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FreightWaves Flashback: Advance on the new Silk Road

2006: Turkish company retreading Marco Polo’s path with multimodal Europe-to-Asia Suez alternative

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The many industries that make up the world of freight have undergone tremendous change over the past several decades. Each week, FreightWaves explores the archives of American Shipper’s nearly 70-year-old collection of shipping and maritime publications to showcase interesting freight stories of long ago.

In this week’s edition, from the April 2006 issue of American Shipper (virtual pages 75-77), FreightWaves Flashback looks at plans to reconstruct a centuries-old overland trading route between Europe and Asia 15 years ago.

Centuries ago, convoys of donkeys and camels trudged goods along the dusty Silk Road joining the two worlds of Europe and Asia. Now, Istanbul-based freight forwarder Advance International has made use of international agency plans to re-establish reliable landbridge routes between the two continents.

In March, the company’s subsidiary Advantage International Transport & Logistic Ltd., specialists in project cargo shipments — particularly power-generating machinery and petrochemical, smelting and mining equipment — became the exclusive container operator for energy-rich Kazakhstan, predicted to be one of the world’s top five oil producers by 2015.

The weekly combined rail and ocean Advantage Express Service operates along the Transport Corridor Europe-Caucus-Asia (TRACECA), established by the European Union in 1993.

Cargo moves via rail from the Georgian port of Poti at the eastern edge of the Black Sea across to Baku, where it is loaded onto a ferry across the Caspian Sea to Aktau, Western Kazakhstan, for a final rail journey via Tashkent to the former capital Almaty.

The eight-day Poti-Almaty transit includes 36 hours for the ferry journey and 10 to 12 hours of loading and unloading onto the ferry. The first test run in December on the 4,111-kilometer route took just 132 hours or about six days.

Advance estimates that the service will transport 50,000 TEUs each year with 56 Russian-type single-stack wagons on each block train. It is marketing the service to non-vessel-operating common carriers as a cheap alternative to the existing road and river routes, which can get ice-choked in winter.

“The freight rate will be between euros 2,500 ($4,000) to euros 3,000 ($3,600) per TEU compared to euros 5,500 ($6,500) for the all-road service, offering the same quantity and transit time,” said Jawad Kamel, Advance’s president and chief executive officer.

New Silk Road

In September 2000, two United Nations commissions identified four major Euro-Asian transport corridor routes — the Trans-Siberian, the TRACEA, the Southern and the North-South Corridor — to revive the historic Silk Road, launching its Joint Project on Developing EURO-ASIAN Transport Linkages 2002-2006.

By improving transport infrastructure and removing border barriers with a harmonized transport policy, the joint project aims to provide scheduled multimodal services from Western Europe as far across as China’s Eastern seaboard and as far down as South Asia to compete against shipping lines travelling through the Suez Canal.

Another of the project’s aims is to open up the vast, often hostile and largely landlocked Central Asian market. Kazakhstan is a large importer of equipment for the oil and gas industries but is out of reach via Suez.

The International North-SouthTransport Corridor estimates that Baltic to India cargoes will benefit from an improved transit time of 25 to 30 days, compared to 45 to 60 days via the Suez Canal.

In May, Advantage International will expand its Advantage Express Service by connecting it to the Trans-Siberian corridor to supply empty containers to Urumqi, a hub city in North-West China.

China’s container availability is desperately low due to the trade imbalance. Kamel admitted that the volumes of containers the company could provide to China would be “just a drop in the ocean” compared to the country’s burgeoning needs. COSCO is Advance’s agent in China.

The expansion to Urumqi will offer a potential connection from the extreme western Chinese inland region to Poti and then by feeder ships to Europe and the East Coast of North America.

Advantage International already operates rail services originating in Turkey, CIS and Russia and combined rail, roll-on/roll-off and ferry services, as well as container feeder services, between Black Sea and Mediterranean ports to Poti for onward transport by rail and road to all destinations within the CIS, Iran and Iraq.

Anticipating good volumes on the Advantage Express Service, the company plans to charter some 12,000- to 15,000-ton multipurpose ships to operate between Western Europe and Poti on a 14-day or twice-monthly sailing frequency. The transit time between Antwerp and Poti is expected to be about 12 days.

For North American cargoes, Advantage International charters ships from Germany’s BBC Chartering and Logistics on two routes: from Houston, Galveston, Baltimore and Charleston to Poti; and from Toronto, Montreal and St. John’s in Canada to the Georgian port. Houston-based World Projects International acts as Advance’s agent in North America.

There are also plans to increase the Advance Express Service’s frequency to five departures a week by the end of this year.

“With a question mark over supplies from other parts of the world, energy from Kazakhstan is becoming more vital every day,” Kamel said.

“Furthermore, with the Chinese government keen to open up inland parts of the country to international trade, more shippers will need to consider the overland option. Central China is a long way from the ports of the country’s Eastern seaboard, and the new express link will be vital in opening up these areas to the outside world.”

