Momentous Implications of Azerbaijan-Georgia-Turkey Railroad
Presidents Ilham Aliyev, Mikheil Saakashvili, and Abdullah Gul attended the groundbreaking ceremony at the Marabda railroad station in southeastern Georgia and an inaugural event in Tbilisi. The three countries are carrying out this intercontinental project without any involvement by other parties or international organizations. With the European Union defaulting on its earlier-declared transit policy, and the United States neutralized on this issue by anti-Turkish and anti-Azeri lobbying in Congress, it is Azerbaijan that has taken the lead in this project, serving both regional and Western interests.
The project will link the railroads of Azerbaijan, Georgia, and Turkey by constructing missing links and upgrading old, worn-out sections in Georgia and Turkey. When complete, the railroad will link up eastward from Baku with Kazakhstan by trans-Caspian shipping lines and westward, from the undersea railroad tunnel near Istanbul to wider Europe. The project is dubbed an “Iron Silk Road.”
Mainly at Azerbaijan’s initiative, in February 2007 the three countries signed an intergovernmental agreement to carry out this project. It involves building 105 kilometers of track from scratch, including 76 kilometers in Turkey and 29 kilometers in Georgia; and totally upgrading some 190 kilometers of old dilapidated tracks in Georgia. The target date for completion is 2010. Project costs are preliminarily estimated at $600 million, including $420 million for construction and reconstruction of those railroad sections, with the remainder to be spent on related infrastructure.
The International Bank of Azerbaijan is financing most of the construction and reconstruction on Georgian territory. It has agreed to give Georgia a $200 million loan on the softest of terms: repayment in 25 years at 1% interest. Georgia will repay the loan from the revenue generated by the railroad on its territory. Turkey is financing and building the railroad section on its territory. The Azerbaijani company Azerinshat Service will construct the Georgian section.
Cargo volume on the railroad is anticipated at 5 million tons annually in the initial stage after 2010, some 15 million tons by mid-decade, and some 30 million tons annually from 2020 onward. Passenger service is also envisaged. This railroad will reconnect Georgia with the outside world after the Russian destruction or blockade of Georgia’s railroad outlets to Russia. The Georgian railroad’s Abkhaz section has been inoperable since the 1992-93 Russian military intervention; and other overland routes are closed since 2006 as part of Russia’s overall transport blockade. Moreover, the new outlet to Turkey and Europe reorients Georgia’s main transport axis from the Russian to the Western direction.
It “opens a window to Europe for Georgia and its citizens,” Saakashvili said at the groundbreaking event. It can also create tens of thousands of new jobs in Georgia and help revitalize the deeply impoverished, mostly Armenian-populated Javakheti area, overcoming its economic isolation.
Azerbaijan had experienced (together with Georgia) the temporary blockade of its own railroad and other transport outlets by Russia during the two Chechen wars. The railway via Georgia to Turkey and Europe will now be safe from that type of Russian action. “This railroad will make Azerbaijan and Georgia stronger and more independent,” Aliyev stated at the groundbreaking event. For his part, Gul described this railroad as a “history-changing project,” one that ultimately links “China to London” on the shortest overland route through the South Caucasus and Turkey. Some observers anticipate that China will prefer this railroad over Russia’s Trans-Siberian for Chinese exports to this region and also to certain European destinations.
Kazakhstan is expected to use this railroad for at least 10 million tons of cargo annually for its booming exports, including oil and grain. With grain exports projected at up to 5 million tons annually, Kazakhstan is now completing construction of an 800,000-ton grain-handling terminal near Baku for storage and transfer from ships to railroad. Through this railroad, Kazakhstan gains unprecedented, direct access to Europe on the shortest overland route. Kazakhstan will be able to shift some of its westbound cargoes into this route, away from Russian railroads.
These charge extortionate rates -- a long-standing grievance of Kazakhstan -- in the absence of competition. The Azerbaijan-Georgia-Turkey railroad will break Russia’s monopoly on railroad transport from Kazakhstan and other Central Asian countries, just as pipelines through the South Caucasus can break the Russian monopoly on oil and gas transit from Central Asia.
The New Transcaucasian Railway
Peace and conflict in the Caucasus
The Ankara government has already forged closer ties with Georgia and Azerbaijan -- particularly for oil and gas delivery from the Caspian Sea -- with a pipeline connecting the Azerbaijani capital of Baku with Georgia and the Mediterranean Turkish port of Ceyhan. The former Soviet republics used to be connected by a Communist-era Transcaucasian Railroad, which once moved millions of tons of cargo every year; but traffic was suspended after the Iron Curtain fell. Not everyone in the region welcomes the planned new Transcaucasian route. The government in Armenia has criticized the decision by its three neighbors to develop a corridor that avoids Armenia altogether. Leaders in Yerevan say the plan deliberately ignores the old rail link between Armenia and Turkey, which has been idle since the the two countries cut off diplomatic ties in 1993. Relations between Armenia and Azerbaijan are not much better: The two countries bitterly disagree over the enclave of Nagoro- Karabakh. The mountainous territory inside Azerbaijan has been controlled by ethnic Armenian forces since a 1994 cease-fire ended six years of fighting, during which over 30,000 people died.
