The Baltic Course  

Kazakhstan - A link in the East-West transit chain

By Mikhail Tuzhikov, Transport Rossii

  The Balts have developed an increasing interest in Kazakhstan in recent years.  This June a large group of Baltic businessmen went to Kazakhstan for the 4th international conference TransEurasia 2002. The Baltic states, as well as CIS states want to have their share of transit between the East and West on the rapidly growing market of transportation services

How can they become partners, and not competitors in the given situation? What arrangements should be made to form a common transportation area, avoiding serious transportation and transit problems at the same time? Which slice will go to the Baltic states when the promising pie of transportation is cut in pieces? Since forgotten times the Baltic states have always been a bridge between the East and the West. For this reason, when Estonia, Latvia and Lithuania found themselves geopolitically positioned in the West in the blink of an eye, few in the transportation industry initially realized that a niche for handling multi-million dollars worth of transit cargo from Asia to Europe had now opened up for.

"Forecasts of developments in the global economy suggest that in the beginning of the next century, key flows of money and goods will focus on the triangle made up by the U.S., Europe and the Far East. Our top priority task will be to make full use of Russia's advantageous geographical position as a natural transit bridge between Europe and Asia."
Russian President Vladimir Putin, Moscow, December 1999, speaking at the Russian transport at the turn of century scientific conference

This was understood at a much later time. Back then, after restoring independence in 1991, the Baltic states saw an upsurge in a 'new' industry - transit. This was due to several reasons. First, Russia lost the largest ports in the Baltics and the need to deliver goods to the international market was objectively satisfied by means of reloading cargo through Baltic state ports. Secondly, the crises in the Russian economy objectively required that Russian companies should make their profits from exporting fuel and raw materials and importing food and consumer goods. And, thirdly, the Baltic response was sufficiently effective and prompt. Baltic ports and railways introduced more attractive terms for the transportation of goods for Russian and foreign carriers working in the transit business.   

In the presence of new economic conditions, the former Soviet republics started joining forces and together looked for an alternative to traditional world transit arteries. To this end, in 1998 the Customs Union members - Russia, Belarus, Kazakhstan and Kyrgyzstan - signed agreements on forming a transportation union and introducing joint terms for the transit and delivery of goods subject to customs control in the member state territories. In 2000 this union was transformed into a qualitatively new organization - the Eurasian Economic Community (EurAsEC) comprising of Russia, Belarus, Kazakhstan, Kyrgyzstan and Tadjikistan. This May, Ukraine and Moldova joined the Community as observers. The Community members are working on optimum routes for cargo transportation through their territories to mutual benefit.

Kazakhstan, Kyrgyzstan and Tadjikistan lie on main transportation routes linking Russia with Central Asian nations, China and Afghanistan. These nations in their turn use Russia's territory for the transit of their cargo to Belarus, Ukraine, Georgia, Slovakia, Turkey, Italy, the Baltic states and a number of other European countries.

Kazakhstan, while having a large amount of its own foreign trade cargo (oil, metals, ferrous alloys, grain, cotton), has no direct outlet to world oceans and therefore is in strong need for transit services by neighboring countries. Thus, it uses the Russian territory to get to the Baltic Sea ports, reaches the Black Sea ports through the Caspian and the Caucasus and the Indian Ocean through the Caspian and Iran. It should be noted that Lithuania which noticed such a multitude of options early on, has made impressive achievements in attracting Kazakh cargo, leaving Estonia and Latvia quite behind.  

Kazakhstan's serious intentions for organizing cargo transit are evidenced by large investments in the renovation and development of its road network. Current national priority projects at this stage include the renovation of the Almaty-Bishkek and Almaty-Astana roads allowing for further travel to Yekaterinburg and Moscow as well as the construction of roads in western Kazakhstan. The Kazakhstan railways Kazakhstan Temir Zholi is ready to put container trains on the Urumchi-Alamty and Urumchi-Moscow sections of transcontinental routes.

Another major transit transportation project involving the Kazakh road network is the Europe-Caucasus-Asia latitudinal transport corridor (TRACECA). The international agreement on this project was signed by representatives from the participating countries in September 1998. The project is financed by the EU and provides for development of transportation from Europe via the Black Sea and the Caucasus to the Caspian region and Asia, by-passing Russia.

The Kazakhstan Transportation and Communications Ministry estimates the transit potential of their country at 2 billion US dollars annually. At present the country actually gets 850-900 million US dollars a year from transit. Latvia alone stands to receive over 300 million US dollars in annual revenues by attracting Kazakh cargo to its ports.

TRACECA program receives financing from two directions - technical aid (training of experts, etc.) in the amount of 30 million euros and investment projects towards rehabilitation of transport infrastructure in the amount of 25 million euros. Total investments reach 270 million US dollars. The key TRACECA objective is to create conditions for subsequent transportation of oil and oil products as well as cotton to destinations outside the Caucasus in Europe and farther on.

Since isolating Russia from this project is objectively counterproductive, the following options of involving the Russian transportation system are being considered: 

  • to create transport directions linking transport networks of Russia and Central and East Asian countries (to Indian Ocean ports) via Azerbaijan, Kazakhstan, Turkmenistan, etc. territories, including use of ferry services across the Caspian;
  • to link up the Eurasian transport connections system with a transport route between the Caspian and the Black Sea via the Volga-Don channel;
  • to step up work in using existing railway routes for the transportation of cargo and passengers across the Russian territory along Transsib and Turksib routes by T and T railways;
  • to expand practical work in the transportation of Kazakh and Turkmenian oil via the Makhachkala port, in preparations for transit of Uzbek cotton through Kazakhstan (Aktau), Astrakhan and farther on to Europe. 

Source: Euro-Asian Transport Corridors

There are also other options: for foreign trade purposes it is technically quite possible to link the Baltic region via Russian railways through Kazakhstan, Turkmenistan, Iran and Pakistan to the Indian railway system. There's also an international project to set up a railway main from South-East Asia (Singapore) through Malaysia, Thailand and Vietnam with the subsequent outlet in Beijing and further on to Europe.    

Transit countries reap benefits on several levels. First of all, in the form of direct revenues as payment for transportation and associated services. Secondly, as foreign investments in the development of transport infrastructure and technologies. The third advantage lies in improved conditions for national foreign trade and domestic transport on the account of developed communications along transit corridors. Other obvious benefits include the opening of new companies, more jobs, regional development. And a factor of no less importance - in reality a transit country builds for itself international prestige as both state consignors and country partners running the transport corridor prefer not to  mess up relations. 

Thus, Russia, Kazakhstan, and the Baltic states have all reasons for optimism. Moreover, most of the forecasts expect the global trade early this century will accelerate much faster than the global production. At this, countries with transit routes of Eurasian transport connections running through their respective territories will get not only significant revenues but also be able to strengthen their positions considerably in the global economic an political systems.