Why the 8th Trans-Caspian Forum Was Important

by Amb. (ret.) Richard E. Hoagland 

The Caspian Policy Center’s 8th Annual Trans-Caspian Forum was important because it brought international attention to the emergence and current status of the Middle Corridor during a period of dramatic and historic change. In his opening remarks, Caspian Policy Center (CPC) President, Efgan Nifti, detailed the special importance of two of these changes – Russia’s unprovoked war of aggression against Ukraine and the ongoing move toward reconciliation between Armenia and Azerbaijan after their September 2020 war, as well as Yerevan’s subsequent turn toward Europe and, more broadly, to the West in general. More than any other recent historic developments, these two events have accelerated the growth of the Middle Corridor. 

During the forum, Assistant Secretary of Commerce for Global Markets and Director General of the U.S. and Foreign Commercial Service, Arun Venkataraman, was a keynote speaker who praised the work of the CPC and its efforts to heighten awareness of the Caspian region.  “We very much value the CPC. And we hope you continue to engage with the Center as this institution is integral in our efforts to strengthen our partnerships,” he said. “The work being done here is necessary at most welcome due to the growing mobile interest in the Caspian region.”

Keynote speaker Ambassador John Mark Pommersheim, State Department Deputy Assistant Secretary for Central Asia, emphasized that U.S. engagement with the countries of the Caspian Region during the past two years is at the highest level ever seen since these countries’ independence more than three decades ago following the collapse of the Soviet Union. Uzbekistan’s ambassador in Washington, Furkat Sidiqov, pointed out that the Middle Corridor is increasingly more than just words on paper: it’s bringing the countries of the region more closely together than ever before. He noted that Uzbekistan, until recently an inward-looking country, has invested in Azerbaijan’s ports on the Caspian Sea, an essential element of the Middle Corridor. He explained that both nations benefit, as does the entire region and their international partners further afield. 

What the CPC’s 8th Trans-Caspian Forum emphasized most clearly is that the need for the Middle Corridor is speeding up, at times dramatically, the integration of the Caspian Region nations into the global polity and economy. As always, more needs to be done. As always, unexpected disasters will sometimes occur; that’s simply a fact of reality. But what we see at this moment is that the eight nations of the Caspian Region are better positioned and are moving forward more responsibly than ever before. I am pleased that the CPC’s 8th Trans-Caspian Forum provided a venue where high-level speakers from both the private and public sectors could call the attention of CPC’s international audience to these positive developments.

 

Middle Corridor:  To Minimize Obstacles, Maximize Coordination 

by Marsha McGraw Olive

Advocates of the Middle Corridor faced a reckoning in 2023 when, after surging in 2022, container traffic got so delayed in crossing the Caspian that shippers switched back to the northern corridor through Russia.  This was precisely the route they had wanted to avoid after the Ukraine invasion.  Making the Middle Corridor more efficient became an urgent priority. But how? An overlooked aspect is coordination -- among states, the private sector, and international financial institutions.  

Aid coordination is the driest of development topics. Yet for the Middle Corridor, it is also the hottest. The reason is because efficiency improvements face unprecedented coordination challenges.  Unlike traditional aid to a single country or project (such as a pipeline or power transmission line), the Middle Corridor involves an exponentially larger number of actors and actions.  As political scientist Mancur Olson famously said, the larger the group, the less it will further its common interest.  

Some good news on the collective action front came out of the Caspian Policy Center’s Eighth Trans-Caspian Forum on “Maximizing the Middle Corridor” on May 21, 2024.  The Forum took stock of progress since the EU Investment Forum in January 2024 in Brussels, which announced commitments of $10.8 billion to reduce transit time along the route from an average of 50 to 15 days. 

