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2023年6月2日

Mark O’Neill EJ Insight

China opens new railway to Europe – without Russia

In March, a train from Jiaozhou in Shandong province carrying new electric vehicles from China reached Koper, the largest coastal city in Slovenia, after a journey of 13,000 kilometres. It was the first train on this route from China to Europe – without passing through Russia.

Russia’s invasion of Ukraine in February 2022 has become an economic catastrophe for the country. This new route is the latest example. The development of such routes means that Russia loses millions of dollars in transit fees.

Because of Western sanctions against Russia, many insurers and freight forwarders are unwilling to cover cargoes that pass through Russia, including the Black Sea. This has forced companies to seek alternative routes to carry goods from China to Europe and back.

The Jiaozhou-Koper train crossed northern China, including Xinjiang, then Kazakhstan to the port of Altynkol. From there it was taken by sea to Alat in Azerbaijan, then to the Black Sea port of Poti in Georgia. From there it went via Turkey to Koper.

Such routes fit perfectly with the Belt and Road strategy of President Xi Jinping and his desire to improve relations with the Central Asian states through which they will run. He hosted a summit with leaders of the five states in Xian in the middle of May. Xi announced 26 billion yuan in financial support and grants for them.

“In the longer term, China supports construction of a cross-Caspian Sea international transport corridor, and would strengthen construction of transport hubs of China-Europe freight train services,” Xi said.

This corridor connects Turkey to China via Georgia, Azerbaijan and the Caspian Sea through Kazakhstan or Turkmenistan, Uzbekistan and Kyrgyzstan.

Kazakhstan Temir Zholy (KTZ), the state railway of Kazakhstan, has been enthusiastically promoting its country’s role in this route. It has completed the trans-Kazakhstan railway. In March this year, it agreed with its Chinese counterpart construction of a terminal on the dry port of Xian, to increase transport of goods from China to Kazakhstan.

Like China, Kazakhstan wants to reduce its transport dependence on Russia. Like Ukraine, it has a large Russian-speaking population. Many fear that Vladimir Putin could use that as an excuse to invade Kazakhstan, in the name of “protecting Russophones”.

Before the invasion, Kazakhstan exported goods to the world market via the northern rail route through Russia. By connecting with China’s rail network and cross-Caspian corridor, it can export more, sell more easily to the European market and avoid dependency on a single route.

In March this year, the national logistics operators of China, Kazakhstan and the European Union signed their first memorandum of co-operation to facilitate cross-border trade and an international logistics corridor for e-commerce.

On February 25 this year, the EU adopted its 10th set of sanctions against Russia, including “a ban on the transit of civilian and military goods through Russian territory”. The big winner is Turkey, since goods will have to be carried on its railways.

Without the war, the China-Russia route is faster and able to carry heavier volumes than the cross-Caspian corridor. But all the countries on the route are working hard to improve it.

On May 18-19 this year, representatives from the European Union and Central Asia held their second economic forum in Almaty, Kazakhstan to discuss the Trans-Caspian Route. They discussed infrastructure projects and the digitalisation of customs and trade processes on the route.

The Trans-Caspian International Transport Route (TITR) is an association with its headquarters in Astana, capital of Kazakhstan, with members from that country, Turkey, Azerbaijan and Georgia. It was founded in February 2014.

According to Asstra.com, a transport newsletter based in Zurich, each year this route carries 10 million tonnes of cargo, including 200,000 containers destined for Europe.

“It is one of the key routes utilised in the Belt and Road Initiative. It has an important role in the economic development of China and accounts for a large share of the region’s cargo traffic. The Caspian states are extensively working to improve infrastructure, build hubs and free trade zones, and create ‘ports of the future’ to attract Chinese transit,” it said in a report in May this year.

“A range of bottlenecks on this route shall be addressed in order to improve delivery timing. For TITR countries, improvement of infrastructure capabilities is a top priority and will help ensure efficient, high-quality and well-coordinated work throughout the entire logistics process,” it said.

How long will the Russian invasion continue? As long as it goes on and Vladimir Putin remains in power, Western sanctions will remain in place. This gives strong economic incentives to develop the cross-Caspian corridor route.

Even after the war, the West and Ukraine are likely to demand reparations worth billions of dollars for the human and physical devastation Russia has inflicted. This will further poison relations and make full resumption of normal China-EU railway trade via Russia more difficult.

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