Connecting Eurasian Supply Chains the Impact of Covid-19 and the Russia–Ukraine War on the EU-China Rail Landbridge

International supply chains are dependent on ease of crossing borders and efficient connectivity in terms of price, speed, and reliability. Communication costs explain why intensification of international supply chains during the last 4 decades has occurred primarily within regional value chains (RVCs), centered on East Asia, Europe, and North America. Initially responding to demand from automobile and electronics firms to connect their European and Chinese supply chains with shorter and more reliable freight services than maritime shipping, the Eurasian rail Landbridge established in the 2010s was the first major overland link between RVCs. The Eurasian Landbridge was resilient through deteriorating EU-Russia relations after 2014 and the COVID-19 epidemic in 2020–21. However, following the Russian invasion of Ukraine and inclusion of the Russian rail company in western sanctions in February/March 2022, traffic along the main Landbridge routes stalled. This paper analyzes the evolution of the Landbridge as an exercise in choice of connectivity for Eurasian supply chains, the response of supply chain managers to the closure of routes in 2022, and the role of public policy in creating reliable alternatives.


Introduction
International supply chains are dependent on ease of crossing borders and efficient connectivity in terms of price, speed, and reliability.Ganapati and Wong (2023) document the evolution of air and sea transport services since 1965 based on cost, speed and punctuality, and they relate the increased share of transport in total output and changing modal patterns to growth of global value chains (GVCs).They also stress GVCs' need for flexibility in responding to external shocks and the importance of identifying alternatives to currently preferred routes.This paper analyzes whether similar patterns can be found in the evolution of rail transport links between the EU and China.
The intensification of international supply chains during the last 4 decades has been concentrated in some parts of the world and so-called global value chains have been primarily regional value chains (RVCs), centred on East Asia, Europe, and North America (Johnson and Noguera 2017).The RVCs were only linked at the final step of sending finished products to markets in high-income countries, typically by ocean shipping.The first major overland link between RVCs was the Eurasian rail Landbridge.For European car companies sending components to factories in China and for electronics firms sending computers and printers from China to their European marketing centres, the benefits of speed and punctuality outweighed the higher costs of rail freight.Nonstop rail services between China and Europe were established in the 2010s to meet this demand.
The first section of this paper describes expansion of trade along the Landbridge that linked RVCs in East Asia and in Europe.Efficient supply chain management relies on just-in-time delivery and minimization of inventories whether held at production points or in transit.Over long distances, rail is faster than sea transport and has more reliable arrival times, as well as being more environmentally friendly, while maritime freight rates are lower.Development of the Landbridge was market-driven, although it relied on governments to agree on transit rules and on the (state-owned) rail companies to collaborate over schedules and rates.As services and routes expanded, the number of customers increased.
With success, a danger is that a key transit country might use its monopoly power to increase prices or that disruption at one point might disrupt the entire supply chain.In the case of the Landbridge, the main routes all pass north of the Caspian Sea and transit Russia.Section 2 describes how China and, to a lesser extent, the EU sought to develop alternative routes, although routes across or south of the Caspian Sea had significant disadvantages compared to the northern route.
The Landbridge flourished despite shocks such as deteriorating EU-Russia relations after 2014, shifting EU-China political relations after 2017, and the COVID-19 epidemic in 2020-21.The third section contrasts the disruption that maritime and air freight suffered due to COVID with the continued operation of international rail services and accompanying modal shift to rail transport.
In 2022, the potential for disruption of the rail Landbridge was dramatically and unexpectedly revealed when Russia's invasion of Ukraine was followed by sanctions that made Russian Railways an unacceptable partner to many customers.The fourth section analyzes the impact of the shocks and the search for alternative routes after the sanctions.
The final section draws conclusions about the relationship between the Landbridge and international supply chains, highlighting the EU perspective.The timing of the two shocks of COVID and war coincided with the EU announcement in 2019-20 of its intention to bring the Trans-European Transport Network (TEN-T) in line with EU-China links, and with EU strategies on Connecting Europe and Asia (2018), on Central Asia (2019) and on the Global Gateway (2021), and the EU-Central Asia Connectivity Conference (2022).The increasing role of rail freight is also consistent with the EU's Green Europe strategy as rail is more environmentally friendly than sea or air transport.