First, there is broad consensus that it is worth the effort to create an efficient land bridge between China and Europe across the Caspian.  To maximize the Middle Corridor, Ambassador Ibrahim of Azerbaijan said, states need to minimize obstacles, and that requires significant investment in multiple activities.  Estimates for hard infrastructure (such as road, rail, and port refurbishing) vary according to route, but range from US$7 billion by the World Bank to 18.5 billion Euros (US$20 billion) by the EBRD.  Also needed are up to 40 soft connectivity measures such as predictable tariffs and customs digitalization.  All these activities must be seamlessly connected across seven to ten countries.  

Second, there is a complementary vision among major external development partners that the purpose of the corridor is to do more than speed traffic and generate transit fees for the countries along the way.  Rather, it should enhance regional economic prosperity in a manner that helps local communities and increases predictability and transparency in the business environment.   EU Hors Classe Advisor Henrik Hololei notably envisioned the addition of Mariupol and other Ukrainian ports to the network in the future.

Third, there is wholehearted agreement on the need for coordination to monitor progress, enhance cooperation, and ensure that development of the Corridor stays on track.  Both the European Union and U.S. are spearheading Coordination Platforms that share these goals.  Each has a different focus, with the EU more on hard infrastructure and the U.S. on soft connectivity measures, but both recognize the need to “coordinate the coordinators.”  

The EU Coordination Platform will be launched in June in Astana, and according to Henrik Hololei, it will complement the U.S. platform, led by Tamar Satterwhite, Senior Counsel in the Commercial Law Development Program (CLDP) of the Department of Commerce.  The State Department funds the CLDP-led platform that includes an expert group to produce technical information and a high-level advisory body, led by state authorities, to make decisions.  It will launch this September in Kazakhstan.  Meanwhile, USAID manages trade, transit facilitation, and economic development programs that will increase cargo traffic and help make the corridor profitable.  Participants in the two multi-stakeholder platforms will overlap. 

There are some tricky issues to iron out, but none are insurmountable.  Routes vary, giving rise to different naming conventions.  The Middle Corridor, as used in most American circles, goes from China through Kazakhstan to the Kazakh Caspian ports of Aktau or Kuryak.   The Trans-Caspian Transport Corridor (TCTC), as used by the EU and EBRD, can veer north or south from Almaty to Aktau/Kuryak or to Turkmenbashi, in Turkmenistan.  The southern option serves Uzbekistan, Kyrgyzstan, and Tajikistan more easily. Ultimately, like the Silk Road, a network of networks with alternatives is desirable for shippers.

Another issue is to prioritize projects along a given route.  The EU-commissioned report by the EBRD on Sustainable transport connections between Europe and Central Asia (June 2023) gives a high-level description of 33 hard infrastructure needs, only in Central Asia, that total 18.5 billion Euros (US$20 billion).  This dovetails with the EU Commission’s strong belief that regional integration through harmonized trade institutions among the C5 (Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan, Uzbekistan) is necessary for greater prosperity.   

But as noted by USAID Assistant Administrator McKee, the Middle Corridor does not make sense without connectivity through the South Caucasus.  Consequently, USAID has launched a $24.4 million, multi-year initiative in that region to unlock up to $200 million in infrastructure investments.  “By supporting job creation across various sectors, including trade, transport, and logistics, we envision a ripple effect of prosperity that improves the lives of local communities.”  She also announced that USAID had adopted a Memorandum of Understanding (MOU) with the EBRD on activities to reduce transit times, drawing on a successful collaboration in Ukraine.

A different approach is taken by the World Bank’s study on the Middle Trade and Transport Corridor: Policies and Investments to Triple Freight Volumes and Halve Travel Time by 2030. It first estimates trade dynamics and then identifies bottlenecks, noting that the strength of the corridor will be defined by its weakest link.  Winnie Wang, the Bank’s lead infrastructure leader in Central Asia, said that “we employ a suite of regional and global modelling tools to design corridor solutions tailored to specific places, and what they produce, and opportunities to unlock new demand.”  This led to identification of 10 priority projects (of which 1 is for soft connectivity) for a total of US$7 billion. In contrast to the EU or USAID, Bank proposals extend from Central Asia to Baku, cross the Azerbaijan-Türkiye border and the third Bosporus bridge in Istanbul before reaching ports in Romania and Bulgaria. 

