BAKU, Azerbaijan, March 20. The visit of James Cleverly, Secretary of State for Foreign, Commonwealth and Development Affairs of the UK, to Kazakhstan led to several thought-provoking developments, which have far-reaching consequences for a number of states. During the visit, some interesting comments were made regarding the view of the UK on the future of the Trans-Caspian International Transport Route (TITR), also known as the Middle Corridor. Additionally, a matter of diversification of oil exports from Kazakhstan via Azerbaijan was also discussed.
The UK official expressed that his government will assist the development of the Middle Corridor, as well as support the diversification of Kazakh oil exports by other routes, namely via Azerbaijan.
Considering that the issues of transportation and energy are some of the priority areas for Kazakhstan and Azerbaijan, the visit points to the future changes that await Kazakhstan and Azerbaijan. We will try to look at several issues in a bid to explain how the visit can transform a significant part of the post-USSR area.
Rare earth mineral deal
The visit resulted in several deals being signed between the UK and Kazakhstan. The most important one is the memorandum on rare earth mineral mining. It is a critically important development for Kazakhstan and Western economies.
China and Russia are known as traditional leaders in the field of rare earth mineral mining. These nations were the major suppliers of these commodities to Western states. By incentivizing rare earth mineral mining in Kazakhstan, the UK achieves several critical objectives.
First, a new major player will be introduced to the market. Due to the limited nature of these goods, Kazakhstan will be able to claim a very adequate market share. This will create a demand for a highly qualified workforce, create new employment options and diversify the industrial potential of the Kazakh economy.
Second, the UK and other Western states will eliminate the dependence on traditional exporters, i.e. Russia and China. While Western states are trying to avoid any dealings with Russia due to geopolitical reasons, the relationship between them and China is hard to characterize precisely. Western powers remain unconvinced that China will abide by the rules, and this perception creates incentives for the west to seek other suppliers.
It should be said that rare earth minerals are critical components in high-technological military systems, in addition to being used extensively in the aerospace industry. Therefore, it should not come as a surprise that the West is interested in unlocking the potential of Kazakhstan.
This would also be a development that would appeal to Baku because the appeal and importance of the Middle Corridor will be impacted positively.
The recent geopolitical uncertainty led to significant transformations in the field of transportation and logistics. Impossibility of using established routes led to an urgent need of finding previously unexplored or underutilized opportunities to guarantee uninterrupted trade. After all, international trade has been the driving force for global economic prosperity for decades, and it is vital to preserving trade relations between nations due to the globalized nature of the modern economy. Considering the major disruption of the supply chains in the aftermath of COVID-19, preserving trade routes becomes an existential issue for each and every global economy, as the potential socio-economic consequences of the inability to do so will be devastating.
There are three potential routes to connect western and eastern economies: one via Russia, another by way of Iran, and the final route are by the Caspian Sea from Azerbaijan to Kazakhstan. Western economies see no opportunity to move goods and services by the first two routes, mostly, due to geopolitical considerations.
In this situation, the only feasible route remaining is the Middle Corridor. The visit of Cleverly was aimed at promoting the further development of the route, as the Secretary of State pledged the support of the UK in this endeavor.
The support of a senior UK official means several things. First, there is no desire or opportunity to restore existing trade routes. This is understandable, considering that there are no indications pointing to an improving global political climate. Second, the UK remains keen to explore new opportunities, which means that there is a significant level of belief in the long-term potential of the Middle Corridor. Third, the UK sees Azerbaijan and Kazakhstan as credible partners, which can guarantee the safety and stability of the route.
There is one major question remaining in the context of the implementation of TITR. Will it remain feasible when geopolitical tensions subside? Various arguments can be made here, however, the most logical and rational argument is that the financial resources allocated for the development of logistics and infrastructure of the route will prevent western decision-makers from abandoning the project altogether. Additionally, there is a question of the perceived future credibility of a hypothetically restored route.
The fact that the UK expressed its support and interest in assisting Kazakhstan’s development of the Middle Corridor is a significant step forward for the success of the route. This development indicates that there is a market for said transportation architecture, which has been constructed for many years, and more countries can be expected to follow suit.
Kazakhstan’s oil export route diversification. An opportunity for broader cooperation with Azerbaijan
Another topic of discussion between Cleverly and various top Kazakh officials was the issues of oil and gas exports. This is another issue that makes Kazakhstan somewhat uncomfortable. A high level of dependence on one oil export route creates significant risks for Kazakhstan, as there is no “plan B” for the Central Asian nation in a force-majeure situation. Think of it the way an investment analyst would consider this issue. One of the first things these specialists learn is to “never put all eggs in one basket”, i.e. always diversify risks to have other options available. Looking at the matter from this perspective illustrates the benefits that Azerbaijan can offer to Kazakhstan in the context of this question.
For many years, it was a major misconception that Baku and Astana are rivals in the field of energy and natural resource exports. After all, this view cannot be blamed, as it seems intuitive to suggest so. However, this is an incorrect approach, as opportunities for cooperation between Azerbaijan and Kazakhstan, in the oil and gas sector exist, and they outweigh the benefits of following the path of rivalry.
For Kazakhstan, Azerbaijan can serve as a safe and reliable oil transit destination, which would offer an additional layer of reliability should other export routes become unavailable for technical or other reasons.
Kazakhstan already started exploring the opportunities offered by Azerbaijani transit infrastructure by sending the first batch of oil, equivalent to 6,900 tons of crude, from Aktau port to Baku. Alikhan Smailov, Prime Minister of Kazakhstan, earlier said that Kazakhstan will 1.5 million tons of oil via Azerbaijan.
There are other opportunities for energy cooperation between Central Asian states, including Kazakhstan, Turkmenistan and Azerbaijan. The abovementioned opportunity is a potential game changer for the Central Asian nations that should be utilized.
Concluding thoughts on the visit and its relevance
The visit of the Secretary of State for Foreign, Commonwealth and Development Affairs of the UK to Kazakhstan provides opportunities for considering the future of the region and the possible transformations. Cleverly’s visit and comments made during the discussions with Kazakh officials point to the desire of the UK political establishment to see a higher level of cooperation and integration between Kazakhstan and Azerbaijan, as it is an element necessary for the success of the Middle Corridor.
From the perspective of integration, one of the key changes that need to be achieved between Azerbaijan and Kazakhstan is the harmonization of customs procedures and legislation, which will significantly decrease the time of transit of goods.
Additionally, the fact that the UK expressed its support for energy cooperation between Kazakhstan and Azerbaijan is another valuable development for Astana and Baku. Besides, European partners of both nations will benefit from it, as the reliability of supplies will be increased.
The visit of James Cleverly, Secretary of State for Foreign, Commonwealth and Development Affairs of the UK, was a very important event for Kazakhstan, and also Azerbaijan. While the visit was also aimed at improving bilateral relations, it created additional opportunities for systemic cooperation between Astana and Baku. Considering the history of partnerships between the countries, there is a high probability that both nations will use the momentum to boost their relations in the transport and energy sector.