DUE to its many border crossings, the need to transfer containers from rail to ship and road and between track different gauges, as well as other operating inefficiencies, the Middle Corridor has traditionally enjoyed less favour for moving long-distance freight between China and Europe.

Also known as the Trans-Caspian International Transport Route, the Middle Corridor is defined by the World Bank as running from the border crossings between China and Kazakhstan at Dostyk and Khorgos and then across Kazakhstan by rail to the port of Aktau on the Caspian Sea. Consignments then move by sea to Baku, and by rail again through Azerbaijan and Georgia, and either continue to Europe by rail via Turkey or across the Black Sea. Due to what the World Bank describes as inefficiencies and infrastructure gaps in Turkey, the Black Sea route is currently preferred.

Despite being the shortest route between the Pacific coast of China and Europe, transit times on the Middle Corridor are three times longer than the northern route via Russia, according to a World Bank report published in November 2023, and are comparable with the maritime route via Singapore and the Suez Canal. However, the attractiveness of both of these routes has declined following Russia’s invasion of Ukraine and, more recently, due to the security crisis in the Red Sea that has seen shipping diverted via the Cape of Good Hope. The Middle Corridor remains the least vulnerable route between China and Europe in terms of external shocks.

Following the Russian invasion of Ukraine, container traffic on the Middle Corridor increased by 33% in 2022 when compared with 2021. But as shippers moved unprecedented volumes of traffic to the corridor in the immediate aftermath of the invasion, its limits quickly became apparent. While technical operational capacity was not reached, difficulties at border crossings and with transhipment and coordination led to very lengthy delays. Traffic moved back to alternative corridors with the result that container traffic fell by 37% in the first eight months of 2023 when compared with 2022.

Despite the current focus on providing an alternative overland route between China and Europe, the World Bank study says that the Middle Corridor primarily provides an opportunity to diversify trade routes and improve connectivity between Azerbaijan, Georgia, and Kazakhstan, and accordingly focuses on these three countries. It notes that all three at present rely heavily on Russia to provide access to ports served by global trade routes and as a trading partner, with 39% of imports to Kazakhstan coming from Russia. As well as diversifying imports and reducing dependence on Russia and China, a well-functioning Middle Corridor offers the potential to export more to Europe and reach new markets that could include the Middle East, North Africa, south and southeast Asia.

The report sets out the policies and investment required to triple freight traffic and halve transit times by 2030. With these in place, it forecasts that a total of 11 million tonnes of freight will move along the Middle Corridor and via the Caspian Sea in 2030, an increase of 209% on 2021. Of this, 4.4 million tonnes will be transit traffic moving in containers, up by 303%. Although trade from Azerbaijan, Georgia, and Kazakhstan is forecast to grow by 169%, at 7 million tonnes it will represent a larger proportion of the total. The World Bank believes that the Middle Corridor will remain a minor player in handling intercontinental trade between China and Europe due to the availability of other options, especially deep-sea shipping. In contrast, at the regional level, developing the corridor and diversifying flows will favour high value-added commodities such as fertiliser, where traffic is forecast to nearly double, as well finished metals, prepared foodstuffs, machinery and chemicals. Time-sensitive and other higher-value freight will partially shift from the northern route to Europe via Russia, and the proportion of Middle Corridor traffic made up by raw materials will fall from 60% to 53%.

The World Bank says that the assessment undertaken for its study corroborated a stakeholder survey which found that transport costs on the Middle Corridor were high and, more importantly, unstable.

While the cost fluctuates, it is close to the fixed rate of the alternative northern route, even though the transit time is twice as long on the Middle Corridor. The study says that in 2022 it took an average of 50-53 days to move freight from Dostyk or Khorgos via the Middle Corridor to the Black Sea port of Constanta in Romania.

Although the longest delays occur during sea crossings, mainly due to a shortage of vessels, the key issues affecting the rail component of the Middle Corridor are high prices, unpredictable transit times, the lack of tracking systems, the difficulties of transhipment and last-mile delivery, and the poor quality of both rolling stock and logistics terminals. End-to-end rail infrastructure comes third in the list of the five main factors limiting capacity and causing operational bottlenecks on the Middle Corridor (see below), ranked in order of time cost. The study says that rail operations “suffer from localised constraints at the port-rail interfaces where a lack of equipment, poor connections, and inefficient operational practices cause delays and increase costs.”

