A significant fiber-optic cable connection will be laid along the Caspian Sea floor thanks to an investment of over $50 million from Kazakhstan and Azerbaijan, Jaslan Madiyev, the minister of digital development, innovations and aerospace industry of Kazakhstan, announced recently. Telecom providers from both countries will work together to complete the project.

The Trans-Caspian fiber-optic cable line is part of a larger initiative known as the "Digital Silk Way" project, which was first launched by Azerbaijan in 2018. The Digital Silk Way aims to establish a digital telecommunications corridor between Europe and Asia. The program includes transferring digital content and internet services from European centers to Asian countries through Azerbaijan. Positioned on the historic Silk Road, Azerbaijan is set to become a key transit hub for digital content and services from major operators like Google and Amazon. The project includes creating an Internet Exchange Center in Baku, enhancing regional connectivity. Recognized as a crucial strategic infrastructure endeavor, the initiative seeks to strengthen digital transit between Europe and Asia.

Emergence of new Silk Road

Azerbaijan’s Digital Silk Way project will support a broader international initiative known as the Trans-Caspian International Transport Route (TITR), also referred to as the Middle Corridor. Established in February 2014, the TITR aims to enhance trade relations, transport and logistics following the historical Silk Road, which connected the ancient civilizations of East and West through Central Asia. The project was driven by an agreement among various countries and organizations, including Kazakhstan, Azerbaijan and Georgia. Later, the TITR extended to include Ukraine, Romania, Poland and Türkiye. The Middle Corridor starts in China and travels through these countries, ultimately reaching Europe.

The initiative aims to offer an alternative, efficient and reliable trade route, reducing reliance on maritime transport and offering faster transit times. It involves establishing a common customs union and applying a unified tariff principle along the entire route. Cooperation among governments, national railway companies and logistics providers is essential to improve infrastructure, harmonize customs procedures and promote the use of the corridor.

The importance of the Middle Corridor during the COVID-19 pandemic and recent conflicts in Europe has been brought up recently. Therefore the digitization of the Middle Corridor and the new opportunities it offers to the countries in the region are critical in the current era. Without these advancements, the Middle Corridor risks becoming less competitive compared to other trade routes.

Digitalization has immense potential to drive economic growth, improve services and increase connectivity in the region. Thus, Azerbaijan’s "Digital Silk Way" project can be seen as the next step toward the expansion and digitalization of the Middle Corridor.

Digitalization of Middle Corridor

Large-scale measures are now being undertaken within the corridor to advance digitalization. These include stabilizing the transit timetable and expediting the transportation of products. Notably, a joint venture agreement on a parity basis has been signed by Azerbaijan Railways CSJC, Kazakhstan Railways NC and Georgian Railways LLC. Another key development is the creation of platforms for container transit in the Middle Corridor and their integration into a unified system for member nations. This is important for freight carriers, as it will enable the efficient and seamless transmission of information.

Furthermore, the adoption of the e-CMR protocol will reduce administrative costs and delays by eliminating paperwork at distribution points. It will further digitize the movement of goods, enhancing connectivity and trade. The ASU DKR online freight forwarding platform, developed by Networks Energy – a leading IT company in Kazakhstan specializing in railway logistics –manages nearly all train transportation in the country in a paperless format. This program, which includes Kyrgyzstan, Azerbaijan and Uzbekistan, is part of a larger regional digitalization efforts.

Notable developments include the signing of a memorandum of understanding between Italy's Sparkle and Azerbaijan's AzerTelecom to establish a digital corridor connecting Europe and Asia, and an agreement between Azerbaijan and Turkmenistan to construct a southern fiber-optic cable along the Caspian Sea floor. Proposals made at the Organization of Turkish States summit to advance digital development demonstrate the strategic vision of significantly reducing travel times and enhancing digital connectivity in the area.

Therefore, Azerbaijan’s goal with the 2018-launched Digital Silk Way project is to digitalize the Middle Corridor by establishing an advanced fiber-optic network that connects Europe and China with markets in Central and South Asia through the South Caucasus. This initiative will improve access to digital services for 2 billion people in the participating nations and strengthen the digital ecosystem across these countries. The project involves laying fiber-optic cables with two main branches – Azerbaijan-Kazakhstan and Azerbaijan-Turkmenistan – across the Caspian Sea bed. This effort is part of the larger "Azerbaijan Digital Hub" program.

Azerbaijan’s digital reforms

Azerbaijan, through a wide-scale Digital Hub initiative, is diligently working to develop its digital readiness and infrastructure for future integration phases. For instance, the national objective is to increase transit traffic through Azerbaijan from 10.7 million tons in 2022 to 13.6 million tons, reflecting a 27% increase. The country is actively developing its cross-border IT infrastructure and implementing digitalization reforms to bolster its digital ecosystem and economic prosperity, in an attempt to become a hub for digitalization in the geography. These reforms have enabled the creation of several systems, including the State Control Information System, the Azerbaijan Digital Trade Hub and platforms for electronic agriculture, procurement, justice, health care, education, social services and property management.

Azerbaijan has also introduced cutting-edge digital residency programs, becoming the first country to offer mobile residency (m-Residency) and the second, after Estonia, to provide electronic residency (e-Residency). Additionally, Azerbaijan is incorporating smart city technologies into the liberated Eastern Zangazur and Karabakh economic regions. Furthermore, in 2021, Azerbaijan established the Analysis and Coordination Center for the Fourth Industrial Revolution (C4IR Azerbaijan), the first organization of its kind in the CIS. Its mission is to lead digital transformation and work in tandem with projects from the World Economic Forum.

Positively, these challenges are driving collaboration and innovation. The future priorities may include crafting next-generation trade agreements for the digital era, adopting C4IR technologies (TradeTech) to strengthen domestic resilience and improve global trade, and addressing broader digital trade issues. These efforts aim to transform the Middle Corridor into a model of digital and infrastructural synergy in international logistics.

Strategic implications, geopolitical influence

Azerbaijan and Kazakhstan's strategic investment in the Trans-Caspian fiber-optic cable not only modernizes their physical infrastructure but positions them as key hubs for commerce and information exchange between Europe and Asia’s major economic blocs. This project is likely to bolster their standing in international relations, giving them greater influence over trans-regional economic discussions and decisions. Moreover, establishing a digital corridor places the countries involved in the Digital Silk Way project in a favorable position as digital technologies increasingly shape global commerce, potentially allowing them to influence future standards and regulations related to digital trade. This strategic maneuver not only aims to transform their local economies but also seeks to redefine their international partnerships and regional leadership in the evolving digital landscape.