Kazakhstan eyeing Baku grain entrepôt for Europe exports

The head of operations at an international seaport in Azerbaijan has said Kazakhstan plans to build a grain depot there to facilitate its goal of broadening its international export market.

Speaking at a conference in Washington, Eugene Seah, Chief Operations Officer at the Baku International Sea Trade Port, reportedly said this week that the facility could appear in the coming five years.

Seah was quoted, in a Russian-language report by Russian business news wire service Prime, as saying that the grain arriving in Baku could be sent forward to “anybody who needs it.”

Building the entrepot will consolidate an emergent trend of countries along what has come to be known as the Middle Corridor enhancing the capacity of Europe-bound transport routes that avoid Russia.

Seah indicated the Baku terminal is minimally exposed to the West’s sanctions against Moscow since only a few Russian ships dock there.

The port has evidently benefited from the surge in east-west traffic through the Caspian Sea since the war began. In 2022, the flow of cargo goods being delivered to Europe via the Caspian, and thereby circumventing Russia, increased 2 ½-fold to 1.5 million tons year-on-year.

As for Kazakhstan, the quantity of exports via the trans-Caspian corridor increased more than sixfold to around 900,000 tons year-on-year over the same period.

Much of those exports were grain.

Kazakhstan’s main grain buyer in Europe is Italy, which imported 226,000 tons of the foodstuff last year, a 10 percent increase on 2021. Turkey purchased 110 tons of grain, which marked a 58 percent increase. Other more active buyers of note included Latvia and Poland.

The notional potential for expansion in this flow is substantial. Agro-industry insiders have said that Kazakh grain producers plan this crop year, which ends in August, to increase overall grain and flour exports to 9 million tons. As business newspaper Kursiv has reported, Kazakhstan customarily exports around 7 million tons of grain and flour in grain equivalent.

Although this sector is of relatively minor importance to Kazakhstan’s economy against the backdrop of the far larger hydrocarbons industry, pragmatic thinking about logistics nevertheless signals the ways in which the country is striving to diversify its export portfolio toward processed goods. Sending agricultural products to markets in the European Union is among the priority areas.

Astana laid out its pitch earlier this month on the occasion of an EU-Central Asia economic forum held in Almaty.

“Kazakhstan can offer the EU more than 175 varieties of processed goods, collectively worth more than $2.3 billion; such items as engineering goods, iron and steel products, and agricultural and processed food goods. Moreover, as a large producer of grain, the country is in a position to become a strategic partner to the European Union in setting the global food agenda,” the Cabinet office said in a May 19 statement.

The statement was unclear about when and over what timeframe the Kazakh government aspires to achieve that level of trade with the EU.

EU Trade Commissioner Valdis Dombrovskis, who was present at the Almaty forum, said that work needed to be done in “eliminating bottlenecks in terms of transportation and helping develop infrastructure."

As Gaidar Abdikerimov, the secretary-general of the association of the Trans-Caspian International Transport Route, explained to Eurasianet, the bottleneck most plaguing the Caspian’s transit potential is the South Caucasus. Underdeveloped port infrastructure limits capacity and causes congestion, he said.

The mooted Baku grain terminal appears tailor-made to address that very problem.