Establishment and Development of the Landbridge, 2011-21
Between 1500 and 2000, trade between Europe and East Asia was almost entirely by sea.As ships increased in size, costs fell.Although rail track had been laid across Eurasia in the late nineteenth and early twentieth century, rail could not compete with sea transport for freight services between East Asia and Europe. 1 The situation started to change between 2007 and 2010 as German car manufacturers chartered trains to transport components from Europe to their joint venture factories in northeast China via the TransSiberian railway (TSR) or through Russia and Kazakhstan. 2 At the same time, electronics companies that had opened large factories in western China were experiencing difficulties exporting products to Europe by sea. 3 Driven by demand from EU car companies sending components to China and from electronics companies wishing to link their production facilities in China to marketing centres in Europe, regular train services were established in 2011 between Chongqing and Duisburg and between Chengdu and Łódź.
Travel times were reduced as competing termini and freight forwarders and other intermediaries increased efficiency, and as the change of gauge process was simplified at the China-Kazakhstan and Belarus-Poland borders.The Chongqing-Duisburg service became daily in 2016.By 2017, train journeys from Chongqing to Duisburg, which could take longer than ships before 2011, had been cut to around 15 days, while the same route by river and sea took between 35 and 50 days depending on congestion along the Yangtze, weather, piracy, and queues to enter the Suez Canal. 4 Meanwhile, air freight rates increased, and ships moved more slowly to reduce pollution (Fig. 1).
The creation and improvement of rail services along the Landbridge was essentially market-driven (Pomfret 2019) and based on pre-existing hard infrastructure.Initially driven by demand from large firms to link their EU and China RVCs, the growth was sustained by a virtuous circle of more services (part container loads, refrigerated containers, multimodal connections) and new routes that stimulated further demand, increased number of trips, and lower costs.By 2017, over thirty cities in China were offering nonstop freight services to Europe.In Europe the main termini were Duisburg and Łódź, but cities far from these hubs, such as Madrid or Budapest, initiated direct regular services.To avoid bottlenecks, e.g. at the Belarus-Poland border where a change of gauge is necessary, services ran to Baltic ports for transit by sea to Scandinavia. 5raffic along the rail Landbridge grew rapidly in the decade after 2011.There is no consistent data source for Landbridge traffic (Bucsky 2019).In part, this is a matter of units: should we count trains or containers?More importantly, it is unclear which routes qualify as Landbridge trade.Numbers reported by the Eurasian Rail Alliance (UTLC) for the mainline through Kazakhstan, Russia and Belarus show rapid growth in container shipments from zero in 2010 to over half a million in 2020 (Table 1).  1 may understate the extent of Landbridge traffic, but they paint a consistent picture. 6Starting from a low base, traffic along the Landbridge roughly doubled each year between 2011 and 2017.The growth continued over the next 5 years and was, noticeably, not disrupted in 2020 and 2021 despite the COVID-19 shock.Improved rail links, with regular services connecting an increasing number of cities, broadened the range of customers willing to pay more than sea freight for faster more reliable transport but unwilling to pay for air freight.Variability of time may be even more important than average time (Ansón et al. 2020); the more predictable arrival time for a train than for a ship is especially important for trade along GVCs, which rely on just-in-time delivery, but there is only anecdotal evidence of the composition of Landbridge freight.The Landbridge has brought financial benefits to those providing and using the services. 7As a result of state subsidies, some of the benefits may be 6 According to Bucsky (2019, 9), 80% of China-Europe trains used the Kazakhstan corridor, 11% the Mongolian corridor, and 9% the northern TSR corridor in 2018.Chinese data on border crossing points show a different pattern (not precisely consistent with the numbers in Table 1), with around 12,000 trains crossing the Kazakhstan border at Khorgos or Alashankou, 4,500 crossing at Manzhouli or Suifanhe for the Russia-only TSR route, and 2,500 using the Mongolia-TSR route via Erenhot-cited in The 2021 Silk Road numbers are there: what do they tell us?Posted at https://www.railfreight.com/specials/2022/01/14/the-2021-silk-road-numbers-are-here-what-do-they-tell-us/ 14 January 2022. 7The state-owned national rail companies, led by Deutsche Bahn, responded to profitable opportunities.The revenues to the rail companies are confidential, but an Asian Development Bank source reported that transfers, but subsidies are mainly given to promote new services (Bucsky 2019). 8inancial and other benefits of rail are likely to have increased over the decade of the 2010s as time, price and other services improved, while ocean-shipping companies adopted slow-steaming to economize on fuel and reduce pollution.