ARMENIA OPPOSES TURKISH-GEORGIAN-AZERI RAIL PROJECT
Plans for the construction of a major railway linking Turkey to Azerbaijan via Georgia are prompting mounting concern in Armenia. Officials in Yerevan, fearing the completion of the railway would further isolate Armenia, have pressured Georgia to pull out of the multimillion-dollar project. The railway also is facing objections from the United States and the European Union. Azerbaijan, Georgia and Turkey revealed their intention to pursue the railway project in May 2005 during the ceremonial opening of the Baku-Tbilisi-Ceyhan (BTC) oil pipeline. The presidents of the three nations said the rail link, estimated to cost roughly $400 million, would promote regional economic integration and create a new transport corridor between Europe and Central Asia.
The project essentially boils down to laying an almost 100-kilometer-long rail track between the eastern Turkish city of Kars and the southern Georgian town of Akhalkalaki. Armenian officials insist that the project makes no economic sense, pointing to the existing railroad running from Kars to the northern Armenian city of Gyumri and on to the two other South Caucasus countries. The Kars-Gyumri link has stood idle for over a decade due to the continuing Turkish economic blockade of Armenia. [For background see the Eurasia Insight archive]. The Armenian government argues that that Turkey, Georgia and Azerbaijan should make use of this Gyumri hub instead of spending hundreds of millions of dollars on building a new one. As an incentive, Yerevan has indicated that it would make the Gyumri hub available without insisting that Turkey lift its economic blockade. "Armenia is ready to let Turkey, Georgia and Azerbaijan use the existing railway line on Armenian territory without Armenia’s participation," Armenian Foreign Minister Vartan Oskanian reiterated during an official visit to Tbilisi on June 27.
The issue was high on the agenda of Oskanian’s talks with Georgia’s President Mikheil Saakashvili and Foreign Minister Gela Bezhuashvili. A statement issued by the Armenian Foreign Ministry said Oskanian "stressed the economic and political importance of the operation of the Kars-Gyumri-Tbilisi rail line." Armenian officials took little comfort in Bezhuashvili’s public assurances that the Turkish-Georgian-Azeri project is "purely commercial." They fear that the new railway would deepen Armenia’s economic isolation. Aggressive statements made recently by Azerbaijani officials, including President Ilham Aliyev, have helped fuel worries in Armenia. The landlocked country has already been left out of regional energy projects such as the BTC pipeline, due to the unresolved Karabakh conflict. [For background see the Eurasia Insight archive].
Influential Armenian lobbying groups in the United States have joined Yerevan in trying to thwart the project. They were instrumental in securing a US congressional committee’s June 15 vote to endorse an amendment that would prohibit the US Export-Import Bank from funding the railway’s construction. "With this amendment, we are sending a message to the governments of Turkey and Azerbaijan that continually excluding Armenia in regional projects fosters instability," said US Rep. Joseph Crowley, a New York Democrat who is the measure’s main sponsor. The amendment is expected to be considered by the full House of Representatives later this year. Similar legislation is pending in the US Senate, and the Bush administration has not voiced objections to either bill. The ambassador-designates to Armenia and Azerbaijan assured pro-Armenian US legislators during recent congressional hearings that Washington is against the construction of the Kars-Akhalkalaki-Tbilisi railroad. Without ex-im bank backing, US companies would likely be reluctant to invest in the project.
The European Union seems to take a similar view. "A railway project that is not including Armenia will not get our financial support," the EU’s external relations commissioner, Benita Ferrero-Waldner, said in Yerevan last February. Turkey and Azerbaijan appear undaunted by US and EU expressions of displeasure. Turkish Foreign Minister Abdullah Gul’s discussed the issue with Aliyev during a late June visit to Baku. The Turkish Daily News newspaper quoted Gul as telling the Azeri leader on June 20 that "Armenia can also join these projects if it wants." However, the Turkish Foreign Ministry spokesman, Namik Tan, clarified the next day that this could happen only after a resolution of the Karabakh dispute. The Karabakh peace process is currently stalemated. [For background see the Eurasia Insight archive].
Tan also downplayed the significance of likely US funding restrictions. "I think the three countries have enough funds. We can finance [the railway’s construction] in one way or another," he said. Baku had hoped to begin work on the railway later this year and have it completed by 2008. But with Turkey, Georgia and Azerbaijan having yet to agree on the sources of funding, this time frame seems unrealistic. Furthermore, the Georgian government is having what Gul reportedly described as "serious hesitations." This might explain why a planned meeting of the transport ministers of the three states, which had been planned for late June, has been postponed until late July. The director general of Georgia’s state-run rail network, Irakli Ezugbaya, publicly questioned earlier in June a feasibility study that was conducted and released by a Turkish company recently. The Caucasus Press news agency quoted him as saying that the study failed to predict the anticipated volume of cargo traffic along the would-be railway.