Kazakhstan And UAE’s New Shipping Route: An Emerging Initiative In Grain Industry – Analysis

Kazakhstan is recognized as a prominent global exporter of wheat and barley, ranking in the top ten countries in terms of export volume. The nation is actively pursuing strategies to enhance its trade capacity, with a specific focus on expanding its market reach and exploring untapped opportunities in the foreseeable future.

Kazakhstan plays a significant role in the global agricultural market as a prominent producer and exporter of various grains, with a particular emphasis on wheat, barley, and other cereals. Kazakhstan has the notable position of being the primary grain producer in Central Asia, with the capability to export about half of its annual grain production. In 2021, the agricultural production of Kazakhstan amounted to around USD 8.4 billion. The nation successfully exported around 7.5 million metric tons (MMT) of grain, including 6.5 MMT of wheat and 0.8 MMT of barley. Wheat is the primary crop in the country, encompassing the largest land area and accounting for 80% of the total grain production. In addition to wheat, the agricultural sector also engages in the cultivation of many other crops, such as barley, cotton, sunflower seeds, and rice. Kazakhstan, as a significant participant in the region, plays a big role in the exporting of flour, primarily targeting neighboring Central Asian nations and Afghanistan.

The Central Asian region encompasses many adjacent nations to Kazakhstan that exhibit a significant need for food security and have historical and cultural connections with Kazakhstan. Kazakhstan has a considerable expanse of agricultural land, including around 274 million hectares, or approximately 74% of the country's overall geographical area.

The aforementioned attribute establishes Kazakhstan as one of the largest countries worldwide in terms of geographical area. The favorable geographical characteristics within the country provide an optimal environment for the cultivation of cereals. The predominant areas for grain production include the northern territories, namely Kostanay, Akmola, and North Kazakhstan. Furthermore, East Kazakhstan, Abai, and Pavlodar are notable regions where substantial grain production takes place. Tajikistan, Uzbekistan, Kyrgyzstan, and Russia are the primary recipients of Kazakh grain imports.

Uzbekistan has the position of being the primary recipient of Kazakh grain, constituting around 47.3% of the total grain exports from Kazakhstan. Afghanistan serves as a significant recipient of Kazakh grain, which is transported via Uzbekistan over the railway route between Termez and Hairatan. Turkey is a consistently reliable purchaser of Kazakh grain, demonstrating a preference for superior quality indices.

Kazakhstan, a prominent grain producer in Central Asia, is now in negotiations with the Abu Dhabi Ports Group (ADP) to develop a cooperative venture focused on enhancing the transportation of Kazakh agricultural exports via Iranian and Gulf ports. Additionally, the company is collaborating with the UAE to establish a shipping route for the export of grain across the Caspian Sea. This initiative aims to decrease transportation costs and time while simultaneously broadening the range of trading partners.

A meeting was organized between Serik Zhumangarin, the Minister of Trade and Integration of Kazakhstan, and David Tafti, the chief executive officer of Simatech Shipping. The objective of the conference was to assess the viability of developing a direct trade pathway for Kazakh exports, namely targeting markets situated along the East African coast, India, the Middle East, Pakistan, and the Persian Gulf.

Kazakhstan and the United Arab Emirates are collaborating to establish an enterprise aimed at facilitating a dependable and effective transportation infrastructure for the exportation of Kazakh grain across the Caspian Sea. In addition, as part of its strategic expansion efforts, the grain shipping entity based in the United Arab Emirates acquired a fleet including 45 vehicles and two barges. Notably, each barge could accommodate up to 350 trucks for transportation purposes.

According to the official statement from the United Arab Emirates (UAE), there is a proposed extension of the existing truck fleet to reach a total of 200 trucks during the next four months. Furthermore, there is a future goal to significantly increase the number of vehicles to an amazing 1,000. The joint venture intends to use a fleet of four boats with an individual carrying capacity of 7,500 tons to transport various types of goods, including bulk, container, and cargo. This transportation will occur between the ports of Kuryk and Aktau in Kazakhstan and the ports of Amirabad, Bandar Abbas, Bandar Imam Khomeini, and Chabahar in Iran. Subsequently, the cargo will be relocated to the ports of Khalifa and Fujairah in the United Arab Emirates, along with many ports in India, Pakistan, the Far East, and the East Coast of Africa.

The implementation of this route has the potential to substantially reduce delivery durations and facilitate Kazakh exporters' entry into Iranian ports such as Amirabad, Bandar Abbas, Bandar Imam Khomeini, and Chabahar. This proposed route will provide improved communication between the ports of Khalifa and Fujairah in the UAE, as well as several ports in India, Pakistan, and the East Coast of Africa. As a result, this will lead to an increase in market opportunities for their agricultural goods.

During the discussions, the parties concerned conducted an analysis of many alternatives for the transportation of goods across the Caspian Sea into Iran, thereafter continuing the transit to countries located in the Persian Gulf. The joint venture aims to provide the necessary infrastructure to facilitate efficient operations, using the port of Kuryk in Kazakhstan and the port of Jebel Ali in the United Arab Emirates as the primary logistical centers. With the presence of two specialized dry ports for the consolidation and re-packing of products, Kazakh exporters will have a unique opportunity to efficiently transport their goods across Iran over two to three days.

Kazakhstan and the UAE are now engaged in efforts to establish a novel shipping route to export grain. Their shared goal of increasing trade volume and broadening market reach in the Middle East, Africa, India, and Pakistan is the driving force behind this initiative. Kazakhstan, as a prominent contributor to global agricultural production, plays a significant role in the cultivation of wheat, barley, and several other grains. However, the nation has geographical impediments when it comes to effectively exporting its agricultural commodities on a global scale. Russia, China, and several Central Asian countries make up the majority of the region in question that is landlocked. These neighboring countries possess restricted port facilities and impose substantial transit costs. Hence, Kazakhstan needs to explore alternate routes that might effectively mitigate its transportation expenses and time constraints.

One plausible transportation route is using the Caspian Sea as a conduit, facilitating connectivity between Kazakhstan, Azerbaijan, Iran, Turkmenistan, and Russia. The Caspian Sea has the distinction of being the most expansive landlocked body of water globally, with abundant natural resources including oil and gas reserves. Nevertheless, some political and legal complexities come with the use and advancement of this technology. In addition, several environmental and security factors impact the safety and long-term viability of marine ecosystems.

Kazakhstan is poised to enhance its grain exports and gain entry into new markets characterized by a significant need for food security. The United Arab Emirates stands to gain significant advantages from its unique geographical location, positioning it as a pivotal regional center for trade and logistics. Both nations will also have the opportunity to strengthen their relationships with other nations along the route, including Iran, India, Pakistan, and other African countries. This would enhance the stability and promote the development of the region.

In conclusion, Kazakhstan has considerable prospects for assuming a significant role within the global grain economy. However, it confronts several obstacles, including geographical limitations, political and legal complexities, and market volatility. The establishment of this shipping route is anticipated to enhance economic collaboration between Kazakhstan and the United Arab Emirates while also facilitating the expansion of their trade networks to include a wider range of partners.