The Analytical Group of AzVision.az

‘Sea of opportunities’ around the Caspian Sea

// On the threshold of new geo-economic era

The geography stretching from Turkey to Pakistan (looking more broadly, from the EU to China) is currently experiencing interesting geo-economic processes, which are conditioned by the latest developments:

○     After Azerbaijan’s victory in the 44-day Second Karabakh War, the unblocking of regional communications, especially the Zangezur corridor, has already been resolved in principle;

○     The establishment of the Organization of the Turkic States opens a new page in economic ties of the participating countries; 

○     After the transition of power, Uzbekistan has abandoned the policy of isolation without hiding its willingness to become a new regional leader;

○     The strategic partnership with Azerbaijan and Turkey enables Pakistan to become an active player in the region;

○     Iran, in its turn, has started to take steps not to miss the current opportunities.   

Figuratively speaking, the “sea of opportunities” is emerging around the Caspian Sea. The question is - how will the regional countries benefit from these opportunities?  

 

Starting point  

 

Although the South Caucasus and Central Asia seem geographically far apart from each other, the history, fate and geo-economic significance of these two sub-regions, located on opposite coasts of the Caspian Sea, are closely linked. The South Caucasus was the most important flank of the fighting between Russia and Britain in the early 19th century, which went down in history as the ‘Great Game’. It started with the Battle of Aslanduz that took place a little south of Azerbaijan’s current borders.

 

There is a simple factor that bonds the history and destiny of these regions: The South Caucasus is an important transport corridor, but what will be transported via this corridor? On the other hand, Central Asia is rich in natural resources that are vital for the world economy. However, without any favourable corridor, those countries are obliged to be the raw-material base of big powers of the region. The creation of a single successful cooperation mechanism by the two sub-regions can greatly contribute to their development. The historical opportunities so far have never been this advantageous.

 

Why now?  

 

“After the collapse of the USSR, a US-dominated unipolar system was formed in the world. However, today we observe the weakening US influence in the regions, so all regional players establish relations with each other to ensure their security,” political scientist Murad Sadeddinov told AzVision.az.

Today we observe the weakening US influence in the regions, so all regional players establish relations with each other to ensure their security. Currently, the ‘restart’ condition has been created in several directions in the region. With the opening of the Zangezur corridor, Central Asia sub-region, as well as China, and Pakistan have gained access to Europe. However, it is not all: Turkey has become more attractive for Turkic countries, located in Central Asia. They noticed that it is possible to achieve effective results with Turkey’s support in a short period of time.

American expert Irina Tsukerman also certifies it. “The opening of the Zangezur corridor would allow circumventing the Iran route currently in place and bringing more direct relations between the countries. The necessity of discussing the relevant issues with Iran will be eliminated. Such projects not only pave the way to regional prosperity but also remove the obstacles for economic and political communication in broad terms. Thanks to the Zangezur corridor, the countries will get closer in settlement of the regional problems,” Tsukerman told AzVision.az.

 

Director of the Turkish Center for Strategic Studies of the Caucasus, Hasan Oktay believes, it is high time to urgently take advantage of the existing opportunities. 

"If an economic unification among Turkic states is successful, we will most likely become the world’s third or fourth economic power. The ongoing US-China economic war will lead to a serious gap in the world. The political and economic union – the Turkic union – that can fill this gap will develop rapidly",  the expert noted.

 

 ‘Turkish march’ for Central Asia  

 

At present, Turkey is strengthening its position in Central Asia against the background of geopolitical and geo-economic struggles waged by power centers such as Russia, China, and the United States. The presence of four Turkic states in the region significantly empowers Ankara's position.

 

Uzbekistan, which did not join the Organization of Turkic States (previously called the Cooperation Council of Turkic Speaking States ) because of its former government's cold relations with Ankara, is now a member. And even the first summit of the organization will be held in Uzbekistan next year at the initiative of President Shovkat Mirziyoyev. Relations between Ankara and Tashkent have reached a new level of quality.

 

"Turkey aims to expand cooperation in these countries through joint economic and transport commissions, high-level visits and working councils," Board Member of the International Association of Freight Forwarding and Logistics Services Providers, Head of the Railway and Intermodal Working Group Sibel Gultekin Karagoz said in her interview to AzVision.az.

