Daily Times

The Russia-Ukraine conflict has triggered some major shifts in the supply chains of West Europe, Eurasia, Central Asia, Caucasus and South Asia. This shuffle of supply chain has considerable impact on the global trade and commerce. Kazakhstan has its gifted landscape with an extensive network of rail, road, air and marine corridors and can transcend its limitation of landlockedness. Therefore, Kazakhstan contributing 60% GDP and 70% FDI of Central Asia, is destined to achieve massive economic gains by availing the opportunity of supply chain shift.

In fact, Russia has written off EU market and has captured the avenues of enhanced trade with China, India and Middle East. Even the prospects of re-emergence of EU-Russia trade to the same level also look very dim. This development has closed Asian trade access to the European markets via Russia. Therefore, the supply chains are moving south. Though an existing route between Asia and Europe is via Suez Canal but the shipping cost and delivery time are higher than alternate routes via Caspian Sea.

The Caspian Sea bordering Kazakhstan, Russia, Turkmenistan, Iran and Azerbaijan, is the largest inland body of water without natural outlets. Kazakhstan’s Caspian Sea ports register a record breaking turnover in the first half of 2022. Kazakhstan’s Statistics Committee reports that the transportation of cargo via internal water transport infrastructure jumped to 433.8 million Tenge (USD 907,530) that is over five times more turnover than during the same period of 2021. Currently, the three Caspian seaports in Kazakhstan are Aktau, Bautino and Kuryk with multipurpose terminals, transshipment facilities and access to the railway, though some further infrastructure development is necessary there.   These ports are important to the “Middle Corridor “or “Trans-Caspian International Transport Route” (TITR) that facilitates cargo from the EU to transit via Azerbaijan’ Baku port, ship to Kazakhstan’s Aktau port and then to China and vice versa.

Moreover, Eurasian Rail Alliance comprising Georgia, Azerbaijan and Kazakhstan has been formed to carry out transit rail/maritime cargo between Europe and Asia by exploiting the transit potential of the Trans-Caspian International Transport Route (TITR). The joint venture of Eurasian Rail Alliance would streamline cargo flows from China, Central Asia to the markets of EU and back, avoiding Russian Transit.

So, the China-Kazakhstan-Russia-EU freight train to Europe has shifted to the Southern route of China-Kazakhstan-Azerbaijan-Georgia/Turkey-Europe. The only difference is that the latter is multimodal.

With widened exports routes in 2022, Kazakhstan has also increased its wheat and flour exports to China, Azerbaijan, Georgia, Pakistan, Turkey, Iran as well as new markets in the European Union.

The Khorgos dry port shared by Kazakhstan and China on either side of the Kazakh-China border is also contributing to the shifting supply chains by handling import and export functions as the busiest dry port in the world.

Another connectivity link ‘Kazakhstan-Turkmenistan-Iran-Turkey Corridor’ has been activated in June 2022 when first freight train from Kazakhstan has entered Iran for further heading to Turkey and Europe.

Kyrgyzstan is in Enhanced Trade & Cooperation Agreement with European Union and has GSP+ status. Kyrgyzstan is connected to Kazakhstan by road and rail. Then Kazakhstan has 2300 km long border with Uzbekistan that has also Enhanced Partnership and Cooperation Agreement with both EU and UK without tariff and duty barriers on over 6200 products. Kazakhstan’s link with Uzbekistan through rail, road and air is boosting trade significantly.

The Eurasian Economic Union (EAEU) is a free trade bloc including Kazakhstan, Armenia, Belarus, Kyrgyzstan and Russia. EAEU has already free trade agreements with Iran, Serbia, Vietnam and is further negotiating others with Bosnia, Egypt and ASEAN nations. This forum is likely to have significant trade impact for Kazakhstan.

In the past five years, trade turnover of Kazakhstan with other countries of Central Asia has reached USD 6.3 billion, a growth of 42%. Kazakhstan is progressing well towards realizing its intra-region trade potential of USD 15 billion.

Kazakhstan exports two-thirds of its oil via Caspian Pipeline Consortium (CPC), the world’s largest international oil transportation project involving Russian and Kazakh companies to the port of Novorossiysk on the Black Sea via a 1500 KM. In view of the vulnerability of CPC channel, Kazakhstan is going to re-route its oil exports via the Baku-Tbilisi-Ceyhan pipeline that ends in Turkey.

Further, Kazakhstan is also part of Quadrilateral Transit and Trade Agreement (QTTA) along with Pakistan, China and Kyrgyzstan that is an alternative gateway for Central Asia to the warm waters of Gowadar port, by completely circumnavigating Afghanistan, in case of instability. QTTA would link landlocked Central Asia to China’s Xinjiang region that is connected with Karakoram Highway toward sea port of Gowadar.

Above analysis reflects how Kazakhstan is poised to secure economic gains in the context of shifting supply lines. Kazakhstan economy has shown a lot of resilience in the pandemic times of COVID-19 and after terror turmoil of January-2022.Being attractive destination of foreign investment, an Increase of 34.9% in FDI has been observed in Kazakhstan despite corona virus.

The writer is a senior banker based in Kazakhstan, with keen interest in Central Asian studies. He can be reached out at rafeeq_kz@yahoo.com.