EU trying to create Central Asia transport corridor

By Rhod Mackenzie

The EU is allocating money to create a new transport corridor through Central Asia, bypassing Russia. The new route is their a competitor to the Chinese “One Belt, One Road” project. Brussels does not hide the fact that these plans are directed specifically against Russia. Will it be possible to implement them?
The EU stated that they plan to implement an economic blockade of Russia by creating a transport corridor from Central Asia to Europe through the Transcaucasus and Turkey. Europe needs new trade routes to Asia that do not go through Russia.

The head of the EU foreign policy service, Joseph Borrell, directly stated that these plans are directed against Russia. The EU wants to enlist the support of the Central Asian countries so that Russia cannot circumvent the currently imposed sanctions. If previously the Central Asian states were in the deep wilderness, now they are in the center of current events, Borrell said.

International observers are looking at this Global Gateway project as a European alternative to the Chinese “One Belt, One Road” project. The Europeans want to transform the Trans-Caspian Transport Corridor into a modern, multimodal and efficient route connecting Europe through the Black Sea and the South Caucasus to Central Asia in 15 days. The route will pass through Kazakhstan, Kyrgyzstan or Uzbekistan, then to Turkmenistan and through the Transcaucasus (Georgia, Armenia and Azerbaijan) to Turkey, and from there to the EU countries by land or sea.
The European Union is going to attract up to 10 billion euros of investment to create a new transport corridor. However, so far the EU is ready to allocate only 3 billion euros in the form of two credit lines from the European Bank for Reconstruction and Development (EBRD) and the European Investment Bank (EIB). The EIB has already signed a memorandum (non-binding agreement) with the governments of Kazakhstan, Kyrgyzstan and Uzbekistan on the allocation of loans worth 1.47 billion euros under EC guarantees. Later they promise to sign a memorandum with Kazakhstan for 1.5 billion euros.

Russia's trade relations with the EU have undergone major changes over the past two years due to sanctions policies. Russia has actively reoriented its exports to the East, and there is an explosive growth in trade turnover with China. And yet it cannot be said that economic ties with the EU are completely severed.
Over the 11 months of last year, trucks transported 4.8 million tons worth 35.3 billion euros between Russia and the EU. Approximately the same amount of cargo was transported by rail - 4.9 million tons worth 3.3 billion euros.

“Russia continues to export energy resources to EU countries that are not subject to restrictions, for example, LNG and other types of fuel, but in much smaller quantities. For example, the share of Russian oil supplies in EU imports fell to 2%, gas to 13%, and coal to zero. The export of metals from Russia to the EU countries has halved, but it continues, and in some of its categories there is even an increase, for example, in cast iron. Russia also continues to supply food products, such as seafood, as well as fertilizers. For fertilizers, by the end of 2023 there should even be an increase in export volumes by about 7–10%,” notes Vladimir Chernov, an analyst at Freedom Finance Global.

The EU continues to export agricultural and industrial equipment, medicines, household appliances, various pumps, elevators, food and beverage preparation equipment, centrifuges, fire extinguishers, etc. to Russia.

“A huge amount of goods are sent from the EU to Russia as parallel imports. This is probably why the European Commission decided to create a transport corridor bypassing Russia,to make it easier to monitor compliance with the sanctions regime,” Chernov believes.
In addition, new logistics corridors from Central Asia to Europe will increase trade volumes with countries from these regions without any risk of supply disruptions, the expert adds.

“The economic blockade of Russia by Europe is simply a cover for its own mistakes, which it finds difficult for it to admit. Europe understands that day after day it is losing its position within the global economy, including control over the flow of goods. China has been developing its “One Belt, One Road” project for many years, and Russia, participating in the Chinese project, is developing the Northern Sea Route. While European ports have lost a large volume of container turnover over the past two years: the Baltic ports - from 17 to 35%, Finland - about 12%, Holland - 9%, Germany - 8%. Europe’s initiative looks more like an attempt to regain lost positions,” says Ekaterina Novikova, associate professor of the Department of Economic Theory of the Russian Economic University. Plekhanov.

This project has, of course, both obvious disadvantages and some advantages. “A multimodal route may even be more profitable, because sea transport is cheaper than land transport, but the time for loading and unloading will be increased. However, depending on which European country will be the final point of delivery, such a route will be more profitable and convenient. For example, it will be closer to Spain from Turkey to deliver goods by sea, and to the countries of Eastern Europe, the Baltics and Scandinavia by land,” says Chernov.

The cost of implementing the project may increase several times. The duration of the project will also be quite long, and they can also increase in practice due to the huge number of participants. “This project could affect more than five countries, so the creation of such infrastructure could take more than five years,” said an analyst at Freedom Finance Global.

And of course, the route bypassing Russia will be longer and more expensive.

“In general, it is most profitable to lay logistics routes along the shortest route in order to reduce fuel consumption and, as a result, delivery costs. Therefore, when the geopolitical tension between Russia and the EU countries subsides, and external pressure begins to weaken, transport companies will certainly return to logistics through Russia,” says Vladimir Chernov.

But for Turkey and the countries of Central Asia, the severance of trade ties between the EU and Russia is clearly beneficial. They signed strategic agreements with Russia, and are now quite ready to cooperate with the EU. “For Turkey and the countries of Central Asia, the current situation is a good opportunity to receive additional investments, including from Europe,” Novikova believes.

“In addition to this, the aggravation of the situation around the Red Sea makes Europe dependent on China and Russia: business knows how to count money and it is difficult for it to explain why it should lose money on transporting its products through the coast of South Africa, and not use the Northern Sea Route. Europe is losing everything, and the construction of new routes will not save the situation,” the analyst concludes