Kazakhstan aims for larger share of China-Europe transit trade

Kazakhstan railroad

Kazakhstan is in the middle of an ambitious railway modernization project that the Kazakh state hopes will upgrade its status as a transport hub in the middle of the Eurasian landmass.

All of the Central Asian nation’s 302 terminals are to be overhauled and 1,500 kilometers of new rails will be laid by 2020, according to the Transportation Ministry. These investments are part of a $60 billion plan to overhaul the country’s existing transport infrastructure.

The modernization of Kazakh railways is taking place within several different frameworks. The Customs Union that has existed between Russia, Belarus, and Kazakhstan since 2010 recently formed a common Transport and Logistics Company, set to be launched in early 2014, and the three former Soviet states signed agreements focusing on the harmonization of railroad regulations. Kazakhstan hopes to earn $5.3 billion from the Company by 2020.

The states also agreed to a single flat rate per kilometer for containers moving between Europe and China along the Union’s railroads, and hope to develop and integrate the railways of Kyrgyzstan, a candidate for Customs Union membership.

Yet, there is also a competitive element to Kazakhstan’s efforts to link its railroads to China. The Kazakh government has been quick to point out that traffic travelling along a new route from Chongqing in China to Duisburg, Germany would reach its destination in 15 days, as opposed to the 18 to 20 days it takes for goods traveling to Europe from China along the Trans-Siberian railway. Beijing’s ambitious efforts at the modernization of Western China, particularly the establishment of highways and railways in Xinjiang province, would be a boon for Central Asia’s transport infrastructure, which can move goods between Europe and Asia faster than sea routes.

Kazakhstan’s trade volume with China reached $24 billion in 2012, with the volume projected to reach $40 billion by 2015. Central Asia’s trade with the Middle Kingdom is now higher than trade with Russia, and joint Sino-Kazakh projects supplying Beijing with oil and gas continue to grow. The chance to divert Chinese trade with Europe through Central Asia instead of through Siberia or the Russian Arctic could play an important role in shifting Kazakhstan away from dependence on natural resource commodities, which formed 38% of GDP in 2011.

The project is ambitious, and the high costs of modernizing creaking Soviet-era infrastructure linking broad swathes of the enormous, sparsely populated country could delay parts of the project. That has been the case with plans to create a high-speed rail linking Astana, the capital, with Almaty, the former capital and largest city.

Cost problems are also a matter of concern for Kazakhstan’s national railway company, Kazakhstan Temir Zholy (KTZ), as it prepares to makes its first public offering as part of the modernization plans. KTZ employs 1 in 54 workers in Kazakhstan, as the company also operates schools and is required to perform a variety of essential social functions in towns across the country that depend on railways.

Furthermore, hopes to establish Kazakhstan as the hub of a new silk road at present seem far-fetched: only 0.05% of the 100 million tons of freight that moves between Europe and China actually passes through Kazakhstan. Nonetheless, the further development of Kazakhstan as a transportation center would allow the Central Asian state to capitalize on the strength of its location, playing to both Russia’s plans for a Eurasian trade bloc and China’s desire to move its manufactured goods to westward with more efficacy.

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Categories: Central Asia, Economics

Author:Luke Rodeheffer

Luke is an incoming MA student at Stanford’s Center for Russian, Eastern European, and Eurasian Studies, where he is the recipient of a Foreign Language and Area Studies scholarship for Turkish. Luke was previously a Fulbright fellow in Ukraine and research assistant at Koç University in Turkey. In addition to security analysis and political risk assessment focusing on the former Soviet Union and Middle East, he enjoys hiking and writing. He has previously contributed to a variety of publications, including Business Insider, The Diplomat, The Interpreter, and the Middle East Monitor. Follow him on Twitter at twitter.com/lukerodeheffer.

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  1. Kazakhstan aims for larger share of China-Europe transit trade … | Kenneth Carnesi - December 14, 2013

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