Against the backdrop of a transformation in Eurasia’s transport and economic architecture, relations between Kazakhstan and Azerbaijan are gradually moving beyond traditional transit cooperation. The Caspian Sea, the Middle Corridor, emerging production chains, and expanding routes toward Europe and South Asia are creating new opportunities for deeper economic cooperation between the two countries. In an interview with CASPIA, Kazakh economist and expert Rahim Oshakbayev discusses the role Azerbaijan plays in Kazakhstan’s strategy, why transport infrastructure alone is not enough, and how the region can avoid dependence on a single route.

— To what extent do Kazakhstan-Azerbaijan relations today constitute a fully-fledged strategic partnership, and to what extent are they still centered on transit and oil exports? What can Kazakhstan offer Azerbaijan beyond transport?

— I would say that politically, this is already a strategic partnership, but economically it remains under-monetized. There is a very telling contrast here: over the past five years, bilateral trade has increased roughly fivefold, yet in 2025 it amounted to only $470.7 million, down 11.8% from 2024. By comparison, Kazakhstan’s trade with China is measured in tens of billions of dollars. So the political depth of Kazakhstan-Azerbaijan relations today clearly outpaces their economic density.

At the same time, it is no longer accurate to reduce bilateral relations exclusively to oil and transit. For example, in 2025 Kazakhstan supplied Azerbaijan with 663,000 tonnes of grain worth approximately $143 million, accounting for more than half of Azerbaijan’s grain imports. The two countries have established a joint investment fund with an initial capital of $300 million; a grain terminal is being developed; industrial cooperation is expanding; and railway equipment is being supplied. In addition, an Azerbaijani project to manufacture cables and transformers is being implemented in Aktau. A trans-Caspian fiber-optic line is under construction, and the creation of a subsea energy cable is also being discussed.

Therefore, I see the next stage not as simply increasing transit flows, but as a transition from a corridor relationship to a production relationship — from relations based primarily on a transport corridor to relations built around joint production and the creation of added value. Kazakhstan can offer Azerbaijan food security, metals and their processing, machinery and industrial cooperation, energy, digital infrastructure, joint investment, and the implementation of projects in third countries.

I see the most promising approach as treating the Caspian not simply as a transport route, but as a multilayered economic platform: cargo + energy + data + investment. This approach could take Kazakhstan-Azerbaijan relations to the next level and give their strategic partnership much more substantial economic content.

— Where is the line between diversification and a genuine ability to reduce dependence on Russian infrastructure?

— It is important not to create the illusion that one route can replace another overnight. In 2025, Kazakhstan exported 78.7 million tonnes of oil, of which 64.8 million tonnes went through the CPC — more than 80%. Today, around 1.2–1.3 million tonnes pass through the Baku–Tbilisi–Ceyhan route, with the potential to increase that figure to 2.2 million tonnes. Therefore, in the oil sector, the Middle Corridor is not yet a substitute for the CPC. It is a contingency mechanism and an additional option.

Moreover, it would be more accurate not to describe the CPC simply as a “Russian pipeline”: it is an international consortium. However, its critical infrastructure and marine terminal are located on the Russian side. That is precisely why physical concentration creates a risk regardless of the legal ownership structure.

The situation is different for other commodities. For example, the U.S. Investment Climate Statement notes that around 64% of Kazakhstan’s uranium shipments used the Trans-Caspian route.

Therefore, diversification is not about replacing Russia. It is about creating real, functioning parallel routes that do not eliminate the need to maintain and develop existing ones. In my terminology, the future of Eurasian logistics lies in a PORTFOLIO OF CORRIDORS. The Northern Route offers scale and accumulated efficiency; the Trans-Caspian route provides optionality; and southern routes potentially provide access to new markets.

Economic sovereignty does not mean the absence of dependence. That is impossible in today’s world. It means having the ability to choose a second route if the first one stops working.

— Which projects over the next ten years could genuinely change the scale of bilateral relations? What is preventing the transition from declarations to deep economic integration?

— I see four projects that could qualitatively transform Kazakhstan-Azerbaijan relations. The first is to turn the Middle Corridor from a collection of national segments into a fully-fledged commercial product: predictable delivery times, a unified digital system, through tariffs, and a single point of responsibility. Its current capacity is estimated at approximately 6 million tonnes / 80,000 containers, while synchronized investments are aimed at increasing this to 10 million tonnes and 300,000 TEU.

The second is a trans-Caspian digital corridor. The Kazakhstan-Azerbaijan fiber-optic line is much more significant than it may initially appear: it transforms the Caspian not only into a transport space but also into data-transmission infrastructure.

