Central Asia’s Railroad Ambitions

Courtesy of STRATFOR (subscription required), an interesting article on potential Central Asian railway development:

A train passes the Tian Shan mountains in China’s far western Xinjiang region

By the end of 2012, most of the pieces could be in place for an agreement on building a railway linking China to southern Central Asia along the historic Silk Road. Plans for such a railway have been discussed for decades as China looks for ways to access Central Asian markets as well as the more lucrative markets of the Middle East and Europe. If the many obstacles to the plan can be overcome, the economic — and possibly political — dynamics in Central Asia would be profoundly changed.


Discussions centering on the China-Kyrgyzstan-Uzbekistan rail line have accelerated in recent months, with Kyrgyzstan’s new government meeting with Chinese officials on the topic just days after taking office in September. Uzbekistan has also given its support for the project, according to statements made by Uzbek Deputy Minister of Foreign Economic Relations, Investments and Trade Bakhtiar Abdusamatov on Nov. 13. Outgoing Chinese Vice Premier Hui Liangyu said in September that China was making plans to accelerate the project.

The Silk Road Railroad

The Silk Road refers to a series of overland trade routes connecting Asia to Europe via Central Asia, South Asia and the Middle East that date as far back as 1600 B.C. One of the main routes runs through Central Asia and the Tien Shan system of mountain ranges, avoiding the high Himalayas of northern India and Nepal.

This route passes through southern Kazakhstan or Kyrgyzstan to Uzbekistan. From there, it could run to either Afghanistan or Iran and then point further west. Cities along the route such as Kazakhstan’s Almaty and Taraz; Uzbekistan’s Andijan, Tashkent and Samarkand; and Kyrgyzstan’s Kara-Suu became economic and population hubs over the last several thousand years because of this geography. But as the powers around Central Asia shifted, trade along the Silk Road began to diminish, particularly as Russia and then the Soviet Union absorbed the Central Asian states. Discussions began in the 1950s regarding the creation of a railway along the Silk Road to China, but mutual distrust between Beijing and Moscow prevented such a project from proceeding.

Only after the fall of the Soviet Union did a rail project linking Central Asia and China actually materialize. China and Kazakhstan built the Alashankou railroad in 1990, connecting Xinjiang in northwestern China to Dostyk in Kazakhstan. From there, the Alashankou railroad links into the Soviet-built rail network that reaches into northeastern Uzbekistan and northern Kyrgyzstan. This system has deficiencies, however, since the rail gauge changes from China to Kazakhstan, creating a host of issues that will also be present in future Silk Road railroad projects.

Future Rail Plans

Now, China is looking to make a much more robust rail system into Central Asia along the more traditional Silk Road routes of the southern Central Asian states. Plans for a China-Kyrgyzstan-Uzbekistan line have been under negotiation since 1997 but have been stalled until now. In the meantime, China has been negotiating with Dushanbe to build a line across Tajikistan through Afghanistan and to Iran, where it would join the Herat rail network. This route option is less appealing to Beijing for three reasons. First, a rail line through Tajikistan would not cross near any Central Asian population or commercial hubs, making the country a mere transit state. Second, the railroad needed to cross Afghanistan to Iran would be much longer and more costly than a railroad crossing Uzbekistan, because the terrain is rougher and the distance and security concerns are greater. Third, Tajikistan is more mountainous, with few good routes for a rail line.

However, China seems to be making progress on its preferred Kyrgyzstan-Uzbekistan route. This proposed rail project would be 268 kilometers (167 miles) long and would run from the Chinese market town of Kashgar in Xinjiang through Kyrgyzstan’s Kara-Suu before ending in Uzbekistan’s Andijan. Both Kara-Suu and Andijan are two of Central Asia’s largest bazaar and commercial hubs, meaning cheap Chinese goods would be able to flood the area. These goods would largely consist of low-value products that Central Asian states desperately need but previously have had to import from more expensive sources like Russia. Such a connection would also open up the Chinese market to Uzbek exporters for commodities such as uranium and cotton. Transporting freight between China and these two regions via rail would cost only 10 percent of the price of transporting it by road.