Examining the rail component of the Middle Corridor in more detail, the report notes that Kazakhstan Railways (KTZ), Azerbaijan Railways (ADY) and Georgian Railway (GR) are highly interoperable, sharing a common track gauge of 1520mm as well as operational and cultural characteristics inherited from the Soviet era that allow the movement of rolling stock between the different networks. Although the positive impact of this interoperability is reduced by the need to tranship freight at the Caspian Sea ports, some wagons travel across the Caspian Sea by train ferry. Containers move on flat wagons that are interoperable across the different railways, offering opportunities for the acquisition of common fleets that can be shared.

To meet its full potential, the rail component of the Middle Corridor requires modernisation and investment to relieve localised capacity constraints caused by equipment, infrastructure and operating practices. These cause bottlenecks that cancel out efficient movement over the rest of the corridor. The physical pinch points are mainly located where freight is transhipped or handed over to a different operator. While containers are relatively standardised, the report says that KTZ, ADY and GR still need to fully adopt equipment and operating procedures for the efficient movement of containers throughout the Middle Corridor. This is being prevented by shortages of specialised wagons, cranes and other equipment, such as those needed to handle 20ft containers rather than the 40ft boxes that are the norm in the corridor. The report says that 20ft containers sit idle at most interchange points due to the lack of specialised equipment, putting the Middle Corridor at a competitive disadvantage.

Without improvement, current railway infrastructure could be an impediment to further development of the Middle Corridor. Capacity varies widely along the corridor; the north-south lines tend to have substantially more capacity than the east-west routes, a legacy of the Soviet era.

Since the ability of the corridor to perform well is determined by the sections with the lowest capacity, the report says that KTZ, ADY and GR must focus on a well-designed and coordinated plan to increase total corridor capacity. The report identifies the key issues limiting capacity on the most critical sections of the Middle Corridor (see table below). In the meantime, “quick wins” could be delivered by ensuring the availability of rolling stock and improving shunting operations in Kazakhstan. Limited availability of rolling stock is a particular constraint in Azerbaijan and Georgia, where transhipment from rail to maritime and road transport also requires immediate attention.

In the longer term, the report says that the introduction of automatic block signalling, other signalling modernisation work and the acquisition of new locomotives and flat wagons can lead to large efficiency gains across the three railway networks of the Middle Corridor. Priority projects that must be studied further in Kazakhstan include increasing capacity on the Dostyk - Mojynty section, building the Almaty bypass, and rebuilding the Arys - Saksaulskaya, Beineu - Mangistau and Seyfullin - Saksaulskaya - Shalkarand sections. In Azerbaijan, work should be undertaken to finalise the implementation of rebuilding the section from Baku to the Georgian border, including replacing signalling and telecommunications systems, raising the maximum speed and changing the overhead electrification system from dc to ac. Finalising the reconstruction of the Tibilisi - Akhalkalaki section should be a priority in Georgia along with starting work to rebuild the line from Akhalkalaki to Kars in Turkey.

There are four border crossings along the Middle Corridor, which vary greatly in operational performance, infrastructure and equipment, as well as the specific issues that affect the speed and predictability of freight services. The border crossings at the break of gauge between China (1435mm) and Kazakhstan (1520mm) at Dostyk and Khorgos are the most developed, with facilities for handling intermodal traffic, but there are disparities between westbound and eastbound traffic throughput. The World Bank report says that from the Chinese side, a very large number of westbound trains are allowed through without delay, while eastbound trains are limited to between six and 10 trains a day at Dostyk.

The border crossing at Dostyk has a throughput capacity of 18 pairs of trains a day. As this barely meets current demand, the report says that expansion will be required as the Middle Corridor develops. The key issue is the waiting time at the border which can be as long as 60 hours, due in part to an insufficient number of sorting tracks and the lack of an automated and unified system for providing preliminary notification of train arrival times. There is also inefficient management of shunting locomotives and the distribution of wagons across the sorting tracks and transhipment areas.