Promoting Alternatives to the Current Main Lines
The Landbridge is a key element of the Belt in China's Belt and Road Initiative (BRI), although the rail services were established before the first announcement of the Belt in September 2013 and were well-developed by the time the BRI was formally launched in May 2017.The Chinese government has been active in promoting alternatives to the main lines, which run north of the Caspian Sea.Experimenting with alternative routes aims in part to serve new destinations, but also to avoid hold-up by a key transit country or a tragedy of the anti-commons.9Multiple options also encourage competition along many dimensions; freight forwarders are aware of differences between routes in terms of efficiency as well as price.10Finally, exploring alternative routes is a precaution against unexpected disruption of current routes that can be disastrous for GVCs. 11 Immediately after the easing of UN sanctions on Iran in January 2016, President Xi visited Tehran.China-Iran train services were established in the same month.The first train from China reached Tehran in February.12So far, no trains from China have gone beyond Tehran.Although the track exists to Istanbul and the Marmaray Tunnel Footnote 7 continued Kazakhstan earned over one billion dollars in transit fees in 2015 (Pomfret 2019, 267).Participation of freight forwarders and integration of Landbridge services into the operations of courier services such as DHL, Fedex, and UPS are profit-driven.A World Bank project found large benefits to countries along the Landbridge (Bird et al. 2020). 8The subsidies are mostly offered by Chinese provincial or local governments to encourage development of services from their cities.In 2020, the central government imposed a cap of 30% on subsidies, and the subsidies are eventually to be discontinued (Pepe 2021).Given the non-transparency, it is impossible to quantify the impact of terminating subsidies; without subsidies, the number of routes will fall as Chinese termini concentrate in a few hubs, whose services are likely to continue to be profitable.
eliminates the need for transfer by ship across the Bosporus, many parts of the rail journey are slow, including a four-hour ferry across Lake Van in eastern Türkiye.
More attention has been paid to the Middle Corridor that runs through Kazakhstan, crosses the Caspian Sea from Aktau to Baku, and then goes through Georgia either to link with the Turkish railway system or to cross the Black Sea by ship (Azhgaliyeva and Kalyuzhnova 2021).The TransCaspian route had been proposed by the EU in the 1990s as a way to link Central Asia and the Caucasus to Europe, but with little success. 13Since then, the hard infrastructure has been improved by completion of the Zhezkazgan-Beyneu railroad in 2014, reducing the length of the east-west rail journey across Kazakhstan, and of the Baku-Tbilisi-Kars (BTK) railroad, which became operational in November 2017 and provided an overland link from Azerbaijan to Türkiye. 14The first China-Türkiye train from Xian in November 2019 used the BTK and crossed under the Bosporus by the Marmaray Tunnel before continuing to Prague (Pepe 2021,  29).However, the rail-sea-rail mode change was an unattractive feature and a Black Sea crossing from Georgia to Romania or onward rail from Istanbul to Europe had problems.

External Shock in 2020-21: COVID-19
International trade was negatively impacted by the COVID-19 epidemic, but the impact on different modes of transport varied.In Russia, Central Asia and the Caucasus, air freight essentially stopped and transport by road was disrupted by requirements for drivers to be tested for COVID at border crossing points and other regulations. 15Sea freight was disrupted by quarantine and other restrictions that stranded ships in the wrong place.Many traders turned to the rail option, and the rail Landbridge flourished in 2020 and 2021.