In 2019, the volume of trade between Turkey and the regional countries amounted to $ 8.5 billion. More than 4,000 Turkish companies operate in those countries. We have contracts with Central Asian countries regarding the International Combined Freight Agreements. The main goal is the integration of transport networks in Europe, the Baltic region, the Black Sea basin, the Middle East, the Caucasus and others.

 
 
Ankara has already achieved several successes in using transit opportunities in Central Asia. By developing trans-Caspian routes and expanding the cooperation with Caspian countries, Ankara has gained access to the Far East. A year ago, the train from Istanbul travelled 8,700 km and reached the Chinese city of Xi'an.

Ankara has already achieved several successes in using transit opportunities in Central Asia.

Last year, the value of Uzbek imports from Turkey increased from $ 151 million to $ 1.1 billion by 7.6 times. This figure is the highest in Central Asia. The proportion of Uzbek exports to Turkey reached $ 970 million. It is primarily related to the open economic policy pursued by the new government in the country. Last year Turkey, which has no borders with Central Asia, became Uzbekistan's fifth largest trading partner with a 5.5% indicator. Experts believe that Turkey and Uzbekistan can easily rank third in this regard.

 

In his interview with AzVision.az, senior lecturer of the Branch of the Plekhanov Russian University of Economics in Tashkent Ravshan Nazarov said that despite the pandemic the trade between Turkey and Uzbekistan rose by 93 % and reached $ 1,5 billion in the first half of 2021. “The Turkish companies, which brought the Turkish experience to Uzbekistan in strategic areas such as construction, energy, and mining industry, have gained significant successes within a short period of time. It once again proves that it is possible to achieve many successes in the future by maintaining the spirit of cooperation.”

 

In July of 2021, Turkish Trade Minister and Uzbek Deputy Prime Minister Sardor Umurzakov announced at a joint press conference that the sides intend to raise bilateral trade to $ 5 billion soon. Turkey has become a leader in opening new enterprises with foreign capital in Uzbekistan. During the first 10 months of last year, 321 enterprises were opened in the country. Russia, which ranks second, can be proud of 196 new enterprises, while this number is 219 for China, ranking third. In total, there are 500 Turkish companies in Uzbekistan. The amount of Turkish investment in the economy of this country is more than one billion dollars. The governments have agreed on the investment of another billion in principle. 

 

Uzbekistan: From isolation to new horizons  

 

Over the last three years, abandoning the isolation policy, the official Tashkent prefers not only to integrate into the global economy but also to pursue the policy of becoming the leader of Central Asia. In his interview with AzVision.az, Professor of UNEC (Azerbaijan State University of Economics), doctor of economic sciences Elshad Mammadov said that Uzbekistan has enough potential to do it. 

The official Tashkent prefers not only to integrate into the global economy, but also to pursue the policy of becoming the leader of Central Asia.

In terms of the population (more than 35 million), Uzbekistan has quite good indicators for regional leadership. The country, with a gross domestic product (GDP) of $ 88.45 billion this year, ranks fourth in the world for its gold reserves and seventh for its production (92 tons per year). Uzbekistan's copper deposits rank 10-11th in the world and its uranium deposits 11- 12th, being in the 7-8th place for its production. Experts currently estimate Uzbekistan's mineral resources at $ 11 trillion. 

 

There are enough untapped oil reserves in the country. Geological oil reserves are 5 billion tons, proven reserves are 530 million tons, geological gas reserves are 5 trillion cubic meters, and proven gas reserves are more than 3.4 trillion cubic meters. The Uzbekneftegaz national company ranks 11th in the world with gas production of 60-70 billion cubic meters per year. In addition, Uzbekistan is traditionally known for its large-scale cotton production.

 

“Turkic states are rich with natural resources. Like brotherly countries, mutual interests must be pursued, and both sides must get benefits,” Director of Turkey's Middle East, Eurasia, and Asia-Pacific Research Platform (ODAP) Ali Semin shared his views with AzVision.az. "There is a need for the members of the Organization of Turkic States to act together. For example, instead of doing profitable trade with other countries, they should do it with each other. However, in this case, the issue of logistics arises, which requires belts and roads," Ali Semin also added.

