The Southern Transport Corridor should not be viewed as a threat by Kazakhstan, but rather be taken as a sign that it is necessary to strengthen Central Asian cooperation and create joint logistics projects with its neighbours, according to Kanat Nogoibayev, a graduate of the CABAR.asia School of Analytics.
Recently, a statement by Igor Babushkin, governor of the Astrakhan region of the Russian Federation, on the development of the Southern Transport Corridor has been actively discussed in several media outlets. According to him, the corridor would help avoid cargo delays on Kyrgyzstan’s border with Kazakhstan and provide a short route from southern Kyrgyzstan via Uzbekistan and Turkmenbashi port in Turkmenistan, bypassing Kazakhstan via the Caspian Sea directly to Russia. Many were concerned about the impact it would have on Kazakhstan as a logistics hub in Central Asia and the threats and opportunities it would bring.
Where did the idea of the Southern Corridor project come from?
Following the outbreak of war in Ukraine, transport routes in the region have become strategically important for all players due to sanctions and parallel imports. Russia’s main ally in this regard has always been Kazakhstan, where most of the goods within the EAEU pass through.
However, the disagreements between the member countries of the union have always become an issue for Russia. Massive queues of trucks at the Kyrgyz-Kazakh border can be seen for several years now and no meetings and agreements at the highest level have affected the practice of groundless border checks.
This impacts the speed of cargo delivery and the safety of food products. For Kazakhstan, it is a matter of national interests and maintaining a dominant position in ensuring the delivery of cargo from China and Central Asia.
The Ministry of Economy and Commerce of the Kyrgyz Republic has repeatedly stated the urgency of the problem at joint meetings within the EAEU. This year, Minister of Economy and Commerce of the Kyrgyz Republic Daniyar Amangeldiev expressed the idea of launching a southern transport route bypassing Kazakhstan, and since the beginning of the year, Uzbekistan, Turkmenistan, Kyrgyzstan and Russia have met in Moscow and Ashgabat, where the parties agreed to improve infrastructure for greater throughput capacity on the Caspian Sea and affirmed their interest in the project.
This is an opportunity for Kyrgyzstan to diversify its transport routes and reduce its dependence on Kazakhstan. In addition, this route greatly shortens the travelling distance of goods and saves time and money. For Uzbekistan and Turkmenistan, this is a clear advantage to earn on transit and export their goods to Russia.
The southern route is not something new to the carriers themselves, but it has rarely been used due to infrastructural problems – lack of regular ferries and the problem of obtaining a Turkmenistan visa to cross the territory. To implement the project, it is necessary not only to negotiate a “green corridor” with Turkmenistan’s leadership but also to improve Russian ports and provide ferries that are cost-effective for transporting trucks. According to officials, this work has already begun and the Russian side is modernising the ports and building new ferries.
Kazakhstan’s position
9% of Kazakhstan’s GDP is accounted for by the transport industry and this is a significant part of revenue. According to the Ministry of Industry and Infrastructural Development of Kazakhstan, 13 international transport corridors pass through the country. Prominent among them are the Trans-Asian Railway (TAR), TRACECA and the North-South Transnational Corridor, all of which link Asia with Europe in one way or another.
Most of the corridors became relevant after independence and Kazakhstan became a significant player in the region due to the availability of railway connections and government investment in infrastructure projects.
So far, the Kazakhstani authorities have not commented on the project of the southern transport route. Most likely, they will not do so in the near future. In parallel, the North-South project is currently being developed, which will connect the EAEU countries, India, South Asia and the Middle East, South Asia and the Middle East. The transit of cargo through the port of Aktau may significantly contribute to Kazakhstan’s access to new markets and revenue generation for cargo transit. This prospect is now more profitable and interesting for Kazakhstan’s leadership.
