Central Asian tri-nation rail link project – a viable oil trade route option

A new tri-nation railway project aims to spark regional trade and cooperation in Central Asia.

Nursultan Nazarbayev and Gurbanguly Berdimuhamedov, the presidents of Turkmenistan and Kazakhstan respectively, launched the 150-kilometer railway line between the two countries, which is part of a larger 1,000-kilometer railway project that also passes through Iran, connecting the three oil and gas powerhouses.  The three countries had signed an agreement as early as 2007 to build the USD 1.4 billion 870-kilometer Caspian Sea Eastern Rail Corridor. Separately, the Turkmenistan-Iranian leg of the project is scheduled to be completed by next year.
ENR10032011RAIL_Turkmenistan_A_The Turkmen-Kazakh section of the pipeline cuts through the Uzen region in Kazakhstan to Etrek in Turkmenistan through the Bolashak-Serhetyak area.

“Building the Uzen-Gyzylgaya-Bereket-Etrek-Gorgan (Kazakhstan-Turkmenistan-Iran) railway supports landlocked Kazakhstan’s external trade diversification strategy, which aims to supplement the country’s traditional trade conduits through Russian territory with additional routes to Kazakhstan’s east, west and south,” said Richard Weitz, an analyst with the Jamestown Foundation.

The railway is expected to facilitate flow of as much as 10 million tons of Kazakh grains, apart from oil products into Turkmenistan and Iran.

“It will also increase Kazakhstan’s yearly trade by as much as USD 5-10 billion, with significant boosts in turnover with Turkmenistan, Iran and additional countries,” said Weitz in a note to clients.

Other countries to benefit

The Washington-based think tank also expects the railway project to benefit other countries such as Uzbekistan and help the region emerge as a transit shipment hub for other Eurasian countries.
“The new line “Zhanaozen – the state border with Turkmenistan” will make the route 600 kilometers shorter than the existing railway via the Turkmen city of Sarahs,” noted a statement from Kazakhstan state news agency.

“The project implementation in Iran relating to the new railway called ‘Bafq-Meshhed’ will reduce the range of freight traffic between the Persian Gulf and the Far East for 1300 km.”

Iran’s Minister of Roads and Urban Development Ali Nikzad said construction of the 90-kilometer Iranian portion of the pipeline was also under way.

The project cements ties with the like-minded regimes in Turkmenistan and Kazakhstan.

“Their proximity has resulted, in part, in the shared use of energy export pipelines,” Weitz said. “Each year Turkmenistan ships more than 30 billion cubic meters (bcm) of natural gas to Russia and China through Kazakhstan. In order to reduce their dependence on access to Russian territory, Kazakhstan and Turkmenistan have cooperated to diversify their energy export routes beyond those that go through Russia.”

Kazakhstan is also serving as transit hub for Turkmenistan oil to reach China – ensuring supplies for the People’s Republic through friendly allies, and breaking away from dependence on Russia.

This interdependence, uncommon among Central Asian countries, gives both countries strong incentives to maintain good relations.

Rail region

Despite the vast stretch of land it covers, Central Asia remains notoriously disconnected with the rest of the world and even within the region.

Lack of funding and tough terrains were often key reasons for Central Asian governments to be lukewarm to the idea of rail projects – but that is changing.

Greater fiscal freedom and interest from a number of parties including the United States, Russia, China and Europe Union and Iran is helping Central Asia improve its global connections.

Railway projects are key to opening up the region and connect to some of the most lucrative markets in the world. From China, India to the east, the Gulf region in the south, and the European Union markets to its west, Central Asian borders an enviable combination of mature and developing markets.

“The Central Asian rail network has the potential to attract traffic away from deep sea container routes from China to the Middle East and Central Europe which suffer from long and arduous journeys; it can take two or three days alone to transit between Western China and the seaboard, which is followed by a journey that rounds the Singapore Peninsula and has to overcome the congested sea lanes through the Red Sea, Suez and Bosphorus…,” wrote David Bryce, an international rail consultant, in a comment in the International Railway Journal.