Central Asia's Rail Trade Revolution: Addressing Energy and Climate Challenges

By IndraStra Global Editorial Team

Cover Image Attribute: This image is computer-generated using AI and is intended solely for illustrative purposes./ INDRASTRA-CREATIVES-AI202401012

 Amid the constantly changing dynamics of global trade, the landlocked economies in Central Asia have discovered a crucial support system through the utilization of railway transportation. The efficacy of trade via rail in the region has witnessed a remarkable surge in recent years, prompting a call for further support to elevate it to new heights. As the world predominantly relies on maritime routes for trade, Central Asia's reliance on rail and road transport stands out, offering a unique perspective on the future of global commerce.

Challenges and Opportunities

The challenges faced by trade via rail in Central Asia are not insignificant. Fundamental differences in railway gauges between former Soviet states, the People’s Republic of China, Europe, Pakistan, and India have posed a structural challenge. Border crossings necessitate the transfer of freight, a labor-intensive and time-consuming process. Historically, long-distance trade faced hurdles due to ineffective trade agreements, changing national trade laws, weak service coordination, and cumbersome border crossings.
The challenges to transport connectivity along the Trans-Asian Railway Network can be categorized into two main dimensions: physical connectivity and operational connectivity. The network, spanning nearly 118,000 km of railway lines, faces a significant hurdle of approximately 12,400 km of yet-to-be-constructed lines. The construction of these missing links poses a substantial challenge due to considerable gaps in required investment, estimated to be around $75 billion. Additionally, the network grapples with a break of gauge issue, with five different gauges, particularly 1520 mm, 1435 mm, and 1676 mm, causing a hindrance to seamless connectivity.
Practical solutions like bogie changing and transshipment are employed to address the break-of-gauge challenge. Although the break of gauge may seem like a serious impediment, the impact on seamless connectivity can be minimized if addressed concurrently with other border crossing formalities. Operational and regulatory divergence among countries for international railway transport, including disparities in border agency formalities and operational requirements, present a broader challenge to railway connectivity.
In response to these challenges, a resolution (71/7) was adopted in 2015, outlining a Regional Cooperation Framework for Facilitation of International Railway Transport. The framework identified four basic issues and eleven areas of cooperation. In 2017, the Fifth Working Group Meeting of the Trans-Asian Railway network emphasized the need for concurrent facilitation measures, such as harmonized customs formalities and efficient electronic information exchange.
Despite these challenges, the region has seen impressive growth in express container trains, rising from 17 in 2011 to over 15,000 in 2021. Political will, regional cooperation, and rail reform have been pivotal in achieving this growth. Simplified processes, reduced border inspections, improved platform companies, and competitive pricing have played a crucial role in facilitating this transformative journey. Ambitious reforms, such as Uzbekistan’s Yallama border crossing, exemplify the commitment of Central Asian governments to foster trade.

Image Attribute: The main gate of Yallama Border Crossing between Uzbekistan & Kazakhstan / Source: Uzbekistan Customs Committee, Ministry of Economy and Finance of the Republic of Uzbekistan

Impact of the COVID-19 Pandemic

With the surge in freight trains from China to Europe, the railways of the region have actively addressed technical and operational issues. However, the COVID-19 pandemic inadvertently accelerated the shift towards rail transport in Central Asia. Border closures and movement restrictions forced truck drivers to stay home, leading to disruptions in road transport. Some countries, like Turkmenistan, closed borders to foreign trucks, and others imposed stringent requirements on foreign truck drivers. This shift from road to rail was not only driven by the need for a more reliable mode of transportation during the pandemic but also by the economic viability of rail transport over the road, especially in the face of rising fuel and energy prices.

Topological Connectivity Index

The UNESCAP report assessed the pandemic's impact on Trans-Asian rail network connectivity using a topological connectivity index. This index specifically evaluates network connectivity in relation to border closures, excluding considerations for rail network performance, such as speed and traffic volume, which are treated as constant factors. Although most border crossings remained open for freight traffic, a significant number were closed for passenger transport. This is reflected in the index values, which were 0.62 for passenger transport closures and 0.85 for freight transport closures. These values indicate a more substantial adverse impact on rail connectivity for passenger transport.

Environmental Considerations

Aside from economic benefits, rail transport presents a more climate-friendly alternative, using less energy per ton of goods moved. This aligns with the goals of the European Union (EU), which emphasizes greener and more sustainable business practices. The push for sustainability in trade could serve as a blueprint for short-distance trade within the region. Central Asian governments are urged to create an enabling environment, offering subsidies for greener transport and exploring alternative fuel options.

Image Attribute: Khorgos Railway Border Crossing between Kazakhstan and China

Future Prospects

The upward trajectory of rail transport in Central Asia is expected to continue in the coming decades. As demand grows and fuel costs rise, the reduced carbon footprint of rail transport becomes an increasingly important consideration for suppliers and end-consumers alike. However, governments must invest in quality infrastructure to sustain this shift, particularly in remote areas. Initiatives, like Uzbekistan’s support for expanding road carriers' truck fleets, exemplify a balanced approach that plays to the strengths of both rail and road transport.

Policy and Regulatory Challenges

Future challenges include fostering a commercial orientation for Central Asian railways, ensuring financial sustainability, and enhancing the reliability and speed of service. Addressing missing links in the rail network will further support trade. The announcement of the China-Kyrgyzstan-Uzbekistan Railway is a significant development, promising to facilitate trade between the People’s Republic of China, Central Asia, Europe, Turkey, and the Middle East. This project not only enhances regional stability but also underscores the natural effects of peace and cooperation arising from increased trade.

Conclusion

Central Asia's embrace of rail transport has proven to be a game-changer for the region's economies. Despite challenges, the collaborative efforts of governments and regional cooperation have fueled an impressive growth in rail trade. As the region looks towards a more sustainable future, the environmental benefits of rail transport and supportive policies can position Central Asia as a global player in the evolving landscape of international trade. The journey towards a well-connected, sustainable, and economically vibrant Central Asia relies on continued investment, cooperation, and forward-thinking policies.

PARALLEL DEVELOPMENT

Image Attribute: A file photo of a standard-gauge track measuring 1435 mm entering China from Russia, with a bogie exchange yard in the distance accommodating both 1520 mm and 1435 mm gauges.  / Source: Wikimedia Commons
In 2022, Russia announced its intention to complete the reconstruction of 41 border ports by the end of 2024, marking the largest port construction plan in its history. The ambitious project, unveiled by Russian Minister of Transport Vitaly Saveliev, aims to address the nation's increasing freight demand and capacity shortages. 
The driving force behind Russia's massive infrastructure undertaking lies in the surge in freight demand and the critical shortage of transportation capacity. Compounding the challenge, the Sino-Russian trade volume has witnessed significant growth, prompting a shift in the flow of goods towards the south and east. This exacerbates the existing capacity shortfall, which is projected to double if left unaddressed. 
Identifying the crux of the issue, Russian Deputy Prime Minister and Presidential Plenipotentiary to the Far Eastern Federal District, Yury Trutne, highlighted the inadequacy of the two main railways, the Baikal-Amur Line (BAM) and the Trans-Siberian Railway. Trutne warned of potential economic losses exceeding 23 billion euros, urging an urgent resolution to the transportation capacity problem. 
While the Russian officials have not divulged specific details regarding the large-scale port construction, a consortium comprising Gazprom Bank and construction company BTS-Most proposed an extension and reconstruction of the BAM and Trans-Siberian Railway in early June. This initiative seeks to strengthen connections with Asian countries and boost international trade.

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