Executive Summary

Since the collapse of the USSR, a number of initiatives have embarked on the momentous task of rebuilding trade and transportation arteries between Europe and Asia across Central Asia and the Caucasus. The underlying logic has been two-fold: by reconnecting the landlocked new states of the region to their neighbors and historic trading partners, the heart of Asia can become a land corridor connecting Europe to Asia. This was the rationale behind the EU’s visionary but poorly implemented TRACECA project (Transport Corridor Europe-Caucasus-Asia). Since 1998, when the EU co-hosted a conference in Baku on the “Restoration of the Historical Silk Road,” the term “New Silk Road” has gradually gained currency in various projects. Indeed, the past several years have seen a competition of initiatives. The U.S. launched its New Silk Road (NSR) initiative in 2010, which nevertheless failed to get the endorsement from the Presidential level needed for its success. Three years later, China launched the Silk Road Economic Belt, itself part of China’s broader “One Belt, One Road” initiative. More recently, following Indian Prime Minister Narendra Modi’s visit to the region, India has also begun to formulate its own version of Eurasia’s emerging web of transport while Pakistan is pursuing a similar but as yet uncoordinated course. It is remarkable that the EU, which pioneered the concept of reopening continental transport a generation ago, is now absent from the list of leaders of this grand project.
Overland trade links offer great potential benefits, but the future corridors are still only in a formative stage. Approximately 90% of the cargo from Europe to China is transported by ship via the Suez Canal; most of the remaining volume is flown by air, without stopping in Central Asia. The overland corridors tra-versing Central Asia are shorter compared to sea routes, but are presently inefficient and, in some cases, relatively expensive. Several obstacles must be overcome in order to make overland transport corridors genuinely competitive. Notable among these are slow borders, but other causes for delay range from impediments in the legal, economic, tax, organizational, and banking sectors to issues with security and communications. Furthermore, there is to create integrated and competitive intermodal transportation and logistics networks across the region. The fact that Central Asia is landlocked compounds these problems, but the heart of the problem is that bottlenecks in one section of a given route end up affecting the entire route and those trading along it.
Thus, overland trade is still in its infancy. This is in spite of China’s increasing trading ties with Eastern and Central Europe, which would be particularly suitable for overland or intermodal transport. China’s trade with Eastern and Central Europe increased nearly tenfold from 2002 to 2013, from $6.8 billion to $58 billion, while its trade with all CIS countries together expanded from $16 billion to $153.5 billion during the same period of time.
Initiatives to ameliorate the situation have been many. But importantly, initia-tives from within the region itself have played a crucial role. All Central Asian states have formulated and begun to implement transport plans and strategies, which have resulted in improved connectivity within the region and new links to Afghanistan. The integration of road and rail networks stands out as particularly promising. Examples include the recently inaugurated Zhezkazgan-Beineu and Arkalyk-Shubarkol rail links in Kazakhstan, completed at a cost of $2.7 billion. The section between Shalkar and Beyneu alone will reduce the transport distance between China and Europe by more than 1,000 kilometers (625mi).
A second and equally important Eurasian land corridor is that which connects India/Pakistan with Europe and the Middle East. Traditionally, Central Asia played a significant role in this ‘southern corridor.’ while development of this route lags at least a decade behind the China-Europe corridor, its long-term potential may be even greater, given the striking demographic characteristics of the Indian Subcontinent as compared with China. Turkmenistan’s new road and railroad, the Pakistan port of Gwadar, Afghanistan’s ring road, and the TAPI pipeline are all elements in this future emerging and vitally important corridor.
In 2011, Kazakhstan completed construction of the 293km (182mi) Zhetygen-Korgas rail link, which connects southern Kazakhstan with the Chinese bor-der—thereby opening a second China-Europe link across its territory in addi-tion to the Alashankou border crossing. The construction of the $1.9 billion Angren-Pap rail link in Uzbekistan, which will connect Uzbekistan’s portion of the Ferghana Valley with the rest of the country, has been approved, and the 928km (576mi) Uzen-Bereket-Gorgan railway now links Kazakhstan and Iran via Turkmenistan.
To the West, opportunities for transit across the Caspian Sea have increased considerably. Kazakhstan has developed the port of Aqtau; Turkmenistan has substantially upgraded the port at Turkmenbashi; and Azerbaijan has built a major new port facility at Alat, south of Baku. Together, these three states have invested tens of billions of dollars in port development. Adding to this are the newly expanded Georgian ports of Poti and Batumi, and the projected port of Anaklia.