The launch of the southern corridor in any case may result in losses of Kazakhstan’s revenues from customs tariffs and indirect revenues from carriers. However, the loss of leverage over the region is more important than the loss of profit. Kazakhstan’s role as a transport hub for Central Asia is important and the loss of leverage like cargo inspection reduces Kazakhstan’s influence.
Another important point is the development of new corridors in the region, such as the China-Kyrgyzstan-Uzbekistan railway and the existing hybrid cargo delivery from Kashgar via Irkeshtam and Osh to Uzbekistan. These routes could divert some of the freight that now goes through Khorgos in Kazakhstan, which would affect customs revenues. If the southern corridor is launched, Kazakhstan will definitely suffer financial losses and its role in the region will become weaker.
Russia’s position
For Russia, the launch of new routes is part of its policy in the region, as it helps to weaken competitors and strengthen ties with new players. Given that the statements about the project were made by the governor of the Astrakhan region, they were more of a symbolic nature to show the seriousness of intentions toward Kazakhstan. All this is also connected with the growing pressure of the West by the threat of secondary sanctions on Kazakhstan and the country’s noticeable distancing from Russia, unlike Kyrgyzstan.
Many experts note that Kazakhstan’s independent policy is not to the Kremlin’s liking and it wants more leverage. An illustrative example of such pressure is Russia’s temporary suspension of the Caspian Pipeline Consortium, which 80% of Kazakhstan’s oil passes through.
It is clearly not in the Kremlin’s interest to delay cargo at the Kyrgyz-Kazakh border, which leads to losses. The existence of a corridor bypassing Kazakhstan is more of a signal to Akorda about measures that can be taken. It should not be forgotten that since the invasion of Ukraine, the main routes from China have been redirected to the “Middle Corridor” through Kazakhstan instead of the “Northern Corridor” through Russia.
The Austrian Rail Cargo Group, Denmark’s Maersk, Finland’s Nurminen Logistics and the Netherlands’ Rail Bridge Cargo, among others, have already started using the “Middle Corridor”.
For Russia, the development of this route can go in parallel with the North-South corridor project with Iran and India, so the capacity of the Olya port in the Astrakhan region will increase in any case. Investments are planned not only from the Russian side but also with the help of private investors from Iran. The regional governor also stated that shipbuilders have started building ships for the Caspian line, taking into account the potential cargo traffic. This makes the southern route project even more realistic. However, it also makes it clear that the “southern corridor” does not interfere with building partnership relations with Kazakhstan and Russia is not going to stop its projects on other routes.
It is equally important for Russia to strengthen relations with Turkmenistan, Uzbekistan and Kyrgyzstan, which have no land borders. The use of the Turkmenbashi port will help to strengthen its influence in this country. Against the backdrop of the geopolitical crisis, we see a clear effort by the Kremlin to draw closer to Central Asian countries. Kyrgyzstan and Uzbekistan, largely dependent on migrant remittances and supplies of agricultural and garment products, are extremely interested in developing this corridor with Russia. Additional economic ties and a real project could compete with Western players that have focused their attention on the region since the outbreak of war. Based on the above, Russia does not want to have a competitor in the region in the name of Kazakhstan and seeks to create new corridors to create more leverage.
China’s position
Any corridors along the Central Asian route are considered by China as an additional opportunity to deliver its cargo to Europe. The Minister of Economy and Commerce of the Kyrgyz Republic noted that the “southern corridor” may be of interest to the “One Belt, One Road” initiative. China has long done most of its shipments through Kazakhstan and Russia, but after the outbreak of war and the imposition of sanctions, rail transit between China and the EU via the northern corridor in Russia fell 34 per cent in 2022. China has therefore actively started to develop new routes and recent talks in Samarkand confirmed China’s plans to build a railway through Kyrgyzstan and Uzbekistan. The new routes significantly reduce the transit time and costs of freight to Europe. For instance, the trans-Caspian corridor has already cut the transit time of cargo from China to Europe threefold, from 53 to 19-23 days, and plans to reach 14-18 days by the end of this year.