 

The Uzbek leadership does not hide its goal of maximum use of transit-transport potential. Hence, the relevant program adopted in this regard pays special attention to the development of the transport and corridor infrastructure, and the establishment of a new automobile, air, and railway route. 

 

New prospects

 

Taking full advantage of the transport and transit potential in Central Asia, which has historically served as a bridge between East and West and is strategically located in the center of the Great Silk Road, could pay dividends to all parties. This will enable Uzbekistan to join international transit cargo freight from the Asia-Pacific-Indian Ocean (China, Pakistan, India) to Europe. Furthermore, a new transit corridor – Uzbekistan-Turkmenistan-Iran-Oman may emerge. Today, the economic integration of the South Caucasus into Central Asia is one of the most promising areas of integration both on regional and global scales.

The economic integration of the South Caucasus into Central Asia is one of the most promising areas of integration both on regional and global scales.

Today, the construction of the Uzbekistan-Kyrgyzstan-China railway is under discussion. The realization of this initiative will make it possible to get the long-awaited access to the Persian Gulf and Turkey through the South Caucasus. Preliminary estimates suggest that the length of the road from East Asia to the Middle East and South Asia through this railway will be about 900 kilometres in length, and the freight delivery time will be reduced to 7-8 days.

Tashkent is eagerly striving to achieve the realization of this initiative due to the “geographical closure” of Central Asia. The Central Asia-Caucasus Institute (CACI) at Johns Hopkins University describes this factor as a major obstacle to the economic development of Central Asian countries, the main burden of which falls on Uzbekistan. It is no coincidence that in recent years, Tashkent has been very active in developing road and rail links, as well as aviation links with Afghanistan and other Central Asian countries. In this sense, Uzbekistan’s role in its region is similar to Baku's role in the South Caucasus.

These efforts have already begun to yield positive results. Relations and trade between regional countries are on the rise. In 2017-2019, the trade turnover between regional countries increased from $2.7 to $5.2 billion.

 

In terms of expanding transit links, Uzbekistan attaches great importance to relations with the Caspian littoral states, especially the opportunities offered by the Baku-Tbilisi-Kars railway, which, in turn, will strengthen Tashkent’s ties with Baku and Ankara.

 

Important junction

 

The statement voiced by the former Uzbek ambassador Bahrom Ashrafkhanov at a forum in Baku last year that “Azerbaijan is a transport and logistics hub for Uzbekistan in accessing the Mediterranean markets” is testimony to the importance of Azerbaijan’s transport and transit opportunities for Uzbekistan. In this regard, Tashkent considers the Trans-Caspian and Transcaucasian corridors to be promising strategic projects. Thus, Uzbekistan, which lies at the heart of Central Asia, is striving to become a serious transport hub for the delivery of not only its cargo but also the products of other regional countries and China to the Mediterranean coast via Uzbekistan-Caspian-Caucasus.

Azerbaijan is a transport and logistics hub for Uzbekistan in accessing the Mediterranean markets

In November 2021, the working group on transport and logistics of Uzbekistan and Turkmenistan held a meeting to explore ways to create favourable conditions for cargo freight through Azerbaijan. The meeting focused on the implementation of cargo transportation from the Turkmenbashi international seaport on the route China-Kyrgyzstan-Uzbekistan-Turkmenistan-Azerbaijan-Georgia-Turkey-Europe. The gas swap deal recently concluded by Azerbaijan, Turkmenistan and Iran is likely to have a positive impact on this issue. Uzbekistan’s possible participation in energy projects to be implemented jointly by Azerbaijan and Turkmenistan is also on the agenda. The growing economic ties between Azerbaijan and Uzbekistan raise the latter’s hopes for the realization of this issue.

Despite the COVID-19 pandemic, in 2020, the trade turnover between Azerbaijan and Uzbekistan increased by 13 percent to stand at $80 million. Over the past three days, the mutual trade turnover has tripled. As many as 195 companies with Azerbaijani capital are operating in Uzbekistan, 69 of which are joint ventures.

