Middle Corridor: safe transportation of Kazakh oil to new markets

Middle Corridor
Collage: DALL-E; Midjourney

Against the backdrop of geopolitical turmoil, growing volumes of traffic along the Trans-Caspian International Transport Route (TITR) are attracting interest from global players. Transport giants are seeking to gain a foothold on new trade routes running through Central Asia-Caspian-South Caucasus, facilitating the movement of goods through these regions by increasing demand for maritime and logistics services. How cooperation between Kazakhstan and the UAE is developing in the field of oil transportation through the TITR, what logistics opportunities the North-South international transport corridor (ITC) represents for our country and what benefits participants receive from these transport arteries, read in the material of the Kazinform News Agency correspondent.

Kazakhstan and the UAE are expanding oil transportation across the Caspian Sea

Cooperation between Kazakhstan and the UAE in the field of oil transportation across the Caspian Sea from Kazakh ports to Baku (Azerbaijan) is based on the business of AD Ports Group in Kazakhstan established in 2023, agreements between AD Ports Group and the State Oil Company of the Republic of Azerbaijan (SOCAR) and the intensification of UAE activities in Georgia.

On October 18, 2023, Azerbaijani SOCAR and SAFEEN Group, which is part of the maritime transport and operations cluster of AD Ports Group (UAE), signed a memorandum of understanding on cooperation in the maritime and shipping sectors in the Caspian Sea, including the delivery of oil and petroleum products, infrastructure development and cargo transportation. This news was announced by official sources of SAFEEN Group.

Following this, on November 26, AD Ports Group, in collaboration with the national shipping company “KazMorTransFlot” (KMTF), announced the acquisition for $35 million and the start of operation of two modern vessels designed to transport Kazakhstan’s oil across the Caspian Sea and their operation through a joint venture "Caspian Integrated Maritime Solutions". The oil tankers were named “Liwa” and “Taraz”, after ancient cities in the UAE and Kazakhstan, respectively.

At the same time, at a ceremony in Aktau, it was stated that “the vessels will operate along a strategic route through the Caspian Sea, performing the function of shuttle tankers transporting Kazakhstan oil to Azerbaijan, and contributing to the diversification of Kazakhstan’s oil transportation routes.”

"This cooperation is being implemented in accordance with the instructions of the President of the Republic of Kazakhstan, Kassym-Jomart Tokayev, to create alternative routes for transporting Kazakh oil. Such cooperation will allow efficient and safe transportation of Kazakhstan oil across the Caspian Sea for further shipment to international markets and is the first step of long-term cooperation with AD Ports Group,” recalled KMTF General Director Aidar Orzhanov.

Middle Corridor
Infographics: Arman Aisultan/ Kazinform

Kazakhstan plans to send 1.8 million tons of oil via the Caspian Sea to the BTC

Since 2022, Kazakhstan, which transports the main volumes of oil through the territory of the Russian Federation via the Caspian Pipeline Consortium (CPC) oil pipeline, due to the difficult geopolitical situation, periodically faces problems with pumping oil through the CPC. This prompted Kazakhstan to send part of its oil by tankers to Baku starting in 2023 and then via the Baku-Tbilisi-Ceyhan (BTC) oil pipeline to Europe. We are not talking about large volumes of transit. Thus, in 2023, about 1.4 million tons were transported; in 2024, according to experts, the volume could reach 1.7-1.8 million tons.

However, already in 2025, by agreement with SOCAR, Kazakhstan can send 2.2 million tons through the Caspian Sea to the BTC. By this time, a settlement of the issue of Kazakhstan’s use of the Baku-Supsa oil pipeline, which has been idle since 2022, with a capacity of 5 million tons/year, may also arrive. Now the balance between volumes and tariff policy is being discussed here. Kazakhstan has declared its readiness to supply about 3 million tons of its oil per year to this oil pipeline, which runs to the Black Sea port of Georgia.

Thus, in total, with the possible coordination of all commercial issues, Kazakhstan can send over 5 million tons of oil per year through Baku from 2025 (for comparison, more than 50 million tons of Kazakhstan oil per year are transported through the CPC), and technically it is unlikely to significantly exceed this indicator.

New trade routes between the Middle East and Central Asia

Kazakhstan regularly emphasizes the importance of developing the transit route for Kazakhstan oil through the Caspian Sea and the infrastructure of the Trans-Caspian International Transport Route, or the so-called Middle Corridor. Thus, on December 2, 2023, in Abu Dhabi (UAE) in the presence of the President of Kazakhstan, Kassym-Jomart Tokayev, AD Ports Group (51% of shares) signed an agreement with “Kazakhstan Temir Zholy” (“Kazakhstan Railways” JSC - 49% of shares) on the creation of a joint venture to improve railway communications, maritime transport, develop operations in the ports of Kazakhstan, accelerate digital transformation and connectivity in Central Asia.

