China's Belt and Road Initiative: Risk Outlook China's Belt and Road Risk Outlook | Page 6

THE TRANS-CASPIAN ROUTE
The growth outlook is much rosier for China’s Trans-Caspian route. The recent completion of work on
the Baku-Tbilisi-Kars (BTK) Railway in the South Caucasus has made rail shipments through Kazakhstan
and Turkmenistan much more attractive. Iran’s expanding rail links with the South Caucasus and Central
Asia are also set to create trade opportunities. Rail turnover through Kazakhstan to Europe reached
102,000 containers by the start of November. Current plans aim to hit 2 million containers by 2020.
The opening of the BTK will surely help boost transit turnover volumes, but there’s no good means of
judging whether 2 million is realistically attainable. Prime Minister Bakytzhan Sagintayev recently spoke
at the “Kazakhstan Global Investment Roundtable,” citing hopes to earn as much as $5 billion annually of
transit on top of the 2 million container figure. Observers should be skeptical while acknowledging that
significant growth is real.
For one, growing transit volumes should first be assessed in terms of China’s export turnover with the
South Caucasus and Turkey, since the route is multimodal. Even with significant subsidies, the relevant
routes Kazakhstan hopes to exploit are most viable for destinations just before or else at the edge of
Europe. For example, China has become Turkey’s leading source of imports, worth $2.1 billion for the
year at the end of November. As of September, trade with Georgia was worth $640 million for the year
with hopes in Tbilisi that this year’s FTA agreement will bring that total to $1 billion annually on average.
Work remains to increase turnover between the states along the route.
For another, Kazakhstan is hoping to rely on private investment and public-private partnerships. The
move is meant to reduce strains on the budget so that money can be spent elsewhere, particularly as
social spending is trending upwards through 2020. Political reforms are beginning to decentralize power
slightly and allow technocrats to manage Kazakhstan’s economy, but progress could vanish if President
Nazarbayev dies without naming a successor. Now that Nazarbayev is demanding the country’s
companies and elites to bring money back from offshore, it’s possible that elites will seek new means to
curry favor or else look for tax breaks via investments into specific projects.  
THE BLACK SEA AND BEYOND
Expansions of capacity are needed given the growing strain on Russia’s rail system. Azerbaijan expects
the BTK Railway’s initial capacity of 5-6.5 million tons of cargo is expected to grow to 17.5 million tons.
Some of that trade will flow into the Anaklia Deep Sea port currently under development on Georgia’s
Black Sea coast. Ports in Batumi and Poti are restricted by shallower drafts and are located in the center
of urban areas, which limits their ability to handle container traffic. The consortium building Anaklia
signed a Memorandum of Cooperation (MoC) with ports in Baku in Azerbaijan and Kuryk in Kazakhstan.
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