In practice there will be a sorting of priority projects among the major international finance institutions, with several co-funded by states, the private sector, and donor agencies such as USAID.  There are just too many needs for a single investor.  The proof of the Coordination Platforms will be a concrete list of bankable projects for immediate implementation.

The Middle Corridor’s Greatest Need

By Dr. Eric Rudenshiold

No one likes to be told what to do.  For international assistance organizations and financiers that goes double.  But for large-scale development efforts, like the Caspian Middle Corridor, there is a definite need for high-level management and coordination of the many, associated, big-ticket programs.  The EU’s Global Gateway Initiative program for the Trans-Caspian Transport Corridor alone targeted $10.8 billion in resources to develop connectivity and help speed cargo transit between Central Asia and Europe.  But, as discussed at the Caspian Policy Center’s (CPC) Trans-Caspian Forum, that is only one of many major initiatives working on this multi-country, trans-continental effort. There are multiple international financial institutions and donors targeting the region’s many needs through a range of development and investment programs.  In many past examples of broad international development interest, these communities often don’t talk to each other, let alone organize and coordinate their efforts.

The CPC Forum stressed the importance of recognizing the Middle Corridor as a multi-modal network of infrastructure that connects the entire region through a web of new and planned throughways reaching north, south, east, and west.  Along its many routes, the Middle Corridor faces some common as well as many unique challenges. With such a large set of sometimes disparate and sometimes interconnected needs, assets are being apportioned or designated for purposes and interests usually prioritized by the funders themselves.  Forum speakers described nascent efforts to provide overarching coordination for hard and soft infrastructure projects, by channeling resources into a matrix of efforts that addresses urgency, needs, and that reflects regular dialogue with the Caspian countries. 

A stand-out sense of the countries in the region, as expressed by senior regional officials, was that the Caucasus and Central Asian countries themselves share a new vision of cooperation and connectivity.  Perhaps best expressed by Armenia’s representative, highlighting the opportunities of reconnecting the region as a major crossroads for trade and transit, there is a common recognition that changes in the region are enabling new working relationships and unleashing prospects for increased trade.  Forum speakers noted these changes, as well as the growing collaboration between Caspian countries, which buttresses the interest of the international finance community.  Outreach by Caucasus and Central Asian leaders to the international community has met with significant and historic success in securing funding and development support.

Yet experts at the CPC Forum noted that the proliferation of these interests and finance commitments is not without potential obstacles.  A major challenge is that different donors and financiers can have overlapping interests and mandates, with each seeking ownership, acknowledgement, and recognition for the funds used, in order to report back to and reconcile with their funding sources.  Having project visibility is critical for program financiers, donors, and implementers.  Cooperation and sharing credit for good works can require some politicking between them.  New coordination efforts will need to address these sensitivities.

 

With tens of billions of investment and assistance dollars pouring into the broader Caspian region, some Trans-Caspian Forum speakers pointed to a particular urgency for identifying program targets, in order to avoid duplication of effort, but also to enhance the impact of strategic planning and prioritization of development.  First things need to go first, even in a region where there are a multitude of competing priorities was an agreed sense during one of the Forum’s coffee break discussions.  The new coordination efforts by the European Union and the United States are both complementary and critical to the shared desire to synchronize and manage regional development, before too many programs and projects are initiated.

Forum speakers and participants optimistically noted that such efforts to oversee and coordinate program funding are beginning for both private- and public-sector efforts.  The CPC event highlighted a general recognition of the unique opportunity for the region to undergo transformative change that works to interconnect the Caucasus and Central Asian countries, increase productivity, as well as boost trans- and intra-regional trade—if the broader development community and countries of the region get it right.  An unavoidable Trans-Caspian Forum conclusion is that remarkable and historic changes are visible across the broader Caspian region and driven by a critical confluence of international funding and political will.  Given the record level of funding being attracted to the region, the emerging coordination efforts discussed in CPC’s Forum were agreed to be a heavy but encouraging step forward.