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24x7Report > Blog > Finance > Uzbekistan and the New Realities of Trans-Afghan Trade
Finance

Uzbekistan and the New Realities of Trans-Afghan Trade

Last updated: 2024/05/31 at 5:27 PM
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Uzbekistan and the New Realities of Trans-Afghan Trade
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For the reason that starting of the 12 months, Uzbekistan has held a number of rounds of negotiations with Qatar and the United Arab Emirates on financing the development of the $7 billion Termez-Mazar-i-Sharif-Kabul-Peshawar railway, which might hyperlink Uzbekistan to Pakistan through Afghanistan.

The venture is essential for the states of Central Asia and Afghanistan when it comes to offering entry to the ocean, in addition to strengthening their transit potential and geopolitical position, however the implementation of the Trans-Afghan Railway has lengthy been sophisticated by instability in Afghanistan Through the Republic interval a serious risk to the venture was the Taliban; now the present Taliban authorities in Afghanistan is able to act as a guarantor of the route’s security. One other remaining main hurdle is the query of funding. As such, Tashkent has referred to as on the Gulf monarchies to cooperate. Kazakhstan, Russia, and Belarus have additionally expressed curiosity.

The position of Uzbekistan within the improvement of trans-Afghan communications stays essential. Nonetheless, the state of affairs may change attributable to elevated competitors with Iran and Turkmenistan, given their energetic interplay with the Taliban regime on transport and transit points.

To the South Seas

Uzbekistan has pursued a constructive coverage towards Afghanistan, diligently involving Kabul – no matter who held energy – within the technique of strengthening connectivity between Central and South Asia.

Since 2011, the Hairatan-Mazar-i-Sharif railway line has been in operation, offering Uzbekistan with an distinctive place within the transportation of products within the Afghan or trans-Afghan course. This hall serves virtually your complete quantity of Afghanistan’s overseas commerce, producing excessive transit revenues. This explains Tashkent’s ardent want to make use of it in new transport tasks.

In November 2023, a memorandum was signed on the creation and implementation of the Worldwide Transport Hall (ITC) Belarus-Russia-Kazakhstan-Uzbekistan-Afghanistan-Pakistan. The size of the route is 5,532 kilometers, and the cargo supply time is 20 days, which is 3 times quicker than transit by sea. The promise of financial advantages fuels the curiosity of northern powers in utilizing the Uzbek-Afghan transit path to export items to South Asia and the Center East.      

Moscow has many different choices in its arsenal, together with routes alongside the Caspian Sea (trans-Caspian), the territory of Azerbaijan (western), in addition to Kazakhstan, Uzbekistan, and Turkmenistan (jap), generally bypassing Uzbekistan. These are all variations of the Worldwide North-South Transport Hall (INSTC) with entry to Iranian ports and roads. 

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The Trans-Afghan Hall won’t solely complement this current mixture, however may even function a superb substitute for the waterway by the Black, Mediterranean, and Crimson Seas, which, in mild of the struggle in Ukraine and the rising Palestinian-Israeli battle, has change into extraordinarily unsafe.

Tashkent additionally plans to develop the China-Kyrgyzstan-Uzbekistan railway hall (development is expected to begin quickly) to Afghanistan. It will assist appeal to further cargo circulate to the Trans-Afghan path to Peshawar.

China, which has critical potential for creating deeper commerce relations with Afghanistan, will partially profit from the connection of the 2 routes. Nonetheless, Beijing has positioned its principal bets on the transport reference to its western neighbor through the China-Pakistan Financial Hall (CPEC), which is named the flagship and the costliest venture of the Belt and Street Initiative. In Could 2023, the Taliban announced their resolution to take part in CPEC, primarily recognizing Pakistan’s unique proper to transit transportation between China and Afghanistan (through the high-mountain Karakoram Freeway and the Broghil Go on the way in which to the Wakhan Valley). On this regard, the position of Central Asian transit for China isn’t so vital, however Beijing isn’t going to put in writing it off both.

Iran isn’t detached to the Trans-Afghan Railway, because it has noticeably intensified contacts with the Taliban alongside worldwide transport corridors. Tehran is constructing the Khaf-Herat railway and intends to increase it to the Lesser Pamir (Wakhan area), the place the borders of China, Pakistan, Afghanistan, and Tajikistan intersect. It will almost definitely be finished by a reference to the Termez-Mazar-i-Sharif-Kabul-Peshawar railway, making an allowance for the Taliban’s beforehand stated plan to attach Mazar-i-Sharif and Herat by rail.

As well as, Uzbekistan, in partnership with Kazakhstan, which has port infrastructure within the Caspian Sea, can act as a handy transit choice when constructing logistics from the South Caucasus, in addition to from Turkey and the European Union, by the South Caucasus within the Afghan-Pakistan course and again. Nonetheless, to grab this chance, Tashkent should compete with Turkmenistan, which borders Afghanistan and the Caspian Sea.