In 2020, the COVID-19 pandemic seriously disrupted international maritime trade.Journey time for cargo ready at the East Asian port of departure to delivery at the European port of arrival increased from less than 60 days in 2019 to over 100 days by the end of 2021. 16Price data presents a similar picture. 17Unreliability of maritime delivery times was highlighted by closure of the Suez Canal for a week in March 2021 13 Under the TRACECA program, the EU promoted a route from Central Asia across the Caspian Sea to Baku and then by rail through Azerbaijan and Georgia to the Black Sea and ship to Europe.Despite support from Azerbaijan and Kazakhstan, the route attracted little China-EU freight due to the inconvenience of transferring freight from train to ship and back to train, twice. 14Further infrastructure improvements in the twenty-first century included opening of a Kazakhstan-Turkmenistan-Iran line in 2013, the Marmaray Tunnel under the Bosporus, and improvements of port and other facilities at Aktau and Turkmenbashi and the new Alyat port in Azerbaijan. 15Air freight and road transport appear to have recovered in 2021.A World Bank study (Arvis et al. 2022)  reported EU-China-EU trade in 2021 by value to be e698 billion (67% by sea, 28% by air and 5% by rail). 16The Flexport Ocean Timeliness Indicator measures the journey of a container from the time it is set to leave a factory to the time it is picked up from its destination port.Separate indicators for the world's two largest trade lanes-the Trans-Pacific Eastbound from Asia to North America, and the Far East Westbound from Asia to Europe-are measured in days, with data provided on a weekly basis (available at https:// www.flexport.com/research/understanding-the-ocean-timeliness-indicator/). 17The Freightos Baltic Index, a weighted average of spot rates for 40-foot containers using real time data from hundreds of logistical providers along twelve global shipping lanes, increased on average by about six after the Ever Given container ship became wedged. 18Even as lockdowns were eased and factories started up again, containers and ships were out of location as managers dealt with crew safety issues and dockside biosecurity.
Rail transport was less affected by anti-COVID measures, and acceleration of digitalization and paperless trade may even have improved the efficiency of international rail transport.Manufacturers, distributors, and logistics agents, who had previously relied on sea transport between East Asia and Europe, turned to overland freight routes.Although the change in transport mode was initially disruptive for many participants, the overland alternatives often turned out to be easier and more profitable than anticipated as users experienced reliable delivery schedules.In May 2020, at the height of the COVID crisis in Europe, UTLC reported that 52,500 TEUs were shipped on the Landbridge, the highest figure for a single month up to that date.Despite the decline in trade flows due to lockdowns and other disruptions to production in 2020 and 2021, the number of containers shipped between China and EU by rail through Kazakhstan increased from 333,000 in 2019 to 546,000 in 2020 and to almost 700,000 in 2021 (Table 1).
The negative side to the unexpected windfall was increased congestion.Travel times by rail between China and Europe had been reduced to 14-16 days, but in 2021 PRC-EU transit times of more than 30 days were reported.The main reason cited was an increase in demand, while popular border crossing points were unable to deal with the sudden rise in numbers.Congestion decreased in the first weeks of 2022, exacerbated by Chinese New Year celebrations (January 31st-February 6th, 2022) when production in China slows down, and the demand for westbound trains is less than usual. 19By mid-February, transport time to Poland had been less than 20 days for several weeks.That was just before Russia's invasion of Ukraine.

External Shock in 2022: The Russia-Ukraine War
The financial and export sanctions imposed by the USA and the EU on Russia on 25 February 2022 meant that European companies could face issues with money transactions when doing business in Russia.A few days later, both the EU and USA included Russian Railways in their sanctions lists.Customers began abandoning the northern corridor, concerned about the legal implications of working with a sanctioned company and about potential problems such as insurance coverage being invalidated by "Act of War" clauses.Alternative China-Europe rail routes were being quickly developed in 2022, highlighting the importance of the Landbridge for Eurasian supply chains.
Footnote 17 continued times between early 2020 and the third quarter of 2021 (Kamali 2022).From the Drewry Container Freight Rate Index of all-in costs for a 40-foot container between major port pairs, Isaacson and Rubinton (2022)  report increased container shipping costs from Russia or China to the USA of over 150% in 2021. 18The Ever Given, one of the world's largest container ships with a capacity of over 20,000 TEUs, was impounded as Egypt and the ship's owners negotiated compensation terms and exited the Canal 106 days after entering. 19Majorie van Leijen, Transit times New Silk Road back to normal, what's the secret?Posted 22 February 2022 at https://www.railfreight.com/beltandroad/2022/02/22/transit-times-new-silk-road-back-to-normalwhats-the-secret/.
