Without China’s geoeconomic policy push, there is still little economic rationale behind the development of the Middle Corridor.
The Trans-Caspian International Transport Route (TITR) or Middle Corridor, is a conglomeration of rail companies from China, Europe, and trans-Caspian geographies comprising China, Kazakhstan, Azerbaijan, Georgia, Turkey, Romania, and Poland. This corresponds roughly to China’s West 2 CR Express corridor, which itself is an overlay of the Central Asia Regional Economic Cooperation (CAREC)’s rail corridors 2 and 6.
The concept and early institutional development of the Trans-Caspian corridor is promising.
The Middle Corridor would allow for greater state-to-state coordination of transcontinental rail freight across member countries adjoining China and the European Union, but is also being developed from the position that the extra-regional and intra-regional rail freight system development should be economically viable for the countries involved.
Most external analyses of China’s CR Express Belt and Road rail freight system have been from the intercontinental China-Europe perspective. But development of the Middle Corridor system relates to the viability of intermediate freight lines. For example, if the three separate legs of Istanbul to Aktau via Baku, Aktau to Khorgos, and Khorgos to Lianyungang are economically viable then Lianyungang to Istanbul also becomes viable.
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The concept of the Middle Corridor is that with minimal Chinese input, the other economies involved can establish a coordinated rail corridor, which can facilitate intercontinental China-Europe trans-regional trade, but also develop intra-regional and extra-regional trade. Most of the potential depends on developing extra-regional trade. For example, if Kazakhstan can increase trade with the European Union, then both the intra-regional and trans-regional trade can piggy-back on that development. But if extra-regional trade with Europe does not increase, then it is difficult for China-Europe trans-regional trade to ever become economically viable.
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There remain serious logistic, infrastructure, and institutional development hurdles if the Middle Corridor is to serve the macroeconomic interests of its host economies and become economically viable for individual freight forwarders, exporters, and importers. Lack of price transparency remains a major fault in both the Middle Corridor and CR Express systems. The Middle Corridor is also multimodal, having to cross seas twice, once in the Caspian and once again on either the Bosporus or Black Sea. While the more trafficked China-Europe CR Express route from Kazakhstan to Poland is longer, it is also a single overland connection.
The conventional narrative on China in the Belt and Road was as an infrastructure investor. But in Central Asia rail infrastructure, China has only been involved in the Qamchiq tunnel project and the Vadhat-Dangara line. China’s rail freight policy in Central Asia has not been an infrastructure project but a logistics development project. For that, there are an array of freight forwarders in China especially at the local level who might have incentives to use the system, or might be subsidized either directly from the central level or at various local levels of government or who might receive some other cross-subsidy to incentivize their participation in the development of the system.
Most development of the international rail freight systems is coordinated by state-owned rail networks, and much of the logistics traffic is through state-owned subsidiaries of these state rail corporations. This state-to-state development of the Middle Corridor governance institution should mean a smoother operational environment for private freight forwarders. Within Central Asia and the Caucasus, logistics operators are mostly state-owned subsidiaries, and while many are well-run and competitive, ultimately their participation is as a result of national industrial development policies where the state sees value in developing this system. From the European side, participating ports and logistics service providers seem less optimistic, and have fewer policy incentives to develop the system.
For China, the wider geoeconomic goals of connecting Xinjiang to the ocean are pursued through a combination of Kazakhstan-Turkmenistan-Iran, the direct Pakistan corridor, as well as the parallel Kazakhstan-Turkmenistan-Afghanistan-Tajikistan corridor development. The ghost prospect of the Kashgar to Osh line through Xinjiang-Kyrgyzstan-Uzbekistan remains geopolitically, if not economically, viable.
However these southern routes still mostly rely on Middle Corridor state Kazakhstan, while the Middle Corridor excludes the Turkmenistan, Kyrgyzstan, Uzbekistan, Afghanistan, and Iran routes to China. This leaves Middle Corridor economies on the Kazakhstan-Turkey line participating in a regional rail link development system that serves as one node in China’s higher ordinate geoeconomic policy interests.
For China’s economic CR Express freight traffic, most crosses Kazakhstan on the same rail links as the Middle Corridor but exits on the Russian route to Europe. Middle Corridor development is tangential to this, and its development cannot piggy-back on China-Europe route developments. For China, these lines are geoeconomic and worth losing money on. CR Express terminals are centered in central China on east-west Yangtze River Economic Belt corridors – meaning that major international freight hubs are in central China, not Lianyungang port of the Middle Corridor or other coastal ports, which would allow Kazakhstan, Georgia, or Turkey access to the Pacific Ocean.
Central Asia, the Caucasus, Turkey, and Eastern Europe have great industrial infrastructure potential for the development of a rail corridor. But domestic industrialization drives are malformed, stalled, or non-existent. Meanwhile, China’s domestic industrial policy is sophisticated and its geo-industrial policy is in an advanced state of deployment. Without domestic trade and industrial policy development from the Middle Corridor state, docking the system to China on one side and the European Union on the other will be difficult.
The three institutional groupings of the European Union, Middle Corridor economies, and China have differing policy objectives and competencies in developing a viable Eurasian rail network. China is invested and infrastructurally developed, but lacks regional competence; the Middle Corridor economies are invested but are structurally and institutionally underdeveloped; while the European Union is regionally competent but uninvested in the project.
Increased rail transport infrastructure and trade volume should benefit the Middle Corridor economies themselves. However, the Middle Corridor remains a reactionary policy to China’s subsidized incentives to domestic freight forwarders to use the CR Express intercontinental rail system. Without the China policy, the Middle Corridor development policy incentives disappear. Without China’s geoeconomic policy push, there is therefore still little economic rationale behind the development of Middle Corridor.
Péter Bucsky is a Ph.D. candidate at the University of Pécs, Doctoral School of Earth Sciences; Tristan Kenderdine is research director at Future Risk. This article is in part a synopsis of a presentation to the Asian Development Bank Institute’s “Trans-Caspian Transport Corridor: Infrastructure and Trade” workshop.