Highlight 18/2025: What are the opportunities and challenges of Azerbaijan’s transit role on the Silk Road?
Varis Bahmanli, 20 March 2025
Azerbaijan has emerged as a pivotal hub on the Silk Road, leveraging its strategic location between Asia and Europe. Situated at the crossroads of the Caspian Sea and the Caucasus, it provides a critical landbridge on the Trans-Caspian “Middle Corridor” linking China to Europe. The country seized this opportunity, investing in transport infrastructure and regional partnerships to diversify its oil-dependent economy via transit revenues. Azerbaijan’s goal is clear: to establish itself as an indispensable East–West transit corridor – a role that brings both rewards and responsibilities. Azerbaijan’s geography makes it a strategic crossroads in Eurasia. It was the first Caucasus nation to back China’s Belt and Road Initiative, positioning itself early as a logistics hub bridging East and West. Its alliances with neighbors Georgia and Turkey led to projects like the Baku–Tbilisi–Kars (BTK) railway (opened 2017), creating a direct rail link from the Caspian Sea to Europe. Combined with the modern Port of Baku, this railway forms the backbone of the Middle Corridor. Now, with Russia’s Northern Corridor less viable due to geopolitical tensions, many shippers are turning south through the Caucasus.
In response, Azerbaijan and regional partners are working to eliminate bottlenecks by improving customs and capacity. International support is rising – the EU has allocated
€10 billion to bolster Middle Corridor infrastructure. The success of Azerbaijan’s transit ambitions is also closely linked to digitalization and logistics efficiency. The country is increasingly implementing blockchain-based trade facilitation systems and smart customs solutions to streamline operations, reduce delays, and enhance competitiveness. These innovations make Azerbaijan a more attractive transit hub in an era where speed and efficiency are paramount. Economically, the transit boom offers Azerbaijan a chance to diversify beyond oil. In 2023, the Port of Baku handled 7.4 million tons of cargo (16% more than 2022), and 72% of that was transit freight. The Middle Corridor’s throughput nearly doubled to 2.8 million tons as many shippers diverted goods away from Russia. To handle this surge, Azerbaijan is expanding capacity: it invested €100 million to upgrade the Baku–Tbilisi–Kars railway, and, with Kazakhstan and China, launched a new intermodal terminal at Baku’s port. These improvements aim to cut China–Europe transit to 15 days and let Azerbaijan capture a larger share of Eurasian trade. The economic dividends – transit fees, port revenues, and a growing logistics sector – are already bolstering non-oil GDP and reinforcing Azerbaijan’s role in regional trade networks.
While the trajectory is positive, challenges remain. Infrastructure bottlenecks – from limited Caspian ferry capacity to inefficient customs – must be addressed (Eurasian Development Bank). Coordination with partners like Kazakhstan, Georgia, and Turkey remains crucial. Regional stability is also key, as conflicts in the Caucasus could disrupt transit. Additionally, Azerbaijan must navigate a complex geopolitical landscape, balancing relationships with the EU, China, and Russia, all of whom have competing interests in Eurasian connectivity. Still, momentum is strong: governments aim to boost annual volumes to 11 million tons by 2030, and ongoing investments suggest Azerbaijan’s transit role will keep growing. Baku can solidify its status as a vital Silk Road gateway, reaping economic gains and geopolitical clout – provided it continues balancing East–West ties and expanding capacity.
Varis Bahmanli, Highlight 18/2025: What are the opportunities and challenges of Azerbaijan’s transit role on the Silk Road?, 20 March 2025, available at www.meig.ch
The views expressed in the MEIG Highlights are personal to the authors and neither reflect the positions of the MEIG Programme nor those of the University of Geneva.