The actual situation is difficult to assess. 20The ULTC website continued to report substantial traffic (681,200 TEUs in 2022) and EU companies continued to work with Russian Railways.Arvis et al. (2022, 42) report that rail connections continued to function, subject to additional procedures to check sanctions compliance, and, although international payments to Russian railways could be difficult, freight charges could be paid in China.At the same time, reports suggested that not all of these trains actually travelled beyond Russia and through traffic on the main line had declined substantially. 21Independent estimates of the traffic agree that the volume of EU-China rail freight travelling through Russia dropped, with a common estimate being a fall in traffic of around one third. 22Poland (195,736 TEUs) and Germany (171,868 TEUs) remained the largest EU hubs.The German pattern is striking; westbound traffic fell by 55% and eastbound traffic by 22%, the latter dominated by auto parts, mechanical equipment, cars, and optical products-reflecting a paradox between "getting rid of China's cheap supply chain" as part of Germany's New China Strategy and support for German inputs into value chains ending in China.Andy Luo contrasts this position with a "moral boycott" of Russia by Dutch and Belgian firms, although he notes that those countries may also have an incentive to encourage a return to maritime transport because Rotterdam and Antwerp are Europe's largest ports.
Alternatives to transiting Russia were sought immediately.In late February 2022, a train went from China to Istanbul and then the containers went by sea to Trieste. 24his example highlights that the Middle Corridor typically involves at least two sea crossings, starting with the Caspian Sea and then either crossing the Black Sea from Georgia to enter the EU through Romania or Bulgaria, or crossing the Adriatic Sea to avoid passing through non-EU members in southeast Europe.Changes of transport mode lengthen the journey, reducing the benefits of rail over sea. 25 In March 2022, two Middle Corridor routes in common use ran from Baku either to a Georgian port and by sea to Constanta (Romania) or to Kars and then by rail to Istanbul or Mersin.In the short term, there are issues with coordinating documentation and rules (e.g.what constitutes a hazardous material shipment) among the countries and operators involved; by contrast, such issues had been long resolved on the China-Kazakhstan-Russia-Belarus-Poland route.Prior to Russia's invasion of Ukraine, less than 5% of Landbridge traffic used the Middle Corridor and scaling up faced capacity constraints associated with the Caspian Sea crossing as well as congestion at Constanta port and on parts of the Turkish rail network. 26s the war dragged on, the focus shifted towards developing a sustainable alternative Landbridge.On 31 March 2022, Georgia, Azerbaijan, Türkiye, and Kazakhstan agreed to create a joint venture that would provide high-quality intermodal transport and logistics services, harmonize cross-border rates, and introduce a unified IT platform to fully automate cargo transport services from China to Türkiye and the Black Sea ports.The statement emphasized the importance of cooperation between the countries along the route and of investment in infrastructure development to integrate the Trans-Caspian transport corridor into the international transport system.A priority is to accelerate works to increase the capacity of the Baku-Tbilisi-Kars (BTK) rail line. 27n the longer term, currently difficult routes south of the Caspian Sea could be feasible.A route through Uzbekistan and Turkmenistan to Iran could connect to the Turkish rail network or to Iran's ocean ports. 28At the September 2022 Samarkand summit of the Shanghai Cooperation Organization, China, Uzbekistan, and the Kyrgyz Republic agreed on the route and financing of a railway linking Kashi (Kashgar), the furthest west point in China's rail network, to Uzbekistan, and hence providing an alternative east-west route to the Caspian (avoiding both Russia and Kazakhstan).

The EU Perspective and Future Prospects
The rapid evolution of the Landbridge highlighted the importance of appropriate connectivity for international supply chains.Use of the Landbridge expanded rapidly in the decade after 2011 and remained robust in face of potential threats of disruption in 2014 and 2020, although China was proactively exploring alternative routes.The Russia-Ukraine war in 2022 highlighted the dangers of relying on a system with a key chokepoint (i.e.transiting Russia).The rapid response to the war-driven disruption-both the resilience of existing flows (e.g. by German carmakers and others who contrived to evade sanctions) and the search for new routes-reflected the demand for Eurasian rail services.
