Page 12 - bneMagazine March 2023 oil discount

12 I Companies & Markets bne March 2023
Few countries have a more advantageous geographical position in geopolitical affairs than Turkey. And few leaders know how to exploit the inherent opportunities better than the country’s leader of two decades, Recep Tayyip Erdogan.
Since Russia invaded Ukraine, Erdogan has hardly missed a beat in exploiting the opportunities offered by both the West and the Kremlin, knowing that with Turkey located at the crossroads of Europe, Asia and the Middle East, none of the major powers dare lose Ankara as an ally.
Nevertheless, there has been at least some pushback from Europe and the US at some of Erdogan’s more flagrant breaches of the spirit and letter of the economic backlash against Russia’s waging of war. Senior US officials visited Turkey in both October last year and late January to turn the screw on Erdogan over Ankara’s growing trade co-operation with Moscow, in both imports and exports. It’s clear the Erdogan administration is busting numerous sanctions, but Washington remains too polite to say it out loud.
The latest suspect scheme put forward by Vladimir Putin and Erdogan is to turn Turkey – linked by several pipeline strands to Russia – into a regional gas hub. How will Europe know that the gas it gets out of this hub is not Russian in origin rather than, for instance, Azerbaijani or Qatari LNG?
Another winner from the sanctions is Azerbaijan, which has also been playing both sides of the field, signing new gas deals with European Commission President Ursula von der Leyen on the one hand but boosting exports to Russia on the other.
Meanwhile, countries like Iran, China and India are seeking to strengthen trade turnover by pushing the International North-South Transport Corridor (INSTC) project for a better connection via a multimodal transport network that spans rail, road and sea. International experts say this project could become an alternative to the Mediterranean-Suez Canal route that would allow Russia to bypass waters dominated by its Western rivals.
The Middle Corridor
With China-Europe cargo forwarders looking to offer businesses the option of freight routes that avoid Russia, Turkey and other countries in the region are keen to help equip and build up the Middle Corridor, officially the Trans- Caspian International Transport Route (TITR) – connecting East Asia to Europe via Kazakhstan, the Caspian Sea, Azerbaijan, Georgia and Turkey.
For non-combatants, the challenge has been getting trade around Russia, the biggest country in the world, and with railways linking Europe and Asia. This has benefited countries in Central Asia (chiefly Kazakhstan) and the South Caucasus that have long held ambitions to create
a complementary route across their territory with much talk of a new Silk Road.
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As reported by bne IntelliNews in 2022, cargo dispatchers in China faced with sending goods to Europe via either Russian or Kazakh territory are increasingly opting for the latter. Volumes dispatched via Kazakh railways are booming, as is transport via Aktau and other Caspian seaports. The head of the Aktau Sea commercial port, Abai Turikpenbayev, forecast in mid-2022 that the volume on the TITR would increase sixfold during the year to up to 3.2mn tonnes.
Moreover, there is a new impetus to develop long-discussed routes westwards out of China, including the China- Kyrgyzstan-Uzbekistan (CKU) railway.
From fertiliser to coal at the Baltic ports
As trade between the EU and Russia slumps, there has been a dramatic fall in the cargo transported to and from Russia and Belarus via the main Baltic ports. Yet data provided by the main ports – Riga in Latvia, Klaipeda in Lithuania and Tallinn in Estonia – shows this has to a great extent been compensated for by other traffic.
Algis Latakas, CEO of the Klaipeda State Seaport Authority that manages the Port of Klaipeda, said in November that although the Klaipeda port was predicting a gloomy 2022 with a drop of up to 35% in cargo turnover, the year turned out much better: the general cargo handling volumes in the Port of Klaipeda in 2022 fell by only 19.7% during 10 months of 2022 y/y, to 30.02mn tonnes.
For many years, Belarusian fertiliser cargoes have made up a significant part of the port’s cargo turnover. In 2021, Belarusian fertiliser cargo accounted for 32% of total transport by volume, while Russian, Ukrainian and Chinese cargoes accounted
for around 8% more. In 2022, however, Belarusian cargoes comprised just a mere 11-12% of the total cargo transported through the port. With the start of the war in Ukraine in late February 2022 and the subsequent sanction packages against Russia, those transit cargoes just disappeared.
The Port of Riga recorded an increased container cargo volume with 460,700 TEUs in 2022, a record-high cargo turnover rate, exceeding the previous year's result by 16%, and transshipped 326,000 TEUs, which is the highest annual turnover in its history.
Importantly, in 2022, coal transportation returned to the
port of Riga, and with a turnover of 5.2mn tonnes, it formed the second-largest group of handled cargo. Compared to the previous year, when coal transshipment in the port of Riga had practically stopped, in 2022 the flow of coal increased 4.6 times. Instead of Russian coal transit, coal from Kazakhstan, Africa, Australia, Indonesia and other coal-mining countries is currently being handled at the port.
In 2022, the Port of Tallinn saw 18mn tonnes of cargo pass through the port, a 21% decrease y/y, due to the implementation of sanctions on Russian and Belarussian cargo. However, the decline in liquid bulk and dry bulk