Transport corridors to increase investments in Azerbaijan, says Fitch Solutions

The development of significant trade infrastructure along the North-South and Middle Corridors could also boost exports and government revenues from transit fees, APA-Economics reports citing report of Fitch Solutions (FS) company.

Russia’s full-scale invasion of Ukraine has sparked renewed global interest in the Middle Corridor trade route connecting China to Europe via Central Asia and the Caucasus, excluding Russia. The World Bank believes that trade volumes along the Middle Corridor have the potential to triple by 2030. Azerbaijan will be a crucial part of that trade route, linking Central Asia to the Caucasus and then onto Europe thanks to its Caspian Sea coast.

At the same time, Russia has a strong incentive to improve infrastructure along the North-South corridor in order to boost trade with its ally Iran and maintain commodity exports to the global south. Indeed, rail freight between Azerbaijan and Iran rose 28% between March 2023 and February 2024, with imports from Russia to Azerbaijan also rising 16% y-o-y to over USD3.2bn. Azerbaijan’s geographical position at a strategic crossroads between East and West, North and South compliments its geopolitical position as chair of the Non-Aligned Movement (see map below). For example, the Baku-Guba-Russia toll road was inaugurated in October 2023 having been under construction since 2017 at the same time as improvements to the Baku-Tbilisi-Kars railway are set for completion in April 2024.

The modifications will increase freight capacity five-fold in anticipation of greater trade volumes moving along the Middle Corridor route between China and the EU. We forecast fixed investment growth to average 6.3% y-o-y of the next five years compared to -3.0% y-o-y over the previous decade.