In fact, AD Ports Group received carte blanche to create a regional logistics hub, and the regional CEO of AD Ports, Abdulaziz Zayed Al Shamsi, announced an ambitious goal - to create new trade routes between the Middle East and Central Asia through the Caspian - South Caucasus - Black Sea, simplifying travel goods through these regions and impacting the global maritime industry by increasing demand for maritime and logistics services.

Behind the seeming ambition of this task is the real, operational work of AD Ports not only in Kazakhstan, but also in Azerbaijan, which involves regular negotiations with SOCAR. Along with this, there are volumes in Georgia, where AD Ports bought a 60% stake in the Tbilisi dry cargo port in March 2024 for $16.5 million.

“AD Ports Group, with assets in Pakistan, Spain, Jordan, Egypt, Congo, Brazzaville, Angola, Uzbekistan, Kazakhstan, Georgia and the UAE, is well positioned to benefit from today’s challenging global markets,” said Mohamed Juma Al Shamisi, summing up results of the first quarter of AD Ports activities in May 2024.

Middle Corridor
Photo credit: Midjourney

It is noteworthy that the company’s revenue during this period amounted to $1.06 billion, which is a twofold increase compared to the first quarter of 2023.

Experts believe that the UAE, represented by the AD Ports Group and its subsidiaries, will seek to increase its participation in trade operations for the transshipment of goods through the TITR, with oil occupying one of the priority shares in the list of goods along with transit dry cargo and vehicles from China.

AD Ports, during negotiations in Baku on February 17, voiced proposals to the government and to SOCAR on the possible replenishment of the fleet of ships of SOCAR and the “Azerbaijan Caspian Shipping Company” and on assistance in the development of port infrastructure for the functioning of regional logistics centers. SOCAR representatives reported that the initiatives were considered.

It is worth recalling that in August 2023, the Kazakhstani companies “Semurg Invest” and “AD Ports Group” (UAE) signed an Agreement on the construction of a grain terminal and a multifunctional sea terminal Sarzha in the port of Kuryk, which is included in the list of the largest infrastructure projects in Kazakhstan and is of great interest to foreign investors.

At the same time, the head of “Semurg Invest”, Nurzhan Marabaev, emphasized that the full implementation of the Sarzha project in Kuryk will increase the throughput of the Trans-Caspian international transport route by 10 million tons per year (this figure is the planned transshipment capacity at Sarzha - editor's note), and the head of AD Group, Abdulaziz Zayed Al-Shamsi, expressed interest in cooperation with the port of Kuryk to develop export routes in Central Asia.

North-South ITC opens up great opportunities for Kazakhstani exporters

At the same time, Kazakhstan must find a balance in relations with its northern neighbor - the Russian Federation, with which it has the world's longest land border and an interconnected economy. Kazakhstan is participating in consultations on the development of the North-South ITC, initiated back in 2000 by Russia. Northern European countries have withdrawn from the project of this ITC, but Russia is currently counting on developing it at the expense of its CIS partners, as well as Iran (the western branch of the North-South corridor) and Pakistan and India (the eastern branch of this ITC). As for the eastern section, it covers countries such as Kazakhstan-Uzbekistan-Afghanistan-Pakistan/India. This North-South branch is not considered for the transportation of oil cargo, but rather may be useful for the transportation of food and dry goods.

Middle Corridor
Photo credit: Midjourney

Thus, at the beginning of May 2024, the Russian company “RZD Logistics” sent from the Yuzhnouralsky transport and logistics center the first full-fledged agricultural express with oat flakes and cereals from Russia to India along the eastern branch of the North-South ITC - by rail through the territory of Kazakhstan to the Sarakhs station (Turkmenistan), from where the containers were reloaded onto the 1435 mm gauge and proceeded through the provinces of Iran to the port of Bandar Abbas and then by sea to the port of Mundra (India).

It was assumed that this initiative, which was launched in the spring of 2023, could open up great opportunities for Kazakh exporters - delivery through the Caspian Sea from Kuryk to Iranian ports of dry and general cargo with further transportation to Chabahar, UAE ports - Khalifa, Fujairah, and further to all ports of India, Pakistan, the east coast of Africa and even to European countries. At the same time, the possibility of delivering goods to European countries was not excluded.

In the difficult geopolitical processes in the post-Soviet space, Kazakhstan and Azerbaijan demonstrate determination in realizing their transport and logistics capabilities. As a result, both countries are currently actively involved in both TITR and North-South projects, and will take steps to develop them, considering the international situation and their own national interests.

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