Main objectives pinpointed by Georgian Railways (GR) include optimising freight and passenger traffic, optimising stations, depots and infrastructure, reducing operational expenses and increasing train speeds. According to national newspaper Agenda, once finalised, Georgia’s railway “will be able to transit about 65 million tonnes of cargo per year – three times more than today”.
However, in January 2015, a report from The World Bank’s Open Knowledge Repository mentioned some difficulties faced by GR in achieving its full potential as a transit link, along with a set of recommendations and areas for improvement.
The report recognises that “the TRACECA international transport corridor requires numerous trans-shipments, ferry ports and high capital intensity to be competitive.” At the same time, it identified “the harmonization of rail tariffs across the corridor” as “the most pressing need from the commercial side of operations”.
According to the document, “volatility in handling prices at Baku rail station is also a common source of complaints among logistics operators”.
Furthermore, the report criticises the bilateral agreement between Georgia and Azerbaijan as “restrictive and often insufficient for export, import and most importantly transit operations”. The document warns that the existent agreement leaves room for “informal payments” at the border between the two countries, which constitute a threat for the corridor’s operations.
“Transit to Central Asia is even longer, due to delays and constraints when crossing the Azerbaijan border, but most importantly to cross the Caspian Sea towards Central Asia,” it concludes.
While there is still more work to be done, Georgia’s Prime Minister Irakli Garibashvili summarised the country’s ambitions in a statement: “In order to fully use our country’s transit potential, alongside with ports, railway infrastructure should also meet international standards.”