Iran at the hub

While the Islamic Republic of Iran may be considered part of the “axis of evil,” it is also located at the crossroads of the TRACECA and NorthSouth Corridor, and has big plans to make the most of its strategic location.

From Europe, Iran imports vehicles from manufacturers like Daimler, Renault, Peugeot and Fiat. Cargo from the United States includes frozen food stuffs.

In September 2000, Russia, Iran and India signed the North-South Transport Corridor Agreement to restore Soviet Union-era connections by extending the Helsinki/St. Petersburg/Moscow route across the Caspian Sea through to the southern Iranian port of Bandar Abbas, India and eventually beyond to South East Asia.

To facilitate the burgeoning corridor, Iran has embarked on one of the world’s largest railway construction programs. Last year, it committed to a five-year economic development plan to plug holes in its rail network and increase its cargo capacity to 53 million tons by 2010.

To do this, Iran aims to upgrade 5,600 kilometers of its existing 8,300 kilometers worth of track and lay down an extra 3,500 kilometers of electrified railway lines.

The development of the Qazvin-Rasht Astara railway has been identified as a priority, which will connect the northern province of Gilan to the state railway network and complete the western branch of the North-South Corridor.

Other major transport infrastructure projects include extending the Sangan-Heart railway by 201 kilometers to link Afghanistan to the Persian Gulf, and a Baku-Astara highway.

Astara Transit Terminal

Advance has identified Astara on the Azerbaijan and Iranian border as a major rail/road hub for the future. Over two years, the company has invested about $17 million to develop and become a 50-50 joint shareholder with the Azerbaijan State Railway in the Astara Transit Terminal.

Advance said cargo moved by rail from Western Europe can reach Astara in about 15 days, or 5-10 days from Russia and the CIS countries. From Astara, cargo will be dispatched to final destinations throughout Iran by road.

The terminal has new offices able to offer through documentation and is equipped to handle break-bulk cargoes, 20-foot and 40- foot containers, including heavy lift, and outsized cargoes up to 120 tons, within the rail loading gauge. It has 6,000 square meters of warehousing, 120,000 square meters of open storage and four sidings, connected directly to the warehousing area.

The terminal is also prepared to transfer cargo from the Russian broad gauge to the Iranian standard gauge in readiness for when Astara is connected to Iran’s rail network.

“Before its break, the former Soviet Union was a main supply corridor by rail from Western Europe to Iran via the Soviet-Iranian border at Djulfa; at its peak moving over 800 rail wagons a day,” Kamel said.

“However, the war between Azerbaijan and Armenia (1988-1994) disrupted this route and the railway through Azerbaijan to Djulfa was eventually destroyed,” he added. “Cargo had to be rerouted, either by sea to the Iranian ports of Bandar Abbas and Bandar Imam Khomeini, or by road via Turkey.

“Other alternatives were rail via Russia to the Caspian Sea port of Astrakhan and then by conventional shipping to the Iranian port of Bandar Anzali or, during May to October only, the Volga River. There is also a very long rail route from Russia via Kazakhstan, Uzbekistan and Turkmenistan to the Iranian border.

“All of these alternatives are either more costly, or not as efficient. Shippers in Iran are seeking more freight capacity on routes to and from Europe. Business is booming and the Astara Terminal heralds the return of a Central Asian transport artery.”.

Notwithstanding its position in the “axis,” Iran has recently troubled a number of governments by threatening to develop its nuclear capacity. Kamel dismissed Iran’s faltering diplomatic relations as a potential threat to the success of the North-South Corridor and the Astara Transit Terminal:

“No matter how many sanctions have been imposed on Iran in the past, none have worked. It is a big market with a population of 70 million. There are so many willing trading countries that sanctions would just make the middleman rich,” he said.

Although Advance has earmarked Iran and the Central Asian region with its latent connections to China and South Asia as a growth market, Kamel refused to be drawn into the company’s profit expectations for the Astara terminal.

“It is difficult to anticipate when we will make money back on the investment. As with any investment, any money is written off on day one,” he said.

Moving cargo through Iran and Central Asian has been problematic in the past.

“There were a lot of mishaps on delivery of cargo. In one case a container roof was cut away and stripped of its contents with the consignee receiving an empty container,” he said.

“Those days are fortunately gone. Unfortunately, there are still a lot of difficulties. Custom invoices go missing and containers can wait more than a year to be delivered awaiting documentation.”

To counter this hazard, all documentation will be handled at the Astara Transit Terminal site office while sales will be controlled from any of Advance’s offices in Bulgaria, Romania, Turkey, Azerbaijan, Uzbekistan, Iran, Kazakhstan or Russia. Advance has also established a network of 30 different sub-agents, headed by Seabreak Antwerp in Belgium, to handle sales of Astara Transit Terminal services in Europe.

How long before a seamless new Silk Road is completed will depend on the willingness of numerous states, some with long-held grudges towards one another, to work together and make serious transport infrastructure investments. For a quicker and cheaper alternative to the transport through the Suez Canal, shippers will hope past differences can be easily resolved and other companies will decide to join Advance on the Silk Road. 

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