Article published by The Diplomat, January 2025.
On December 25, 2024, Azerbaijan Airlines flight 8432 crashed, killing 38 people. Coincidentally, the flight’s point of departure, Baku, and the city close to its crash site, Aktau, are the two main ports of the Trans-Caspian International Route (TITR), also known as the Middle Corridor. This trade route connects China to Europe through Kazakhstan, Azerbaijan, Georgia, and Türkiye.
For Europe, trade along this corridor has become increasingly important to gain access to Chinese goods and Central Asian energy resources and critical raw materials, while bypassing sanction-stricken Russia and Iran. The EU has invested significantly in Middle Corridor trade as a result.
However, the Caspian Sea, located at the heart of the Middle Corridor, still is a major obstacle to improving regional connectivity. Unresolved legal disputes, regional security issues, and steadily declining water levels could all inhibit this trade route from realizing its economic potential.
Legal Issues
For most of the 20th century, only two countries had access to the Caspian Sea: the Soviet Union and Iran. With the collapse of the Soviet Union, four new littoral states emerged – Azerbaijan, Russia, Kazakhstan, and Turkmenistan – necessitating a new legal arrangement for the division of the sea and its offshore oil and gas deposits. Years of legal bickering followed.
The 2018 Convention on the Legal Status of the Caspian Sea, although a major breakthrough, did not provide a solution to this problem. Under the Convention, littoral states are only allowed to construct seabed infrastructure provided that these projects comply with the environmental standards laid down in the Framework Convention for the Protection of the Marine Environment of the Caspian Sea. Russia and Iran have repeatedly invoked the Tehran Convention to effectively block the construction of pipelines connecting Azerbaijan to Kazakhstan and Turkmenistan.
Militarization of the Caspian Sea
Amid a lack of legal progress on seabed delimitation, a number of incidents occurred between the littoral states. In 2001, disagreements between Iran and Azerbaijan over the development of Caspian hydrocarbon fields nearly led to a military confrontation. Ongoing disputes resulted in a slow but steady arms race. In the Caspian balance of naval power, Russia still holds most of the cards.
Since 2022, the Caspian Sea has served as a launching pad for bombers and cruise missiles against Ukraine. In response, the Ukrainian military managed to strike the main Russian naval base in Kaspiysk, Dagestan, with a kamikaze drone in early November 2024. These hostilities, combined with Russia shooting down Azerbaijan Airlines flight 8432, are a potential threat to regional security in the Caspian Sea. This could deter long-term investments in trade and infrastructure development.
Declining Water Levels
The Caspian’s steadily declining water levels are another cause for concern. Over the last two decades, these have already dropped by 1.7 meters. A 2020 study published in Nature projects a decrease of a further 9 to 18 meters by the end of the century. Kazakhstan in particular is heavily affected.
While concerns about a drop in water levels are shared by all littoral states, there is no agreement on its cause. So far, governments in the region have mostly pointed to the natural cycle of water level fluctuations and thereby underplayed their own responsibility, or that of other states. Yet human interference has definitely contributed to the current environmental problems. Russia, for example, built a series of large dams on the Volga, which accounts for approximately 80 percent of the Caspian’s inflow.
The substantial costs of dredging and limited cargo capacity per ship are already increasing overall costs of shipping across the Caspian, making the Middle Corridor as a whole less attractive. In the long run, the projected decreases of water levels by 2100 could even make many of the Caspian ports wholly inaccessible.
Going Forward: Cooperation and Competition Along the Middle Corridor
On the one hand, Russia and Iran have little interest in strengthening trans-Caspian connectivity. Developing new trade routes and oil and gas infrastructure would compete directly with their existing corridors and pipelines. On the other hand, Russia and Iran have much to gain from keeping trans-Caspian trade moving. The Caspian Sea is a crucial part of the North-South Corridor linking Russia to Iran. Bilateral trade is increasingly important for these two sanctioned countries, and a substantial part of Iran’s arms deliveries to Russia is likely shipped across the Caspian. The Ukraine war has also deepened Russia’s ties with Azerbaijan. Baku has become essential to Russian energy exports, sanctions evasion, and for keeping a land bridge open to Iran.
Meanwhile, the naval balance of power in the region is shifting. Russia’s warships in the Caspian are the largest of all navy vessels in the region, requiring relatively deep waters to operate effectively. By contrast, Kazakhstan currently possesses a growing fleet of shallow draft ships that are better equipped to operate in the shallow northern part of the Caspian Sea.
These are extracts from an article written by Julian Postulart and previous PSI intern Douwe van der Meer for The Diplomat, January 2025. The original publication complete with figures can be accessed via the link here.
Photo credit: R~P~M /Flickr