150 years ago, the American transcontinental railroad was completed, connecting the United States from sea to shining sea and ushering in a new era of connectivity and economic growth. Among other things, the railroad enabled rapid and relatively efficient commerce across the country, and allowed information to flow more freely, replacing services like the Pony Express. By providing this increased connectivity, the railroad truly unified and integrated the country from coast to coast. Today, while the role of the cross-country railroad networks in the United States may have diminished, the advantages of rail transportation clearly have not: another transcontinental railroad has bloomed.
However, rather than uniting the North American continent, this railroad connects two existing economic powerhouses: Western Europe and East Asia. Starting from the eastern coast of China, this railroad passes through Kazakhstan and Russia, two countries that have invested heavily in the infrastructure. From Russia, the railroad extends to Belarus and Poland, and then feeds into the existing European Union rail network to reach receiving European cities. Gaining prominence in the mid-2000s, the railroad predominantly carries higher-value Chinese goods destined for the European market, such as electronics and select designer clothing. The railroad’s rise in the 21st century reveals the vast untapped opportunities of Central Asia, and perhaps more significantly, it highlights the strength and potential of an Eurasian economic alliance.
A Brief History of Eurasian Trade and Transportation
Ever since the Han Dynasty and Roman Empire, people and goods have flowed in significant numbers across the Eurasian continent by caravan, taking years to travel from end to end on the Silk Road. Although this early trade was extremely inefficient by modern standards, it opened new markets and brought prosperity to nearly every society along the overland route. However, as shipbuilding and navigational technologies improved, and as the first European navigators successfully found sea routes to Asian trading hubs, this transcontinental trade gradually transitioned to the seas.
While this shift may have enriched countless coastal cities in both Europe and Asia, it also deprived many landlocked areas of efficient and economically viable connections to the outside world. By the early 1900s, the lack of efficient transportation proved to be a military and technological pitfall for the territorially vast Russia. Because of its landlocked geography, Russia had little capability to send military forces to its eastern provinces, and in 1905, suffered a substantial military loss to Japan. As a precaution against future attacks, and to bolster its military capability across its territory, Russia completed the Trans-Siberian Railway in 1916. This railroad proved to be militarily significant during World War II, becoming a safe route that allowed the United States to supply its Western European allies. Thus, even without economic incentives, a railroad can be attractive to the leaders of Central Asia because of its strategic advantages.
In Russia, just one year after the Trans-Siberian Railway was completed, the Bolshevik Revolution and the ensuing years-long chaos greatly hindered the practical usage of the infrastructure. As a result, the economic advantages of the railroad were not immediately clear, and only became apparent once the Soviet Union achieved stability and started to industrialize. Later, in part due to the Soviet Union’s relative isolation as a communist regime, there was little effective international use of the infrastructure, and the railway largely remained a vital domestic link, with the exception of its temporary military use during World War II. In any case, East Asian manufacturing, especially high-value manufacturing, such as electronics, had not sufficiently grown to require such an overland connection to Europe during much of the 20th century. This of course changed as Japan, South Korea, and Taiwan increasingly provided more exports in the 1980s and 1990s, but in all three cases, sea shipping proved feasible and inexpensive because of their coastal geography.
Developments in the Past Decades
Eventually, manufacturers began to flock to China in the late 1990s and early 2000s in pursuit of the relatively cheap labor that it offered. However, these early factories were located on the eastern coast of China, mostly near ports that allowed for cheaper shipping to overseas customers. By the late 2000s, companies like Foxconn started to move their factories further inland in response to rising labor costs in China’s coastal cities, fueling demand for a land-based route to Europe. Although these companies initially experimented with the Trans-Siberian Railway, it proved to be geographically impractical because it deviated too much to the north. Soon, however, they found the logical alternative: a more southerly route, cutting through a number of Central Asian countries that had once been part of the Soviet Union. Naturally, as coastal wages continued to rise, more companies followed this trend, and the flow of traffic on the railway has continuously expanded.
Around the same time, Foxconn and H.P., two electronics firms with a heavy presence in Chinese manufacturing, sought alternatives to ocean shipping. They began to pilot rail shipments of their products to consumers in Europe, initially routed along the Trans-Siberian Railway, which passed exclusively through Russia. These early shipments were successful and clearly demonstrated the viability of freight shipments across Eurasia. Soon, these companies shifted to a more southern route, which passed through Kazakhstan before entering Russia. In April 2011, a train completed the 10,300-kilometer journey from Chongqing, China, to Duisburg, Germany, a milestone that paved the path for future trains.