The recent China-Central Asia summit in Xi’an at the level of the countries’ top leaders emphasises China’s dominant economic role in the region. In one way or another, the development and modernisation of ports on the Caspian Sea serve China’s interests. Given that the southern part of Kyrgyzstan is already used for cargo, the presence of the corridor could also enhance parallel imports to Russia.
Despite the officials’ statements, the unexpected growth of the GDP of the countries in the region and trade turnover with Russia proves the delivery of sanctioned goods. While Kazakhstan fears the threat of secondary sanctions and may limit parallel imports, other countries are more interested in benefiting and are less targeted by the West.
West’s position
The visit of German President Frank-Walter Steinmeier to the region and the European Union-Central Asia summit shows the high interest of Western countries in strengthening relations with the Central Asian countries.
There is no doubt that they are dependent on Chinese supplies and having an alternative to the “northern corridor” is an opportunity to receive their cargoes uninterruptedly. It is also in the EU’s interest to reduce Russia’s influence in the region, but due to weak economic ties, they have nothing to offer to the countries. Recently, the Ministry of Industry and Infrastructural Development of the Republic of Kazakhstan stated that the transit traffic of Chinese cargo through Kazakhstan increased 2.6 times and amounted to 1.1 million tonnes.
For example, a year after the war began, the trade turnover between Kazakhstan and the European Union increased by 70.9% and totalled $6 billion. In this case, the “Southern Corridor” is a blow to the interests of Western countries. Against this background, the West can only take advantage of disagreements and increase cooperation with Kazakhstan. Steinmeier’s visit to the Mangistau region is proof of that. Therefore, on the one hand, the corridor may be a lever of influence for Russia, but on the other hand, it may also bring Kazakhstan closer to Western partners, given the multi-vector policy of the state.
What can Kazakhstan do?
Based on the aforesaid, we see that despite the difficulty in the implementation of the “southern corridor” project, the countries are determined to build a route bypassing Kazakhstan and the appropriate foundations for this do exist. However, Kazakhstan can still reduce the lost profits and prevent the construction of this corridor.
Among the obvious recommendations – stopping the practice of cargo delays at the Kazakh-Kyrgyz border. In this case, the main initiator, Kyrgyzstan can continue to use the route through Kazakhstan rather than solve the issue of the “green corridor” with Turkmenistan, where visa restrictions are much more complicated and stringent.
In addition, trucking companies indicate that the cost of transporting goods along the southern route is complicated by high financial charges from Turkmenistan for the same cargo. As a result, Kazakhstan has an opportunity to keep the current route without losses for itself.
The second aspect is the modernisation of ports on the Caspian Sea to increase cargo throughput from China and use promising destinations such as the North-South corridor. Given that the Aktau and Kuryk ports can be improved faster than the Russian port of Olya. In such case, the main routes to Europe from China can still be very profitable, and cooperation with the western world offers high credibility to Kazakhstan as a partner in Central Asia. One should not forget about the improvement of transport routes to the north through Petropavlovsk, because the “southern corridor” is inconvenient for the delivery of goods from Kyrgyzstan and Uzbekistan to Siberia, so there is still an interest in freight transport through Kazakh territory.
Emphasis should be given to strengthening relations with Central Asian countries in order to create joint projects in the Caspian Sea. A consultative platform of Central Asian countries as well as bilateral meetings can help. Unity of the region on economic issues can help avoid excessive Russian influence and create a favourable atmosphere for cooperation. Given that a huge flow of goods from China runs through Kazakhstan, its connection with its neighbours can redistribute the cargo flow evenly without the involvement of third players like Russia and reduce Russia’s leverage.
The Southern Transport Corridor should not be perceived by Kazakhstan as a threat, but rather as a sign that Central Asian cooperation should be strengthened and that it is in the national interest to create joint logistics projects with its neighbours.