Now Is The Time To Build Trans-Caspian Pipelines – Analysis
By Arab News
By Luke Coffey
There has recently been a lot of interest in the Middle Corridor’s growing importance as a key transit route connecting European and Asian markets for goods, energy and the movement of people. In simple terms, this corridor stretches from Turkiye, through the South Caucasus, across the Caspian and into Central Asia. This is the only trade route on the Eurasian landmass that bypasses both Russia and Iran.
The importance of this corridor was recently demonstrated in the air. Fighting in Iran closed many traditional airspace routes in the Middle East and uncertainty about the safety of commercial flights over Russia’s North Caucasus made the Middle Corridor vital for air transport.
In addition, there has been significant investment in improving the region’s ground transport infrastructure, with rail lines and roads being built and modernized and key ports on the Caspian Sea expanded and updated. One crucial area that needs more attention, however, is the free flow of energy resources, specifically oil and gas, along the Middle Corridor. This is where the Caspian Sea serves as both a challenge and an opportunity.
Two proposals that are now being debated deserve more attention. The first is the Trans-Caspian Gas Pipeline under the Caspian, which would connect Turkmenistan with Azerbaijan. The second is an oil pipeline under the Caspian connecting Kazakhstan with Azerbaijan, a newer idea that merits serious consideration.
The Trans-Caspian gas proposal has been discussed for decades but has made little progress. It would allow Turkmen gas to flow westward through existing infrastructure in the South Caucasus and onward to Europe. Europe depends heavily on the Caspian region for gas, primarily from Azerbaijan. This has been particularly true since Russia’s large-scale invasion of Ukraine in 2022, which saw Europe’s imports of Russian gas sharply decline and its search for alternatives intensify, turning Brussels’ attention toward the Caspian.
While Azerbaijan has increased gas flows to Europe, there has also been growing discussion about looking farther east to Turkmenistan. Turkmenistan has some of the largest gas reserves in the world but it remains limited in terms of where it can export it. Russia was once the largest importer of Turkmen gas but now it is China.
Europe has never been able to tap into Turkmenistan’s reserves in a meaningful way because of the challenge of moving gas across the Caspian profitably. Liquefying natural gas for such a short distance is cost-prohibitive. The pipeline has not been built for two reasons: the legal questions surrounding the status of the Caspian Sea, and Iran and Russia insisting they should have a say in any major infrastructure project as littoral states. In sum, Tehran and Moscow do not want to compete with Turkmenistan as providers of energy resources.
Meanwhile, to the north, Kazakhstan is keen to better diversify how it exports its oil. Kazakhstan ranks around 12th globally in proven oil reserves. Right now, a vast majority of this oil is transported through Russian territory to the Black Sea via the Caspian Pipeline Consortium pipeline. But the war between Russia and Ukraine has made policymakers in Astana more interested in seeking alternative export arrangements.
International sanctions regimes can complicate the export of oil through Russian territory to global markets. Then there is the added complication of war. The Russian port city of Novorossiysk on the Black Sea, which serves as an export outlet for both Russian and Kazakh oil, has faced repeated disruption, while the overall security situation in the Black Sea is not conducive to the safe passage of commercial shipping.
In recent years, Kazakhstan has tried to diversify by shipping oil in smaller tankers to Baku and then into the Baku-Tbilisi-Ceyhan pipeline, which runs through the South Caucasus into Turkiye, and onward to global markets through the Mediterranean. But the real constraints are the limited number of tankers and port infrastructure that is insufficient to move very large volumes. This is why there is growing interest in building a pipeline connecting Kazakhstan to Azerbaijan under the Caspian and then onward to global markets.
There is no better time for policymakers to push for both these initiatives. First, the geopolitical circumstances in the region facilitate the construction of such pipelines at a time when Russia and Iran would previously have opposed new infrastructure of this kind. Both are currently preoccupied elsewhere. Russia remains consumed by Ukraine, while Iran is focused on the consequences of its war with the US and Israel. With two Caspian states distracted, an opportunity exists for the other littoral states to advance their own interests in energy infrastructure.
Second, there is renewed US attention on the region that should be taken advantage of. In the 1990s, in the aftermath of the Soviet Union’s collapse, Washington was vocal in supporting the construction of new pipelines. Having American backing for new pipelines crossing the Caspian and linking Central Asia to the South Caucasus today would go a long way toward reassuring international investors.
Finally, both Kazakhstan and Turkmenistan want to diversify their exports. Turkmenistan continues to face a difficult economic situation, while Kazakhstan knows that as long as instability in the Black Sea persists, its oil exports could remain under threat. Diversifying export routes would go a long way toward alleviating these concerns.
The Caspian region has been, is and will continue to be an area of geopolitical importance. And the Middle Corridor will only grow in importance in the context of global trade. The sooner policymakers solve some of the energy transport problems associated with the Caspian, the better off the countries of the region will be. The stars have aligned geopolitically to make the dream of new pipelines under the Caspian a real possibility. Policymakers should not squander this moment.
- Luke Coffey is a senior fellow at the Hudson Institute. X: @LukeDCoffey
