In the last five years, Azerbaijan has embarked on a rapid transformation of its railway infrastructure and logistics ecosystem, aiming to become a pivotal Eurasian transit hub.

As a central actor in this transformation, Azerbaijan Railways (ADY) has undergone significant structural and strategic reforms. Its current agenda – process optimization, digitalization, decarbonization, and modernization – aligns with Azerbaijan’s broader economic diversification goals and ambitions to connect vital trade arteries such as the Middle Corridor and the International North-South Transport Corridor (INSTC).

Strategic Imperatives Behind Railway Investments

Given the shifting geopolitical dynamics in Eurasia and the Middle East – including instability, sanctions, and energy security concerns – Azerbaijan’s push for economic diversification away from hydrocarbons is no longer just desirable, but essential. Railways now has the potential to form the backbone of this non-oil development strategy.

Since 2022, transit traffic has surged. In 2024, ADY transported over 18.5 million tons of freight. Transit volumes rose by 5.7% to 7.3 million tons, while imports grew by 10% to 5.2 million tons, compared to 2023. The East–West corridor – a key artery within the Middle Corridor – handled more than 3.2 million tons of cargo. ADY now facilitates at least 1,000 block trains annually, a figure made possible through strategic infrastructure upgrades and enhanced international cooperation. Moreover, in an effort to develop major part of domestic railway network, particularly in the formerly war-torn Karabakh Economic zone, ADY managed to rebuild four new stations in Barda, Aghdam, Tazakand, and Kocharli towns which were ruined during the invasion period in the early 1990s. The most significant part of the reconstruction process came with recent inauguration of the new Aghdam Railway and Bus Terminal Complex on May 10, 2025, with the capacity of serving 800–1,000 railway passengers and 1,300–1,500 bus passengers daily. It is noteworthy to mention that the revitalization strategy for Karabakh and Eastern Zangezur entails to stimulate substantial economic growth and attract significant foreign and domestic investments. 

Middle Corridor and the External actors

China, seeking alternative routes to traditional transit lines, has increasingly prioritized the Middle Corridor as a part of its BRI project. Azerbaijan, due to its strategic location and logistics capacity, plays a key role in this corridor as a driver of key initiatives. The geopolitical shifts that unfolded after 2022 elevated the strategic importance of the Middle Corridor for China significantly. The disruption of global supply chains, primarily due to international conflicts, coupled with the growing significance of the Middle Corridor for global trade between the EU and China, prompted Beijing to adopt a more proactive approach in its engagement with countries along this route.

Within the intensified partnership alongside the trade route, in March 2024, the first block train from China’s Xi’an to Baku arrived via this corridor in just 11 days, marking a new chapter in Azerbaijan’s transit capability and strengthening its attractiveness as a reliable East-West gateway.

Additionally, Central Asian states like Kazakhstan are using the corridor to diversify away from traditional trade routes, especially for the export of crude oil and natural gas. Azerbaijan’s strategic ports, railways, and customs facilities are now enabling faster, more secure land freight routes to Europe via the Caspian and South Caucasus.

Notably, greater connectivity means better access to Central Asia’s vast natural deposits of rare earth elements crucial for civilian and defense products, new energy, and information technology. As the corridor countries seek to reach new markets, China, Turkey, the EU, and the United States share a common interest in increasing cooperation.

Accelerating Digitalization and Infrastructure Renewal

The rise in container traffic has emboldened ADY to invest in digital transformation. In 2024, the company launched an online tariff calculator and the “ADY Smart” digital platform to improve logistics transparency. That same year, Singapore-based Global DTC PTE Ltd introduced a digital platform for cargo owners and rail operators, enhancing real-time tracking and issue detection across the TITR (Trans-Caspian International Transport Route). Recognizing these advances, the Asian Development Bank (ADB) approved a $47 million loan in September 2024 to support ADY’s digital transformation. This investment targets improvements in safety, operational efficiency, and capacity.

Strategic Role in Regional Geopolitics: Zangezur Corridor and Horadiz–Aghband Railway

The Horadiz–Aghband railway, launched in 2021, is ADY’s most geopolitically significant domestic project. It is a vital part of the envisioned Zangezur Corridor, linking mainland Azerbaijan with the Nakhchivan exclave and eventually Turkey. The Zangezur line spans 110.4 km, with over 300 engineering structures, including 8 stations, 3 tunnels, 47 bridges, and a 1,071-meter tunnel.

This project gained traction in the post-2020 period, which reshaped the South Caucasus geopolitical order. Baku now sees this corridor not only as a logistical pathway but as a symbol of strategic revival and regional leadership. On the other hand, Azerbaijan has the necessary maritime and railway capabilities to support the full operation of the Zangezur Corridor—including the Port of Baku at Alat, which aims to become the major intermodal logistics hub of the Silk Road region.

While the Middle Corridor remains the centerpiece of Azerbaijan’s East-West connectivity strategy, Baku also supports the International North-South Transport Corridor (INSTC), linking India to Russia and Northern Europe via Iran and Azerbaijan. Azerbaijan’s balanced stance aims to maximize transit revenues from both routes while avoiding overreliance on any single geopolitical axis. Hence, in May of 2024, ADY successfully completed the reconstruction of the cargo yard located in the Astara region of Azerbaijan to ensure the faster handling of significantly increasing cargo transshipments along the INSTC. The multimodal transportation services along the INSTC have so far been carried out only at ADY’s terminal in Astara, Iran.

However, geopolitical instability in the region makes the Middle Corridor more attractive for Western and Central Asian partners, boosting Azerbaijan’s centrality in that route. Yet, INSTC’s potential for Southern trade flows – especially from India and the Persian Gulf – is a long-term economic opportunity that Baku continues to support with investments in southern rail infrastructure.

Azerbaijan’s ambitious railway transformation is more than a domestic infrastructure upgrade – it is a strategic recalibration of the country’s geopolitical and economic posture. By investing heavily in modernization, digitalization, and cross-border connectivity, Baku is positioning itself as an indispensable node in both East–West and North–South transport corridors. The parallel development of the Middle Corridor and the INSTC reflects Azerbaijan’s pragmatic balancing strategy: diversifying partners, maximizing transit revenue, and avoiding entanglement in volatile geopolitical blocs. 

As shifting global trade dynamics seek alternatives to traditional routes, Azerbaijan’s railway network—anchored by ADY—is set to play a defining role in the future of transcontinental commerce. Through deliberate infrastructure diplomacy and resilient investments, Baku is not merely connecting regions—it is reshaping the very routes of global trade.