Competitors for Transit

The above steadiness of pursuits of world and regional powers within the subject of transport connections with Afghanistan by the territory of Uzbekistan brings the implementation of the long-term initiative to construct the Trans-Afghan Railway nearer to actuality. The size of the long run railway will likely be 647 kilometers. The transportation of products from Pakistan to Uzbekistan alongside this route will take solely 3-5 days as a substitute of the present 35. The price of transporting one container is anticipated to decrease by virtually 3 times. By 2030, the potential cargo circulate by the brand new railway will likely be about 22 million tons per 12 months. Its bulk will likely be fashioned by transit.

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The prospect of funding by the Gulf states within the venture to construct a railway from Termez to Peshawar is turning into extra apparent. In 2020, the Emirati firm AD Ports Group and the Uzbek firm Sanoat Energetika Guruhi (Saneg) created the three way partnership ADL-Ulanish. It was trusted with the event of a feasibility examine for the venture. Within the fall of 2023, a Qatari delegation visited Tashkent and got acquainted with the technical parameters of the Trans-Afghan route, after which they expressed readiness to implement it. It appears probably that  these gamers will unite right into a consortium, which can subsequently obtain the correct to handle the operation of the railway.

Hypothetically, the institution of a railway connection between Tashkent and Islamabad will strengthen the aggressive benefits of Uzbek transit extra broadly, coupled with its geopolitical and geoeconomic significance for exterior actors. Nonetheless, the present realities of trans-Afghan communications might solid a darkish shadow on that cherished prospect. In spite of everything, the Taliban help the development of not solely the Trans-Afghan Freeway, but in addition the Khaf-Herat railway with entry to the Iranian port of Chabahar on the shores of the Gulf of Oman, and in addition intend to activate the Lapis Lazuli Hall, initiated by Turkey, Azerbaijan, Turkmenistan, and Afghanistan in 2012.

The beginning part of the Lapis Lazuli Route must be the railway from the Torghundi checkpoint on the Afghan-Turkmen border to the town of Herat. Its development has already been agreed with the Turkmen aspect. From Herat, the route will proceed to Ashgabat, then proceed to the Caspian port of Turkmenbashi with entry to the port of Baku, then by Georgia to Ankara and Istanbul.

Thus, Afghanistan is able to diversify commerce flows, concurrently decreasing transport dependence on Iran, Pakistan, and, to a sure extent, Uzbekistan. On this case, Turkmenistan will profit essentially the most attributable to its connecting position within the Lapis Lazuli mixture. This can be a critical problem for Tashkent.

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If the Torghundi-Herat railway line is launched, Uzbekistan dangers dropping its privileged standing within the transportation of export-import cargo of Afghanistan and its overseas commerce companions.

Such a pattern has already emerged. For instance, neighboring Kazakhstan, which has historically used Uzbek transit to enter the Afghan market, lately has begun to actively have a look at various routes by Turkmenistan. Most probably, Russia will observe the identical instance. Moscow has not hidden its plans to connect with the Lapis Lazuli Hall by its personal ports on the Caspian Sea and lengthen it to Pakistan. It must be famous that in 2023, the Taliban proposed the Herat-Kandahar railway venture to supply connectivity between the Russian Federation and Pakistani ports within the Indian Ocean.

Conclusions

Towards the backdrop of regional navy conflicts affecting the safety of strategic sea routes connecting East Asia and Europe, Eurasian land routes exhibit excessive significance in enhancing the circulate of commerce between these subregions. Important adjustments within the worldwide logistics system are fueling the event of trans-Afghan communications, the place Uzbekistan has secured its standing as a key transit nation and dependable associate of Afghanistan.

In tandem with Kabul, Tashkent is forming efficient transport corridors, involving states from close to and much overseas. The core of all these tasks must be the Termez-Mazar-i-Sharif-Kabul-Peshawar railway, which is scheduled to be launched in 2030. China, Russia, Iran, and the Persian Gulf international locations are exhibiting various levels of curiosity on this route. Its profitable implementation will deliver Central Asia financial bonuses as a result of diversification and intensification of overseas commerce, and in addition a geopolitical dividend, which will likely be expressed in decreased dependence on northern cargo supply routes. On the similar time, Uzbekistan, as up to now the one nation that has direct, uninterrupted railway communication with Afghanistan, may have one other elementary alternative – to strengthen its transit potential.

To keep up and enhance aggressive benefits within the southern course, Tashkent must handle competitors with Iran and Turkmenistan. Right here you will need to work proactively – to enhance tariff coverage, simplify customs procedures, enhance the situation of highway infrastructure, enhance the standard of transport companies and way more. Finally, this may have a constructive influence on the attractiveness of Uzbek transit.

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