Kazakhstan’s transit potential

1. Strategic Location: Positioned at the heart of the Eurasian continent, Kazakhstan is a crucial link for Asia-Europe transit traffic. The shortest routes from Europe to Central Asia, China, and Southeast Asia pass through our country. The notable growth in rail cargo transportation with China accentuates its strategic importance.

 

2. International Railway Transport Corridors: Northern Corridor, Southern Corridor, Central Asian Corridor, North-South Corridor, and Trans-Caspian International Transport Route: These corridors exemplify Kazakhstan’s commitment to enhancing regional connectivity. Each corridor serves as an important link for trade and transport, promoting economic growth not only in Kazakhstan but also in the connected regions.

 

3. EBRD Assessment: The European Bank for Reconstruction and Development (EBRD)’s endorsement of The Central Trans-Caspian Network (CTCN), traversing through southern Kazakhstan, as the most sustainable option for forging links between Central Asia and Europe, highlights its sustainability and efficiency. Furthermore, plans to build and overhaul extensive railway networks, including a dry port near the Chinese border, reflect a robust commitment to improving transit facilities. EBRD has estimated that an investment of around €18.5 billion ($20 billion) is required for these projects in Central Asia, which underscores their magnitude and potential impact. Under a business-as-usual scenario, transit container volume on the CTCN could increase from 18,000 TEUs in 2022 to 130,000 TEUs in 2040. If investment projects and soft connectivity measures are implemented to achieve a free-flow transit time of 13 days, transit container volume could increase to 865,000 TEUs by 2040 on the CTCN.

 

4. Major projects: To date, the following major infrastructure projects are in progress (the map is attached at the bottom of the document):

 

• Completion of the Dostyk-Moiynty Second Tracks:

• The construction of the second line at the 836-kilometer-long Dostyk-Moiynty section in the Karaganda region began in November 2022. The completion of the project is scheduled for the fourth quarter of 2025.
• The total cost of the project is 543 billion tenge ($1.17 billion).
• The general contractor for the construction is “Integra Construction KZ” LLP.
• This project aims to enhance the volume of transit traffic between China and Europe. It includes increasing the capacity by up to five-fold from 12 to 60 pairs of trains per day and boosting the transportation speed to 1500 km/day from the current 800 km/day.
• During construction, 419 engineering structures (5 large bridges, 87 small and medium-sized bridges, 288 culverts, 14 road overpasses) as well as energy and communication facilities will be built.
• The total economic effect of this project will increase budget revenues by $8.8 billion over 20 years.

 

• Construction of the “Bakhty – Ayagoz” Railway Line:

• On December 21, 2023, the construction of a new 272-kilometer-long Bakhty-Ayagoz railway line began in the Abai region. The completion of the project is scheduled for 2027.
• The project is intended to unload two existing border railway stations at Dostyk-Alashankou and Khorgos-Altynkol, and increase the throughput capacity of the border crossing points of Kazakhstan and China from 28 to about 48 million tonnes.
• The construction of the crossing and the railway line will cost over 320 billion tenge ($693 million).

 

• Almaty Station Bypass Railway Line Construction:

• The construction of the Almaty Station Bypass Railway Line began on November 14, 2023. The completion of the project is scheduled for 2024.
• The project covers the construction of a new railway line between Zhetygen, 50 km north of Almaty, and Kazybek Beka, 90 km northwest of the city centre.
• The execution of this project is expected to reduce the load on the Almaty hub by 40% and decrease the goods delivery time to 24 hours.
• The project includes the construction of 130 km of new tracks, of which 77 km are the main track, three switches, 13 bridges, 5 rail overpasses, and one road crossing, requiring 228,000 domestically manufactured sleepers, and 16,000 tonnes of rail.
• The volume of private investments in the project amounts to
  6 billion tenge ($201.3 million).

 

• The new Darbaza-Maktaaral Railway Line.

• The construction of a new railway line, Darbaza-Maktaaral, spanning 152 km in length, commenced in the Turkestan region on November 27, 2023. The completion of the project is scheduled for 2025.
• The new line, connecting Kazakhstan and Uzbekistan, aims to alleviate congestion at the Saryagash station, integrate the Maktaaral region with the main rail network, and enhance transit connections to Iran, Afghanistan, Pakistan, and India.
• The cost of the project is estimated at 250 billion tenge
  ($523.1 million).
• According to EBRD, this new railway line will decrease transit times for regional trade, partially relieve the pressure at Saryagash railway crossing with Uzbekistan, and increase corridor capacity 2.5-fold.

 

• Aktau Port “Container Hub” Feasibility Study:

• The development of the technical and economic justification (TEJ) for the “Construction of a container hub based on the Aktau port” began in April 2023. The work on the financial and economic section is nearing completion. The completion of the document’s development, along with obtaining the conclusion of the state examination, is expected in March-April 2024. The completion of the container hub construction is planned for 2025.
• Currently, the container handling capacity of the Aktau port is 70,000 TEUs. After the upgrade of the transshipment yard and equipment, it is planned to increase it to 120,000 TEUs. With the completion of the construction of the container hub, this figure will rise to over 300,000 TEUs.
• The construction of the container hub will enable the transportation of all types of cargo by containers. Already, the export of non-ferrous metals is being carried out through the Aktau port using containerization. Containerization reduces cargo handling time to just one day, whereas transshipment onto a vessel can take up to 4 days, and considering weather conditions, it can even take a week.
• Investments in the project amount to 13.7 billion tenge
  ($28 million).

