BAKU, Azerbaijan, April 20. South Caucasus’ importance as a transit hub has increased, Cameron Evans, Junior Analyst at UK’s PRISM Political Risk Management told Trend.
Evans noted that since the start of the conflict between Ukraine and Russia on February 24, and the associated sanctions levied on Russia by the West, the South Caucasus’ importance as a transit hub has increased.
“It has been a target of alternative route considerations for the energy sector. Kazakhstan (RoK) is a suitable example of a country where sanctions have highlighted the country’s vulnerability to Russian economic instability and the need for greater regional cooperation to compensate for this. However, Russian pressure and the economic costs of changing transit routes are limiting, meaning that the South Caucasus is unlikely to play a key role as a transit hub,” Evans said.
Evans added that with the effects of Russia’s economic instability being felt strongly in the RoK on 12 April, RoK state railway company Kazakhstan Temir Zholy and Azerbaijan Railways signed a key cooperation agreement on logistics in relation to the transcaspian transportation route, demonstrating the growing importance of the South Caucasus as a transit hub.
“Uranium is a prime example showing the transcaspian transport route’s increasing importance. The majority of the RoK’s uranium exports are sent via rail to the port at St Petersburg before being shipped to global markets. Exports have yet to be disrupted, but there is a risk that the EU might stop accepting ships from Russia. It is far easier for the RoK to divert its uranium exports than energy exports," Evans said.
He noted that there are two potential routes for these exports: via China and via the Caspian Sea and the South Caucasus to Turkey and beyond.
"If the RoK were to diversify its uranium export routes from Russia, there would likely be only a limited reaction from Moscow due to its reliance on RoK uranium. However, there are two key issues - an increase in cost and security concerns. These factors mitigate the advantages of a pre-existing transport network which is safe from instability in Russia,” he said.
Evans recalled that RoK has stated that it would seek to increase exports across the Caspian Sea to the BTC pipeline which begins in Baku, Azerbaijan.
“This has long been a stated ambition for the RoK, however, due to political pressure from Russia, a trans-Caspian shipping route – not to mention a pipeline – has failed to develop any momentum, with just 3 per cent of RoK oil exports traveling across the Caspian. This political pressure is another key mitigating factor in significantly increasing the South Caucasus’ importance as a transit hub,” he said.