The third is a Central Asia–Azerbaijan–Europe energy bridge: “green” electricity and, in the longer term, other forms of energy trade.

The fourth is joint production and investment projects. A joint investment fund already exists, while the Azerbaijani side has also openly discussed the possibility of joint Kazakh-Azerbaijani investments in third countries.

What is holding this back? I would call it not a shortage of memoranda, but a “fragmentation tax”: different procedures, certificates, data systems, payment mechanisms, tariffs, the allocation of responsibility among operators, and enforcement mechanisms.

At the recent CAMCA Forum in Baku, a remarkable example was given: if six links in a chain each perform their function with 95% reliability, the end-to-end reliability of the entire system is only around 74%. Every agency may report excellent performance in its own area — while the customer ultimately receives an unreliable system.

— Are there already the foundations for a common economic space encompassing Central Asia and the South Caucasus? What needs to happen for cooperation to become irreversible?

— The foundations are there. There is no common market yet. Political geography is changing faster than economic geography. Azerbaijan is increasingly viewing itself simultaneously as part of the South Caucasus and of the broader Caspian–Central Asian space. This was also very clearly articulated at CAMCA: the issue is not simply a C5+1 format, but the emergence of a broader Caspian geo-economic space.

There is also an economic foundation. The World Bank estimates that fully developing the Trans-Caspian Corridor could more than triple trade flows, roughly halve transport times, and add around 3.3% to GDP and 2 million jobs across the affected economies by 2040.

But I would distinguish between an arithmetic market and an economic market. One can add up the GDPs of Kazakhstan, Uzbekistan, Azerbaijan, Georgia and the other countries and arrive at an economic space worth roughly three-quarters of a trillion dollars. But ten neighboring economies do not become a single market simply by adding their GDPs together.

Irreversibility will emerge when private businesses begin making investment decisions based on the existence of a regional market. In other words, a factory is built in Kazakhstan because an investor is confident that it can supply Uzbekistan and the Caucasus; a logistics hub is built in Azerbaijan to handle cargo from Central Asia; a data center is designed around regional demand; and banks finance regional production chains.

Real integration begins when the cost of breaking ties becomes higher than the cost of maintaining them. This is achieved not through declarations, but through long-term investment, production chains, and everyday transactions.

— How does Astana assess the long-term consequences of growing Chinese economic presence?

— I would not frame the question in terms of whether it is “dangerous” or “beneficial.” China is already an objective part of Kazakhstan’s economic model. According to Kazakh statistics, trade with China amounted to approximately $34.1 billion in 2025, while Chinese statistics put the figure at $48.7 billion — the difference is attributable to differences in accounting methodology. China is already Kazakhstan’s largest trading partner. Kazakhstan estimates the accumulated volume of Chinese foreign direct investment between 2005 and 2024 at approximately $26.4 billion.

The question, therefore, is not whether Chinese presence will increase. Most likely, it will. The question is what form that presence will take. If Kazakhstan primarily sells raw materials while purchasing machinery, vehicles, consumer goods, and technology, a new asymmetry emerges.

If, however, Chinese capital creates processing industries, manufacturing, renewable energy projects, logistics infrastructure, facilitates technology transfer, and gives Kazakh producers access to the Chinese market, the effect is completely different. Therefore, I would formulate the task as follows: do not reduce China; increase Kazakhstan within its economic relationship with China.

At the same time, Kazakhstan should increase the number of functioning alternatives — the EU, Türkiye and the Caucasus, South Asia, and the Gulf states. At the CAMCA Forum, I particularly liked the concept of “strategic transactionalism”: rather than choosing a single external partner, expand the portfolio of functioning relationships.

— What significance do the new agreements between Azerbaijan and Armenia on connectivity have?

— Potentially, very significant. If TRIPP and related projects are implemented, for the first time in decades there could be a direct railway connection between Armenia and Azerbaijan. Combined with the possible reopening of the Armenia–Türkiye railway connection, this could create an additional continuous chain linking Central Asia–Azerbaijan–Armenia–Türkiye–Europe. The Armenian side is also considering the restoration of routes capable of connecting the Persian Gulf and the Black Sea.

For Kazakhstan, this means not only another route to Europe. It potentially means access to a new set of markets and a new level of optionality. Geographically, Kazakhstan is a landlocked country, but the objective is to become economically connected to multiple directions.

There is an important formula that was repeated several times at the forum: the world itself is becoming economic infrastructure. Just a few years ago, Armenia and Azerbaijan were viewed primarily through the prism of conflict. Today, discussions already encompass railways, electricity, pipelines, and business links. This represents a qualitative transformation of the region’s entire economic geography.