These developments dovetail with the Baku-Tbilisi-Kars railroad, which will connect the Azerbaijani and Georgian railroads directly to the Turkish rail net-work; and the Marmaray project, which is digging a tunnel beneath the Bospo-rus that will connect the European and Asian sections of the Turkish railroad system. When these two projects are completed, a high-capacity railroad link from the shores of the Caspian to the European Union will be operational. Fur-thermore, the existing railroad connections to Georgia’s Black Sea coast provide the opportunity to develop the maritime linkages to the Central and East European railroad system, particularly the Viking Railroad. This Railroad, forming a Baltic-Black Sea link, connects Lithuania with Ukraine via Belarus, a 1776km-run over 52 hours.
From a European perspective, a number of steps can be taken to further the development of continental trade. A key question is the placement of logistics hubs in the region. Being centrally located and bordering every Central Asian country including Afghanistan, Uzbekistan has considerable potential. And for future links between Europe and South Asia, Turkmenistan is also centrally located. Yet as European leaders consider the expansion of trade and transportation links, Kazakhstan occupies a unique position in at least three ways. First, by virtue of geography, Kazakhstan forms a one-country link between China and the Caspian Sea. Second, Kazakhstan is the Central Asian country that has gone the farthest in terms of deepening institutional cooperation with the EU, as evidenced by the signing of an enhanced EU-Kazakhstan Partnership and Cooperation Agreement this week. Third, in a regional context Kazakhstan offers an improving business environment crucial to the establishment of a trading hub: In the World Bank’s Doing Business 2016 ranking, Kazakhstan jumped 12 positions from 53rd the previous year up to 41st. If the EU were to take a more strategic approach to continental transport and trade, it will be natural to focus initially on the partnership with Kazakhstan. Importantly, this should not occur at the expense of a focus on other regional countries, but as a first step in what must ultimately be a regional effort that includes all Central Asian states, including Afghanistan.
The heady potential has fed the prevailing enthusiasm, but it has also caused all parties involved to underestimate the challenges that must be addressed before such potential can be achieved. Four issues in particular deserve greater attention.
While the program thus far has been dominated by governmental initiatives, future success will be determined as much or more by market realities, and will depend on the private sector. Therefore, the first challenge is to embrace and build upon the inevitable shift from activities initiated and funded by governments to market-driven activities in many spheres, which must exist for the project as a whole to succeed.
Second, it will be necessary to develop “soft infrastructures” along the route itself. Given its location and its status as the largest transit country between Europe and China, Kazakhstan is a likely and suitable locus for such activities, which should be developed both by Kazakhstan-based businesses and by Ka-zakhstan-Europe partnerships in many fields. The development of such busi-nesses will benefit shippers in the East and West and at the same time be essen-tial to garnering the local support within Kazakhstan, which will be instrumental if the New Silk Road is to be sustainable.
Third, the geopolitics of transport and trade must be fully understood and their importance acknowledged by clear-headed policies. It is in the interest of both Europe and Central Asia to ensure that no power gains the ability to monopolize or control the emerging East-West transport corridors. This means utilizing the existing road and rail links to Northern Europe via the Russian Federation. But it also calls for balancing that route with the emerging corridor to Europe via the Caucasus and Turkey. Failure to achieve such balance will imperil the success of the entire project.
Finally, to assure that both present and future phases of the project are informed by the insights to be gained from the analysis of longer-term developments on the Eurasian continent, and specifically the likely rise of the Indian sub-continent as a major economic force by the year 2040. Acknowledging this emerging reality, the European Union, Kazakhstan, and other Central Asian states should combine forces to advance the opening of the most direct and efficient transit corridors between Kazakhstan, Central Asia, and the Indian sub-continent. These should be understood as an essential but separate supplement to the Silk Road Corridor, and their creation should be a task for the transit countries themselves.
The successful development of continental trade requires close and effective coordination between the European Union and the transit countries of Central Asia. Such coordination must be based on their common interests as defined through careful analyses by both sides and by close consultation between them. Rather than define their common interests narrowly in terms of trade, the two sides should extend the inquiry into all matters that will be affected by the opening of Eurasian land corridors, including nearly all sectors of their economies, diversification, governmental institutions, national and regional security, and demography.