 

But in any case, it is necessary to intensify mutual steps in this area. The current trade turnover of 80 million between the two countries can not be considered satisfactory, especially given the prospect of Uzbekistan being able to take advantage of the extensive transport and logistics opportunities opened by the "3 + 3" format, which created conditions for comprehensive cooperation in the region after the restoration of Azerbaijan's territorial integrity. The participation of Uzbek companies in the reconstruction of the liberated Azerbaijani territories can also play an important role. Access to Turkey through the Zangezur corridor will make a significant contribution to the growing Ankara-Tashkent relations.

 

Pakistan

 

Pakistan is a very important neighbour of the Central Asian region. Historically, Pakistan's vectors of interest have never been directed towards the north - to Central Asia. There has always been a cooling in ties between Pakistan and Central Asian countries. However, today there are attempts to develop these ties. Pakistan's relations with Azerbaijan and Turkey can also play an important role in this direction.

Azerbaijan-initiated projects, as well as the unblocking of transport routes in the region, will allow Pakistan and Central Asian countries to gain access to the European markets via Azerbaijan and Turkey, Qaiser Nawab, a Pakistani expert on strategic communications, told AzVision.az.

For Pakistan and Central Asian countries, Azerbaijan and Turkey are more relevant for economic relations due to their strategic position in global trade.

For Pakistan and Central Asian countries, Azerbaijan and Turkey are more relevant for economic relations due to their strategic position in global trade. The Belt and Road Initiates (BRI) and China-Pakistan Economic Corridor (CPEC) are the key development projects that will connect Central Asia to South-East Asia and the Middle East to Europe. 

 

The China-Pakistan Economic Corridor starts from Kashgar and extends to the Gwadar Port. On October 8, 2021, the first run of trucks via the Islamabad-Tehran-Istanbul (ITI) transport corridor was solemnly celebrated. The 25-40 day period between Pakistan and Turkey by sea has been reduced to 6 days with a new highway route. Both Azerbaijan and Turkey have strong trade ties with Pakistan and Central Asia, which allows the corridor to reach Europe.

The Pakistan-Turkey Joint Commission on Road Transportation is currently holding meetings to determine transition documents. In addition, the two countries have an agreement on international road transport. Pakistan and Turkey aim to increase trade to $ 5 billion.

 

Crossing bridges

 

China, the world's largest exporter, is also Turkey's largest trading partner in East Asia. Therefore, high-level commercial relations with China require adequate logistics. According to the Turkish Ministry of Commerce, China is one of the countries within the "remote country strategy". Turkey believes that it is necessary to take advantage of such a large market. The Organization of Turkish States, which emerged in the space between Turkey and China, is, in fact, a bridge between Turkey and China, and in a broad sense, between Europe and China.

In December 2021, the Iranian Ambassador to Azerbaijan Seyed Mousavi shared a map on Twitter to show that his country was not left out of the process. On the map shared by the ambassador, we see that the route starting from India (Mumbai) passes through the port of Bandar Abbas to the Azerbaijani border, from there to Georgia, and then to the Black Sea ports.
Although Tehran at some point tried to oppose the new geopolitical situation and the "3 + 3" platform, it soon accepted the reality and showed that it was working by launching the "Persian Gulf - Black Sea" project.

 

Resonance of interests

 

Summarizing all this, we conclude that there is already a historic stage for the development of the two neighbouring regions, whose destinies are closely intertwined. Evolution usually follows a spiral trajectory, as it does in geographical and economic processes.

 

The critical potential has already been accumulated to move the process forward. The geopolitical situation, infrastructure opportunities, and the assessment of economic interests in new realities - all dictate the next joint steps. These steps have been taken one by one in recent years. Now all parties are ready to act at the same time to realize the accumulated potential. This will ensure a strong resonance and the beginning of a new stage in the evolutionary spiral of the regions.

 

Trends in stock exchanges are emerging as follows: actors who see the potential first and correctly assess it, move the market by buying some assets. New actors are joining them, and the trend is gaining momentum. Those who miss the first chance, no matter how late, try to "hop on the train" so that they can take advantage of the trend. Those who join late earn less. Those who take the first step are always more likely to make a profit, but the risks are worth it. At present, the South Caucasus-Central Asia train has already departed. The geopolitical trend is settled. There is no risk. There are still enough opportunities to benefit.


The Analytical Group of AzVision.az

  30 January 2022    Read: 984    Can be read: 29 min.

29 min.