For Kazakhstan, it is particularly important that the new route not be perceived as yet another line intended to eliminate existing ones. The more genuinely functioning routes there are between Central Asia and global markets, the greater the bargaining power and resilience of Central Asia as a whole.

— What contradictions between national interests are hindering integration? What do forums tend not to discuss?

— I would not speak of any hidden contradictions. Most of them are perfectly rational, although they are indeed discussed less frequently.

The first is the question of who captures the rent. Every port, railway, customs authority, and state-owned operator is interested in maximizing revenue from its own segment. But the optimum for an individual segment does not always coincide with the optimum for the entire route.

The second is competition between economies. Many countries in the region have similar exports: hydrocarbons, metals, minerals, and agricultural products. One participant at the forum made a valid point: it is easier to integrate economies when they complement one another than when they export virtually the same things.

The third is sovereignty. Everyone is willing to talk about harmonization until the question arises: whose standards should be recognized, who should change their own rules, and who is prepared to give up part of their administrative powers and the associated rent?

The fourth is geopolitical regimes. The EAEU, sanctions against Russia and Iran, and relations with China, the EU, and Türkiye mean that different countries in the region operate within different regulatory frameworks.

The fifth is state ownership. A significant share of railways, ports, and infrastructure is controlled by the state. As a result, discussions about integration and development based on private initiative can sometimes conflict with the corporate interests of state-owned operators. This was also discussed directly during the latest CAMCA panel.

And there is an even more uncomfortable question: Are we building corridors to develop our own economies, or primarily to transport Chinese goods to Europe and export our raw materials outward?

At the CAMCA Forum, this question was raised quite forcefully: if new infrastructure merely changes the route through which raw materials are exported without changing the region’s position in global value chains, we may change the road while remaining on the periphery. For me, this is one of the most important questions raised at the entire forum.

— Is Kazakhstan seeking to become an independent decision-making center in Eurasia, or is its strategy determined by its largest neighbors?

— I would not use the word “center” in the sense of yet another power around which everyone else must organize themselves. Kazakhstan is instead seeking to increase what is now often called agency — its ability to make its own decisions by expanding the number of available economic options.

Geography is not going anywhere. In 2025, Kazakhstan’s trade with China amounted to tens of billions of dollars, while trade with Russia reached $27.4 billion based on trade statistics within the SCO framework. These are neighbors that cannot and should not be “replaced.”

Therefore, I see substantive multi-vector diplomacy not simply as maintaining symbolically good relations with everyone. It means having several export routes, several major markets, several sources of investment, several technology partners, and the ability to withstand the closure of one channel without suffering an economic shock. This optionality is at the core of strategic autonomy and resilience.

In this sense, developing relations with Azerbaijan is particularly important because it gives Kazakhstan another fully-fledged vector — through the Caspian, the Caucasus, and Türkiye. This is neither an anti-Russian nor an anti-Chinese strategy. In my view, the most rational model should not be anti-anyone. It should be focused on resilience and freedom of choice. This is also the conclusion I reached in my analysis of Eurasian corridors.

— Could Afghanistan become Central Asia’s gateway to South Asia and the Indian Ocean?

— This scenario has become significantly less theoretical literally within the past few weeks. On September 30, Kazakhstan, Uzbekistan, and the UAE signed a memorandum on studying the Kazakhstan–Uzbekistan–Afghanistan–Pakistan railway project (CASA), providing access to Pakistani ports. At this stage, the agreement concerns technical and economic studies and the search for a financing model, rather than a ready-to-build project.

There is also a western configuration through Turkmenistan: Turghundi–Herat–Kandahar–Spin Boldak, with onward access to Pakistan. Kazakhstan has already signed a memorandum on the basic principles of such a project. The economic rationale is enormous. For Central Asia, this could potentially provide access to the sea not to the west or north, but to the south — toward Indian Ocean ports and the enormous South Asian market.

But I would be very cautious here. A map is not a functioning route. Such a route would require security over decades, financing, insurance, predictable border procedures, unified operational responsibility, technical compatibility between railway systems, and sufficient cargo volumes in both directions.

There is also another important caveat: access to Pakistani ports is more realistic than an automatic gateway to the Indian market. India represents a colossal economic opportunity, and Dr. Frederick Starr was absolutely right to ask at the CAMCA Forum why the forum was speaking so little about India. But there is a separate geopolitical challenge between access to the Arabian Sea and unhindered access to the Indian market — namely, relations between India and Pakistan.

Therefore, to me, Afghanistan is potentially not a dead end, but a bridge. But it should not be assessed simply by looking at a line on a map. If Afghanistan can offer businesses guaranteed delivery times, transparent tariffs, insurance, and security, the route will become a reality. If not, its geographic advantage will remain merely geography.