Sidestepping Russia, China shores up new Caspian Sea trade route through Central Asia to Europe

Navigating the waves and ripple effects of regional conflicts that have obscured traditional trade routes and weakened Russian influence in the Central Asian region, China is stepping up its engagement there, especially in transport connectivity.

The mutual interests and win-win message were highlighted as President Xi Jinping made a state visit to Kazakhstan this week and met President Kassym-Jomart Tokayev.

In a joint statement on Thursday, the two countries pledged to "improve the level of interconnection and continue to deepen cooperation in the fields of infrastructure", including opening more border ports and accelerating the push for cargo shipments across the Caspian Sea.

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A day earlier, the two leaders virtually attended the opening ceremony of the Trans-Caspian International Transport Route - a road corridor through which cargo trucks arriving from China can board ferries across the Caspian Sea and on to Europe.

And on Monday, China Railway announced regular daily train services for the China-Europe Railway Express, departing from Xian, with containers unloaded and reloaded onto ships to cross the vast Caspian Sea, before arriving in Baku, capital of Azerbaijan.

The trip takes around 12 days and "provides more choices for domestic and foreign customers in foreign trade transport", according to the company.

Just a few months ago, such efficiency in conquering the world's largest inland body of water was still a pipe dream. The very few cargo shipments being made then faced treacherous sea winds and limited infrastructure.

"This has come naturally," said Yang Jin, an associate research fellow at the Chinese Academy of Social Sciences. "Geopolitical conflicts in Eurasia might become a new normal, severing some traditional trade channels. So, everyone - not only China, but also Central Asian and Caucasus countries - is compelled to develop a new, stable alternative route."

The China-Europe Railway Express, long a flagship project of Beijing's Belt and Road Initiative, with a reputation as an alternative to sea and air freight, has been largely shunned by European traders since the Ukraine war intensified in 2022. All mature routes of intercontinental rail travel go through Russia.

So, the Caspian Sea route, also known as the "middle corridor", appeared on shippers' radars as a viable alternative that avoids Russia.

The route goes from China to Kazakhstan, across the Caspian Sea, and through Azerbaijan and Georgia before splitting into two lines - one through Turkey, the other across the Black Sea - then arriving in Europe.

"It is a truly multinational project ... Every country along the line wants in on it, so everyone has strived to bring their own infrastructure up to standards," Yang said.

The fate of the route was further enriched by the crisis in the Red Sea, where Houthi militias in Yemen have repeatedly attacked cargo ships since November, endangering the vital marine route connecting Asia with Europe through the Suez Canal.

With a new port and some new ships in operation, coupled with less wind recently, the shipping capacity of the Capsian has indeed increased for intercontinental rail cargo, according to Andrew Jiang, general manager of Shanghai-based Air Sea Transport.

But the current efficiency is still a far cry from the traditional northern route that goes through Russia, and Kazakhstan's current transport capacity is too limited to satisfy China's export demand, he added.

"Once the Red Sea crisis ends, it will be really hard to say which way the market will go," he said. "When the Ukraine war ends, Europe-bound cargo will go back to the northern route."

A real game-changer for connectivity in the region would be the China-Kyrgyzstan-Uzbekistan Railway, which the three countries reached an agreement on last month, as it would start from Kashgar in southern Xinjiang, instead of adding more congestion to the Khorgas railway port in the north, Jiang said.

Meanwhile, it would provide a much faster and cheaper alternative to current routes on the China-Europe Railway Express and is expected to bring enormous economic benefits for the two inland countries once constructed.

More than two decades after the plan was hatched, the rail line had been long held back due to Russian opposition, as the country hoped to maintain its political and economic influence over Central Asia - its geopolitical backyard - and the new railway would likely reduce Russia's transit income.

China "seized the opportunity" to push forward the project, Yang said.

Funding for the railway project was resolved by creating a joint venture among the three countries, and China will provide loans worth US$2.35 billion.

But risks still persist, as only a preliminary agreement has been signed so far, he added.

"This project is a very big one, after all. The local terrain is very complex, so there are certain technical risks in terms of the construction in high mountain areas. And there are also many cities along the route, so it is difficult to say whether there are local forces in these areas that will become a disruptive factor in the future," Yang said.

Meanwhile, it may also further stoke geopolitical competition between China, Russia and the United States, as all three have a different vision for the transport infrastructure network in the region.

Washington's plan, though far-reaching, is to link the countries of Central Asia through new rail lines with Afghanistan, while Russia has proposed a north-south route that connects its own rail system with the area, Yang added.

"Generally speaking, for China, opportunities outweigh risks for the China-Kyrgyzstan-Uzbekistan Railway, as long as we proceed prudently," he said.

This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP's Facebook and Twitter pages. Copyright © 2024 South China Morning Post Publishers Ltd. All rights reserved.

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