bab-el-mandeb
The Red Sea Bottleneck and the Reconfiguration of Routes
The blockage of the Red Sea shipping route, caused by the actions of the Houthi rebels, has generated a temporal collapse in trade flows between Asia and Europe. The average delay for transit through the Bab-el-Mandeb Strait rose to over 18 days in the second quarter of 2026, with a 37% reduction in operational capacity for major shipping companies compared to pre-crisis levels. This congestion has made the traditional route not only slower but also less predictable: the additional cost for a single container, estimated at $4,200 on average, was borne by logistics operators who had to prepay or resort to extended insurance coverage.
The immediate consequence was a search for physical and temporal alternatives. The Middle Corridor — the trans-Caspian railway that crosses Kazakhstan, Azerbaijan, Georgia, and Turkey — recorded an increase in transit traffic from 1.92 million tons to 2.33 million tons in the second quarter of 2026. This is not an isolated figure: the total volume handled by Georgian railways during that period amounted to 3.9 million tons, with a transit share of 59% of the total. This indicates that Georgia is no longer just a transit point, but a strategic node for logistical reconfiguration.
The railway as an intermodal system
The efficiency of the Middle Corridor route stems from a series of infrastructural and procedural optimizations. The transfer from train to ferry in the Caspian Sea has been reduced to 14 hours thanks to the introduction of an automated wagon exchange system between Azerbaijan Railways (ADY) and Georgian Railways, eliminating duplicate inspections. Customs operations in transit have been digitized through a common platform between the authorities of Baku and Tbilisi, which has reduced the average customs clearance time from 48 to 12 hours.
The total cost for a container traveling from China to Germany via the Middle Corridor is estimated at $3,950 in Q2 2026, with an average transit time of 17 days—lower than the average maritime route times (24-30 days) and comparable to air transport times for non-urgent goods. The operating margin for railway carriers has been maintained at 9.6% thanks to the use of double-decker trains and optimized route scheduling along the Georgian section.
Strategic Leverage: The Centrality of the Trans-Caspian Node
The expansion of logistical capacity in Georgia was not accidental. The TC-GATE project, funded with 320 million euros from the World Bank and the Asian Development Bank, included the expansion of railway infrastructure along the route between Batumi and Tbilisi, resulting in a 41% increase in operational capacity in the first half of 2026. The integration of new automated terminals in Poti has enabled an average container unloading speed of 38 TEU/hour, which is higher than the European average (32 TEU/hour).
This strategy was supported by an alliance between logistics operators: the Georgian company 166 Global Logistics entered into agreements with four Chinese railway carriers and three European shipping companies to ensure continuous flow coverage. This vertical integration reduces the risk of delays and increases negotiating power on prices, allowing B2B clients to obtain contracts with fixed rates on a quarterly basis.
Impact on Operating Margin and Working Capital
The efficiency of the Middle Corridor has reduced the average cost per TEU from $4,100 to $3,950, with a direct impact on the gross profit margin of companies using this route. For a company with 20,000 containers per year in transit, this represents an annual saving of approximately $3 million in operating costs. The average working capital immobilization time has decreased from 45 to 28 days, thanks to reduced customs clearance times and improved real-time flow visibility.
The strategic value of Georgia as a multimodal hub translates into attracting foreign direct investment. The government has announced the opening of a free zone in Batumi, with tax exemptions for logistics operators handling more than 10,000 TEU per year. This incentive is not only fiscal: it allows for a recovery of working capital in less than three months compared to the traditional model, with an estimated ROI of 24 months for early operators.
Alert for Business Decision Makers
Logistics managers must evaluate the adoption of the Middle Corridor not as a temporary solution, but as a structural change. The main risk is the saturation of Georgian infrastructure: the current traffic volume is approaching the operational limit of the 1520 mm railway network, with an estimated residual capacity of less than 18%. Renegotiation of contracts with carriers should be completed by the first quarter of 2027 to avoid transit rate increases exceeding 5%.
Photo by Usman Yousaf on Unsplash
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