Though Uzbekistan and Kyrgyzstan are attractive markets to China, Beijing’s ultimate goal is to connect this route through Afghanistan and Iran to the much larger, more lucrative markets in Turkey and Europe. There is already a robust rail system in Iran, Turkey and Europe, so China only needs to connect to those countries’ networks to gain access to their markets.

It is estimated that sending cargo by rail from China to Europe would take a week versus the several weeks or even months it would take to ship. Shortening transportation times and reducing costs for shipping between two major economic hubs like China and Europe is especially appealing given that both are struggling under the current economic conditions.

Naturally, China must take many political and security considerations into account regarding the feasibility of building a rail network through Central Asia, Afghanistan and Iran. China has shown in the past that it does not shy away from working in difficult environments. But Beijing is thinking about the long term in regards to this project, and the long-term prospects for each of these states is uncertain.


A number of significant obstacles to building a rail route through Kyrgyzstan and Uzbekistan exist.

Rail Gauge

The first challenge to the project is that the rail gauge in former Soviet territory differs from the gauge in the rest of the world. Rail tracks in the former Soviet territories are on a broad-gauge track of 1,520 millimeters (60 inches) versus the global standard gauge of 1,435 millimeters used in China, Europe, Iran, Turkey and most other countries. The Russian Empire and the Soviet Union intentionally used a different gauge to block invaders from entering Russia by rail. Consequently, trains on the current rail line from China to Kazakhstan must stop at the border, where cargo is unloaded and then reloaded onto trains on the broad-gauge rail line in Kazakhstan for transit through Central Asia. Similar hindrances to rail transit exist between Europe and the Middle East on one side and the former Soviet territories on the other.

China has proposed building a standard-gauge line through Kyrgyzstan and Uzbekistan so cargo will not have to be moved to different trains before entering or leaving China and when entering or leaving Central Asia for Afghanistan and Iran. Kyrgyzstan has stated that it is open to this proposal, mainly because it has little rail infrastructure, so having two incompatible gauges is less of an issue. But Uzbekistan thus far seems opposed to having a different-gauged line built through its territory. Uzbekistan already has a fairly extensive rail system, and it wants cargo to and from China to be able to move throughout the country. (Uzbekistan is also wary of the project because of security issues, but it could use the different gauge size as an excuse not to agree.) This is by far the largest roadblock to China’s rail ambitions.

If the Central Asian states ultimately decide to switch to standard-gauge tracks, this would represent a monumental shift symbolizing their desire to connect to the wider world rather than remaining isolated and dependent on Russia.


The next issue the project faces is cost. It is estimated that the China-Kyrgyzstan-Uzbekistan railroad will cost approximately $2.6 billion, with most of that expense falling to Kyrgyzstan for its section of the line — China’s side of the rail line is mostly built, and Uzbekistan has a pre-existing rail system (though it would have to start from scratch if it decided to go with the standard gauge). Kyrgyzstan is one of the poorest former Soviet states, with a gross domestic product of a mere $5.9 billion in 2011. Even the cost of the Kyrgyz section (a little less than $2 billion) would be one-third of the country’s GDP.

In years past, scenarios have been discussed in which China would finance the line for Kyrgyzstan, and Bishkek would repay Beijing in installments with mineral deposits (gold, aluminum, etc.). But such an agreement seemingly lost its appeal in 2012 after China built up a surplus of commodities as it reduced its consumption of them. In July, unconfirmed reports emerged that unnamed German investors might take up Kyrgyzstan’s financial load in exchange for control over the line, but such reports have since dwindled.

According to Stratfor sources in Kyrgyzstan, recent negotiations have envisaged a group of Chinese investors financing the Kyrgyz cost of the project. This would not be surprising since China has invested heavily in Central Asia for years. These investors would keep income from fees for transiting the goods; Kyrgyzstan is open to sacrificing that income because of the jobs the rail line would create and the government’s desire to facilitate the entry of inexpensive Chinese goods into Kyrgyzstan.