Later that year, Russia, Belarus, and Kazakhstan formed the Eurasian Economic Union (EEU) to strengthen economic ties, an agreement that also reduced the number of customs checks as a train passes through Central Asia, thus allowing for faster trains. By 2013, after shipping procedures were refined, the Chongqing-Duisburg route had attracted the attention of other companies, and perhaps more importantly, the attention of governments, which soon provided subsidies for the train services, clearly believing that more train traffic would promote increased economic activity.
Today, there are many more variations of the Eurasian freight routes. Trains passing through Kazakhstan, Russia, Belarus, and Poland can easily be re-routed to different final destinations thanks to the extensively developed networks in China and Western Europe. These variations include the world’s longest railway route, spanning a distance of more than 13,000 kilometers from Yiwu, China to Madrid, Spain. With such extensive connections, it is not surprising that the volume of freight shipped across Central Asia by rail is significantly more than what it was in 2011, and continues to increase rapidly.
However, while the idea for the railway may have originated from the private sector, governments have also played a key role in promoting and sustaining it. In particular, the Chinese government has incorporated the railway as a central part of its Belt and Road Initiative (BRI), which it first announced in 2013, two years after the first run of the Chongqing-Duisburg train. Since then, it has dedicated a substantial amount of funding to ensure the success of the trans-Eurasian railway, and although official statistics are not available, experts estimate that the trains are still heavily dependent on subsidies, which undoubtedly increase their competitiveness relative to alternative methods of transportation.
Likewise, Kazakhstan, a key host of the railway, has invested more than US$3 billion in the rail infrastructure, with the expectation that by 2020, the railway would be able to handle a full one-tenth of the current volume of freight carried by planes and ships. Yet, while promoting economic growth is arguably the main incentive for government investment, the trains do not make stops in intermediate countries such as Kazakhstan, thus limiting the potential for domestic development. Clearly, economics do not fully explain the railroad, and there are powerful political incentives, potentially including Chinese influence through the BRI, that are fueling these developments.
While cost certainly presents a significant barrier, albeit one that has been overcome by government funding, there are various practical and logistical challenges that threaten the railway’s success. Some of these are particularly evident at the newly-built Khorgos dry port, located near the border between China and Kazakhstan. For instance, the trains cannot simply run directly from China to Europe because of physical limitations. The track gauge – the width between the two rails – is different: while China uses the standard 1,435mm gauge, Kazakhstan uses the Russian standard 1,524mm gauge, as a result of its many years as part of the Soviet Union. At Khorgos, specially designed cranes transfer cargo containers from Chinese standard-gauge wagons to Russian-gauge ones. A reverse process happens in Poland, because the European Union also uses standard-gauge wagons. Since these transfers are very time-consuming, they make train transportation less efficient. However, since country-wide changes in railway gauges would be extremely costly and disruptive, countries are unlikely to address these problems in the future.
Additionally, the problems of corruption and bureaucratic red tape are rampant throughout the region. For instance, the infrastructure itself is quite possibly the product of corrupt government institutions. There is a notable precedent of corruption regarding railroad networks. For example, top officials overseeing the construction of Kenya’s new railway – a project also supported by China through the Belt and Road Initiative – were recently arrested on corruption charges. Additionally, when freights pass through multiple countries, there is a substantial amount of paperwork accompanying every train at every border crossing, making shipments vulnerable to corruption by border guards. A lack of bureaucratic cooperation between bordering countries worsens this problem, requiring shippers to meet many different standards in order to avoid inspection, which, again, proves to be extremely time-consuming and inefficient. These logistical complexities reveal the potential inadequacies of the railroad in its current state, which became particularly evident when commercial shippers sent empty cargo containers from China to Europe in order to take advantage of government incentives.
The Promise and Future of Central Asia
From corruption to pure economics, it is clear that many problems plague the railroad. The very fact that governments across Central Asia are so heavily investing in it, despite the countless challenges, demonstrates the enormous potential geopolitical advantages in the offing. The substantial Chinese investment through its Belt and Road Initiative, and the fact that the railroad primarily serves to funnel Chinese goods to the European market, leaves no doubt about the predominant beneficiary of the railroad. As Chinese influence grows in the region, and as Russia increasingly cooperates economically with China, it is clear that the United States is at risk of losing its global economic supremacy.
Perhaps more significantly, the railroad does not only serve economic interests. In the event of a major conflict, control over the railroad could be of utmost military importance. Although the railroad’s host countries, such as Kazakhstan, may hold significant leverage in such a scenario, it is more likely that the nearby Russia will have a notable influence over the operations of the railroad. Thus, the growth and further development of this trans-Eurasian trade network actually provides a critical connection across the vast Eurasian continent to one of the United States’ historically greatest competitors, causing the United States already limited influence in Central Asia to dwindle even further. Moving forward, if the United States is to maintain its global influence, more attention must be paid to the trans-Eurasian railroad.