The EU moves more slowly than China or the Middle Corridor countries, but it too has increased focus on the Middle Corridor.In 2019-20 the EU had announced the intention to bring its Trans-European Transport Network (TEN-T) in line with EU-China links.Revisions of TEN-T regulations announced in April 2022 focused on three pillars and promised that the revised regulations would be supported by significant investment. 29The EU commitment to Central Asia was restated at the EU-Central Asia Connectivity Conference in Samarkand on 17-18 November 2022 attended by the EU High Representative for Foreign Affairs, Josep Borrell, and the foreign ministers of the five Central Asian countries. 30f the post-war settlement between Russia and Ukraine is appropriate, the main lines of the Landbridge could revive. 31Absent those conditions, how feasible are alternative routes?The Middle Corridor and services to Iran are already in use, although traffic is far less than that carried on the main Landbridge routes prior to the Russia-Ukraine war.The attractiveness of the alternative routes will be increased if the countries involved can reduce delays by agreeing on customs procedures for trains in transit and prioritizing the through trains, by setting reasonable but not excessive freight rates, and by investing to improve choke points such as change of gauge (see Fig. 2).
This paper has focused on exogenous shocks, contrasting the impact on the Eurasian rail Landbridge of the COVID shock in 2020-1 and of the Russia-Ukraine war shock in 2022.Despite differences in the shocks and responses, overland trade between the EU and China, substantially driven by Eurasian value chains, has remained resilient.The long-term prospects for rail connections between China and Europe are positive. 29Pillar number one sets minimum infrastructure parameters along the entire TEN-T network for train length (740 m), axle load (22.5t),P400 loading gauge, and electrification and interoperability of signaling systems.Pillar number two requires creation of adequate capacity to ensure a defined number of 740-mlong trains per hour on every TEN-T line, to elevate the punctuality of freight trains to 90%, and to enable crossing of an internal EU border within 15 min.The third pillar concerns mandatory modernization of existing intermodal terminals and construction of intermodal terminals where capacity is lacking. 30In the previous month, President of the European Council Charles Michel visited Kazakhstan and Uzbekistan.The press statement with President Mirziyoyev of Uzbekistan emphasized: "Creation of sustainable transport corridors has been specified as key factor for increasing mutual trade, including explore options for further development of the Trans-Caspian Multimodal Route...The Presidents discussed the importance of expanding port capacities, increasing ferry and rail fleets, harmonizing customs procedures, introducing digital solutions for cargo handling and border crossing."Allocated EU funding for Central Asia is 300 million euros over four years. 31Closure of the Suez Canal in 1967 was an unanticipated exogenous shock, whose impact on trade lasted for 3 years and on GDP for 5 years (Feyrer 2021).Electric trains along well-maintained track are a more environmentally friendly mode of international transport than ships or planes.32Whatever the future expansion, rail transport has already proven to be an important link between the regional value chains of East Asia and Europe (see Fig. 3).

Fig. 1
Fig. 1 Time and Cost of Shipping a 40-foot Container from Shanghai to Hamburg by Air, Rail and Sea, 2006 and 2017.Source: Hillman (2018), Redrafted from Zhang (2017).I am grateful to Jonathan Hillman and Sabrina Zhang for permission to use

Fig. 2 Fig. 3
Fig. 2 Alternative Rail Connections between Europe and China.Source: Buck Consultants International at www.bciglobal.com(reprinted with permission).TSR Trans-Siberian Railway (green), TRACECA routes across or south of Caspian Sea, avoiding Russia (black), CCR central corridor route, the main Landbridge route (red)

Table 1
Volume of traffic on China-EU-China container trains Sources: column 1 UTLC website at www. utlc.com;column 2 Chinese official data cited in The 2021 Silk Road numbers are there: what do they tell us?Posted at https://www.railfreight.com/specials/2022/01/14/the-2021-silk-road-numbers-are-here-what-dothey-tell-us/14 January 2022 The UTLC numbers understate total freight because many customers, especially from northeast China, use the TSR.The Chinese data in Table 1 cover all routes, and try to exclude bilateral trade with Kazakhstan, Mongolia or Russia, but it is not always clear where to draw the line, e.g.trains to Russian Baltic ports are mostly Landbridge traffic to Scandinavia or Germany.Both series in Table