Movement of People

A major concern of this project is that neither Kyrgyzstan nor Uzbekistan wants the proposed rail line to facilitate the transit of large numbers of people into Central Asia. Kyrgyzstan’s economic minister said the railway could bring 250,000 Chinese tourists to Central Asia. There is still strong prejudice against the Chinese in Central Asia, a sentiment that dates back to Soviet anti-Chinese propaganda. It is widely feared in the region that many of these Chinese passengers would be Uighur job seekers who would compete for employment.

Deep mistrust also exists between the Central Asian states regarding the creation of increased passenger transit options between their fellow Central Asian countries, particularly between Kyrgyzstan and Uzbekistan. Uzbekistan’s border with Kyrgyzstan is frequently closed due to security concerns, particularly after the 2010 revolution in Kyrgyzstan that sent 100,000 refugees (or, by Uzbek estimates, four times that figure) across the border into Uzbekistan; ethnic tensions still exist between both countries’ populations. Uzbekistan has used the border as leverage with each of its neighbors in the past, closing its borders with Kyrgyzstan, Kazakhstan and Tajikistan for most of April 2010 through October 2011.

Promoting economic growth in Andijan, the current terminus for the China-Kyrgyzstan-Uzbekistan rail line, could also create problems for the Uzbek government, raising questions about whether the project will proceed. The Andijan region is a major security concern for Tashkent, which has had difficulties controlling the population there. Allowing foreign influences to expand or bolstering the economy in the region could strengthen the population, making it more difficult for Tashkent to maintain control.

The Russia Factor

Another major factor in this situation is Russia, which sees Chinese rail links into the former Soviet states as a threat to Russian influence in the region. Russia has benefited from having the Central Asian states remain on the broad-gauge rail system, which has kept other countries from shipping their goods to Central Asia en masse and undercutting Russian goods. This has kept much of Central Asia dependent on Russia’s more expensive goods. China has expanded its influence in Central Asia via investment and large energy links, and a rail line would further increase its presence in a way that would strongly impact the base-level economies in the region — something Russia fears.

To block outside competition, Russia and Kazakhstan have sought to ensure that transporting goods into Kazakhstan by rail from non-former Soviet states is laborious and expensive. Having goods enter Central Asia from states Russia cannot manipulate as easily, particularly Uzbekistan, concerns Moscow. Uzbekistan has recently broken out of Russia’s security bloc and has been trying to distance itself from Moscow’s influence. Tashkent has been reaching out to large potential partners in areas concerning the military and the economy, among others. A direct rail link between China and Uzbekistan via Kyrgyzstan could strengthen Tashkent’s relationship with just such a partner.

Russia is also working to create an economic union between many of the former Soviet states. Belarus and Kazakhstan already belong to this group, known as the Customs Union. This has impacted Kazakhstan’s legal trade with China. Similarly, Kyrgyzstan — which is planning on setting up its road map for Customs Union membership by the end of 2013 — could see this membership reduce the benefits it has obtained from increased trade with China.

This entry was posted on Friday, November 23rd, 2012 at 4:24 am and is filed under Uncategorized.  You can follow any responses to this entry through the RSS 2.0 feed.  Both comments and pings are currently closed. 

Comments are closed.

Wildcats & Black Sheep is a personal interest blog dedicated to the identification and evaluation of maverick investment opportunities arising in frontier - and, what some may consider to be, “rogue” or “black sheep” - markets around the world.

Focusing primarily on The New Seven Sisters - the largely state owned petroleum companies from the emerging world that have become key players in the oil & gas industry as identified by Carola Hoyos, Chief Energy Correspondent for The Financial Times - but spanning other nascent opportunities around the globe that may hold potential in the years ahead, Wildcats & Black Sheep is a place for the adventurous to contemplate & evaluate the emerging markets of tomorrow.