Aktau: A Look Inside Aktau, Kazakhstan's Other Hub On The 'New Silk Road'

In addition to the much-discussed Khorgos Eastern Gate SEZ and dry port, which has been covered in-depth here on Forbes.com and is the focus of an upcoming BBC World documentary, Kazakhstan also has a lesser-known western gate. Sitting on the coast of the Caspian Sea on the western fringe of the country, otherwise surrounded by desert, is Aktau. Nearly as remote as its eastern counterpart at Khorgos, Aktau is likewise attempting to transition from the middle of nowhere to an epicenter of trans-Eurasian transport and trade.

Originally a “secret” Soviet city dedicated to uranium mining, Aktau is today best known for being the heart of Kazakhstan's oil industry. But as a core component of a national movement to build a logistics industry to diversify the economy away from being solely reliant on resource exports, Aktau is attempting to develop into a great crossroads at the core of Eurasia that is directly linked in with China to the east, Russia to the north, Iran to the south, and Azerbaijan, Turkey, and Europe across the Caspian Sea to the west. Aktau is at a prime position on an emerging corridor of the New Silk Road, which is currently the most southernly of a series of three parallel multimodal shipping routes that extend between China and Europe.

"The rail connection from Khorgos to Aktau port will enable cargo to be transported along the Caspian Sea and the Caucasus to Europe as well as to the south through Iran to the Persian Gulf. With the new railway line connecting Georgia & Turkey, cargo can now be shipped via Aktau over the Caspian Sea and then by rail through Azerbaijan and Georgia for delivery in Turkey and beyond," said Steve Huang, the CEO of China operations for DHL, one of the freight forwarding companies that are pioneering this transport route.

While both of the more northernly overland corridors of the New Silk Road pass through Russian territory, the route via Aktau bypasses this geopolitical giant to the north completely. The main advantage of going around Russia is that manufacturers and freight forwarders can sidestep the country’s reactionary sanctions against many types of EU goods — products such as cheese, produce, meat, and most dairy products. These transport bans severely hamstring Europe’s ability to fully leverage the newly established trans-Eurasian rail network, as the type of products that its producers would otherwise ship overland to China largely happen to be the same ones that Russia prohibits from crossing its terrain. Aktau provides a workaround to this trade blockade, and the route is starting to gain interest and momentum.

“Three years ago most people were laughing at [shipping products by rail between Europe and China]," said Martin Voetmann, a 12-year veteran of Kazakhstan’s logistics industry who is currently working at the Aktau seaport for DP World. "In Russia, they are laughing at the idea that they can move via Aktau, saying that it's much more expensive and inefficient and all of this. We have seen the first train now. Hopefully, this year we will see a more stable flow. I think it will start.”

Oil, oil products, steel coil, and grain are some of the main commodities that are currently being shipped out of Aktau. Much of this cargo is going to and from Iran and Turkey.

As of now, much of the cargo that comes through Aktau is shipped by ferry across the Caspian Sea. The process is about as inefficient and archaic as it seems. A giant ferry pulls into port and entire rail wagons and trucks are piled on and chained down to the deck. They are then carted to the other side, where they are unhinged and carrying on their way. There are very few such rail ferry operations in the world today, and there is a good reason for it: there are better ways to transport cargo in the 21st century.

Voetmann is at the forefront of trying to modernize Aktau port, with the main ambition of preparing it for containerization. Why is containerization so important for Aktau? As Voetmann put it, it’s all in the moves per hour. Containerization is fast, sleek, and is perfectly-suited to the inherently multimodal nature of Aktau.

“If you have containers than you can ship anywhere,” he said. “With these pipelines and these trade routes it changes the whole picture in the region. If we successfully manage to do some development of the container segment we will see vastly cheaper imports from Iran, from Dubai, [and] eventually we could establish Pakistan and India and East Africa via some of these routes because they have fairly good connections into Bandar Abbas [Iran]. Suddenly, we have possibilities for other markets.”

One of the biggest criticisms of Aktau port and the trans-Caspian corridor of the New Silk Road in general is that it simply costs more to ship cargo through there than the other two, more established, overland routes between China and Europe. Containerization could help remedy this problem.

“I think we have possibilities now here, especially with these transit trains [between China and Europe]," Voetmann continued. "So if we have the base cargo, which could be this transit cargo, then suddenly you will see a new segment where we can start to do container transport on the sea. Not by ferry, but by container vessel. . . and it becomes cost efficient.”

Like at Khorgos, there is also a special economic zone at Aktau where investors can set up manufacturing and warehousing operations without the burden of corporate income tax, land tax, property tax, VAT on imported goods, customs duties, and, for the near future at least, rent. However, also like in Khorgos, the status of the Aktau SEZ is fledgling at best, and relatively few investments have yet to take hold.

However, there are additional issues blocking Aktau’s ambitions of becoming a multimodal, trans-continental transport and manufacturing hub. Namely, the 15 kilometers of rail line leading into the port is privately owned by a company called Kaskor Transservice, who reputedly takes advantage of its monopolistic position by charging exorbitant rates to carry cargo in and out of the port, holding the would-be transport hub in a proverbial stranglehold.

“When American companies come here they will be like, ‘Who's this company? Where do they fit into everything? That's not transparent. We're out of here,’” Voetmann explained the direct ramifications of this peculiar arrangement.

As other corridors of the New Silk Road are starting to boom, shipping volumes going through Aktau are actually on the decline. With the demand for Kazakh oil going down, less tankers are being shipped through Aktau, and much of the port's bulk cargo volume is kept afloat by a single client in Iran who imports large quantities of steel coils.

However, work on the northern expansion of the Aktau seaport is currently underway, and multiple new piers and a large grain processing center are nearing completion. This new development is posited to eventually double the port's cargo capacity from 10 to nearly 20 million metric tons per year.

Khorgos Eastern Gate and Aktau Western Gate form two emerging transport hubs which flank both sides of Kazakhstan, ideally working in tandem to push cargo to each other across the country -- across Eurasia -- along a rising new corridor of the Silk Road Economic Belt.