Similar problems have been identified at Khorgos. Although infrastructure is more developed on the Kazakhstan side of the border, there are only two tracks in the transhipment area on the Chinese side which prevents trains from passing each other. Throughput capacity is 17-18 trains a day and the transit time is roughly the same as at Dostyk. There is no marshalling yard and an insufficient number of reception and dispatch tracks, as well as those for storing empty wagons. Rolling stock flow management is inefficient and there is a lack of electronic data exchange. The construction of a marshalling yard or a container terminal should be studied further as a priority, the World Bank says.

The busiest border crossing on the Middle Corridor is between Böyük Kasik in Azerbaijan and Gardabani in Georgia, but infrastructure here is weaker than at Khorgos or Dostyk and it forms a major bottleneck. The average crossing time is three days, with capacity limitations and a shortage of locomotives exacerbated by the lack of electronic data exchange for completing customs formalities. Neither Böyük Kasik nor Gardabani were designed as border stations and lack facilities for sorting or reforming trains, while their location in populated areas limits the scope for future development. There are more tracks at Böyük Kasik than at Gardabani, with the result that trains may take longer to cross the border if they are required to undergo customs inspection in Georgia.

The border crossing at Akhalkalaki in Georgia opened in 2017, and its modern design and equipment allow for efficient transhipment between 1520mm gauge and the 1435mm-gauge network in Turkey. However, the report says that this border crossing may become a bottleneck following the completion of the new line to Sivas in Turkey. It recommends that further studies to increase capacity here should be undertaken as a priority.

Although the World Bank says that massive efficiency improvements can be achieved in the short term through better coordination, logistics, and digitisation, it says that large-scale investment will also be needed over the next 10 years and that KTZ, ADY and GR will need public- sector support for the necessary capital spending. While all three generate respectable freight revenue, the report says, past debt obligations and unfunded government requirements prevent them from being able to meet the cost of infrastructure projects.

As the largest railway, KTZ generates around $US 2.5bn in annual revenue, but its debt burden means that it is unable to find commercial finance on competitive terms, relying on public-sector support through increases in direct government funding or loans from international financial institutions. ADY is in a similar position and relies for the most part on public-sector financing. It is Georgian government policy that GR should be financially independent and self-sustaining, but the report says a recent €500bn Eurobond issue “has topped its financial capacity for the foreseeable future” and that GR’s ability to fund its own capital needs is likely very limited.

Azerbaijan Railways (ADY) relies mainly on public-sector financing.

In November 2022, Azerbaijan, Georgia, Kazakhstan and Turkey signed a roadmap setting out the priority investment projects and other actions needed to improve the Middle Corridor between 2022 and 2027. In June 2023, Azerbaijan, Georgia and Kazakhstan agreed to create a joint logistics operator. Support and interest in providing investment and technical assistance has been confirmed by the World Bank itself as well as the European Union (EU), the European Bank for Reconstruction and Development (EBRD) and the Asian Development Bank (ADB), together with other multilateral development banks and bilateral partners.

In January, EIB Global, the arm of the European Investment Bank (EIB) dedicated to financing projects outside the EU, signed a Memorandum of Understanding (MoU) to co-finance sustainable transport projects with Kazakhstan and the Development Bank of Kazakhstan. In addition to other MoUs signed with Kyrgyzstan and Uzbekistan, which are building a new railway to China, EIB Global is providing a total of €1.47bn and this is expected to attract further capital, resulting in total support of €3bn. According to an earlier EBRD study, total investment of €18.5bn is required if the Middle Corridor is to reach its full potential. Meanwhile, ADB is finalising its own study and says that it stands ready to support the development of the Middle Corridor in all forms.

“Now is an opportune moment to make the Middle Corridor more competitive, expand its capacity, address inefficiencies, and reduce costs,” says Mr Charles Cormier, the World Bank’s regional infrastructure director for Europe and Central Asia. “A combination of short-term gains in efficiency through various measures, along with medium-term investment, will strengthen the functioning of the Middle Corridor and catalyse its potential.”