 

5. Dynamics for 2022-2023 (Transit and Cargo Transportation Growth): The significant increase in cargo transportation and transit, including container shipments, highlights the growing demand for Kazakhstan’s transit routes. In particular:
   • In the first 10 months of 2023, the volume of freight traffic in Kazakhstan by all modes of transport amounted to 725.6 million tonnes.
   • Rail cargo transportation. In the first 10 months of 2023, rail cargo transportation reached 246 million tonnes, an increase of 3% compared to the same period in 2022. It’s projected to hit 300 million tonnes by the end of 2023.
   • Rail cargo transportation between Kazakhstan and China amounted to over 23 million tonnes in 2022. In 2023, this figure has increased by another 22%.
   • Road transport. Transportation by road transport reached 184 million tonnes of cargo in 2023.
   • Export shipments. The railway has been meeting Kazakhstan’s export needs effectively, with export shipments totalling 70.7 million tonnes, an 8.5% increase since the start of 2023.
   • Transit transportation. Transit transportation increased by 19% from 2022 to 22.5 million tonnes in 2023. Kazakhstan aims to elevate transit cargo volumes to 35 million tonnes by 2029.
   • The total capacity of Aktau and Kuryk seaports is 21 million tonnes per year. Seaports have the possibility of transshipment of oil, grain, and general cargo and provide seamless ferry transportation of goods in wagons and motor vehicles. The merchant fleet consists of 20 vessels.

In the first 11 months of 2023, the volume of traffic through seaports amounted to 6.5 million tonnes, which is 10% more than in 2022. Export transportation of Kazakhstan’s goods to European countries is predominant.

 

6. Growing significance of the Middle Corridor: Today, the Trans-Caspian International Transport Route (TITR), also known as the Middle Corridor, has emerged as a significant alternative to existing routes. In particular:
   • The volume of cargo transportation along the Trans-Caspian International Transport Route increased by 2.5 times to 1.5 million tonnes in 2022. The TITR’s total throughput capacity is 5.8 million tonnes of cargo annually. The volume of container traffic was 33,000 twenty-foot equivalent (TEU) containers in 2022, while the current potential of the Middle Corridor is 80,000 TEU containers.
   • For the first 9 months of 2023, the volume of cargo transportation has increased by 88% and amounted to 2 million tonnes (the first 9 months of 2022 – 1.1 million tonnes).
   • Kazakhstan’s strategic goal is to increase the capacity of the Middle Corridor up to 10 million tonnes by 2030.
   • Kazakhstan signed roadmaps with Azerbaijan, Georgia, and Turkey to address “bottlenecks” and develop the Middle Corridor by 2027.

 

7. Delivery Time Reduction: The reduction in delivery times for goods, with further improvements planned, is a testament to the efficiency and effectiveness of Kazakhstan’s transit routes. For instance, the transit time along the Trans-Caspian International Transport Route was reduced from 38-53 days to 18–23 days. It is planned to reduce this period to 14–18 days in 2024, including within the territory of Kazakhstan – from 6 to 5 days.

 

8. Joint Railway Enterprise formed by Kazakhstan-Azerbaijan-Georgia: Kazakhstan Temir Zholy national railway company, Georgian Railway and Azerbaijan Railways inked an agreement to create a joint venture to develop multimodal service on the Trans-Caspian International Transport Route on October 26, 2023 in Tbilisi. A new company named Middle Corridor Multimodal Ltd. has been registered at the Astana International Financial Centre in November 2023. The company will provide services on a one-stop-shop basis, guarantee delivery times, and pursue a coordinated policy for developing multimodal service on the China – Europe/Türkiye – China route.

 

9. Upgrade and modernisation of infrastructure: Ambitious projects like Dostyk – Moiynty and others signify a major push towards expanding and modernising the rail network. Purchasing new locomotives and cars, and upgrading existing networks, will significantly enhance transit capacity and efficiency. Furthermore, emphasising the development of multimodal transport, including road and rail, aligns with the global trend towards versatile and efficient transit solutions.

 

10. Cooperation with Europe: Efforts are ongoing to engage European transport and logistics companies. For instance, in June 2023 the German company “Rhenus SE” and Kazakhstan’s railway company “KTZ” have signed a memorandum of understanding for joint work to increase cargo flow on the Trans-Caspian International Transport Route. The document provides for interaction in the development of logistics centers, increasing the terminal capacities of the ports of Aktau and Kuryk. In addition, on June 1, 2023, the Lithuanian company “LTG Cargo” joined the International Association “Trans-Caspian International Transport Route”. This opens up new opportunities for diversifying cargo flows from Kazakhstan to Lithuania and vice versa. Currently, negotiations are underway between the Ministry of Transport of Kazakhstan and Austria’s “Rail Cargo Group” for the company to join the TITR Association and open a representative office in Kazakhstan.

 

11. Simplification of Transit Procedures: The Kazakh Prime Minister’s directive to simplify registration and goods passage processes will likely expedite transit, making Kazakhstan more attractive for international trade.

 

Green Energy Initiatives (KZ-AZ-UZ): Kazakhstan has signed an agreement on November 15, 2023 with Azerbaijan and Uzbekistan to create a project to export green energy to Europe. Parties agreed to prepare technical specifications and establish a joint venture for the export of eco-friendly energy at a meeting in Baku dedicated to the prospects for exporting electricity from Central Asian countries to Europe through Azerbaijan. This is a strategic move, leveraging Kazakhstan’s renewable energy potential and fostering sustainable development. This not only boosts Kazakhstan’s economy but also contributes to environmental sustainability by promoting greener transit options and reducing transit times.