(MENAFN- Trend News Agency) 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.
Middle Corridor
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.