The Growing Role Of The Middle Corridor In Global Supply Chains
With geopolitical tensions causing organisations to rethink their supply chains, the Middle Corridor (MC) has seen a considerable boom. It is the shortest route from China’s Pacific coast to Europe and begins in Türkiye before passing through the Caucasus region of Georgia, Azerbaijan and the Caspian Sea. Using rail and road respectively, the final destination is China, after stopping through Turkmenistan, Uzbekistan and Kyrgyzstan.
The MC is the most significant factor in the efforts to recover the ancient Silk Road. Sparked by rising popularity, regional countries show a great attraction towards it. For example, Kazakhstan is the largest landlocked country in the world and thus retains a vital role as a transit country due to its strategic demographic between Europe and Asia.
The entire trade route is deemed more beneficial for the economy than the more popular Northern Corridor that runs across Russia. Being 2000km shorter, the MC is faster by approximately 15 days, coupled with more favourable weather conditions. Plus, there are opportunities for the cargo traffic in Asia so that stock can reach the Middle East, North Africa, and Mediterranean region by benefiting from Türkiye’s port connections.
A necessary alternative
The MC gained traction nearly two years ago following the outbreak of the Russia-Ukraine war. The immediate disruption to the global supply chain meant that a portion of rail traffic urgently needed to be diverted away from the Russian route.
Asian countries are still seeking geopolitical and geo-economic independence to veer operations away from the conflict. China and its railways were against prioritising the MC at that time, preferring the Northern route.
However, this situation appears to be evolving as China are now expressing an interest to invest and enhance the corridor for rail freight services to Europe.
An increase in demand
Another reason for the corridor’s increased attention is due to the volume spike of cargo. Over the first 7 months of this year, there has been an 86% year on year boost in the volumes through Kazakhstan. Expansion of the railways has been necessary to accommodate the soaring demand.
Construction has since begun on a new rail logistics terminal in Almaty, Kazakhstan and on China’s Xi’an Dry Port. Recent meetings between Kazakhstan and China resulted in development plans to advance transport and infrastructure of the Middle Corridor. These extensions are crucial to Xi Jinping’s Belt and Road Initiative.
Similarly, work has begun in progressing Uzbek rail markets. Investing in transhipment capacity, like in Uzbekistan, will enable the pursuit of future evolution to interconnect the world.
These plans to invest into the MC are already showing signs of success, but due to extensive costs of construction, there is a constant worry regarding funding. China would be able to cover the costs unilaterally, however it is currently not one of their top priorities.
A permanent shift?
It is evident that geopolitical tensions have a trickle-down effect on the movement of global trade. When war breaks, shipping routes must adapt, so more money must be invested into the diversions.
The Russia-Ukraine war has shone a light over the Middle Corridor which is now being recognised as a more efficient trade route. What long-term impact this goes on to have on other routes across the globe remains to be seen.
If you have any questions on your supply chain, don’t hesitate to contact a member of the team.