"THE BAKU-TBILISI-KARS RAILWAY: THE FIRST STEP IN A LONG PROCESS"
The Power and Interest News Report (PINR)
Dec 13 2007
On November 21, the presidents of Turkey, Azerbaijan and Georgia
inaugurated the construction of the Baku-Tbilisi-Kars (B.T.K.)
railway in Marabda, South Georgia. Linking Baku in Azerbaijan with Kars
in eastern Turkey via Tbilisi in Georgia, the railway is scheduled
to be completed in 2009-2010 and will transport goods, especially
oil and passengers.
The project includes construction of a 29-kilometer (18 miles)
segment in Georgia and a 76-kilometer (47 miles) segment in Turkey.
There are plans to extend the railway corridor to Europe once a tunnel
under the Istanbul strait becomes operational around 2012.
According to Azeri officials, Kazakhstan and China are interested
in the project, as the new railway would allow them access to Europe
faster than the existing trans-Siberian route.
The B.T.K. railway is far from being an isolated project in
the Eurasian context. After the breakup of the Soviet Union, the
increase in trade between the former Soviet states and the need for
new outbound intra-continental transportation corridors has prompted
landlocked states to seek various forms of cooperation in developing
a transnational infrastructure.
For Central Asian states, road and rail transportation corridors are
indispensable vectors of regional and global integration. It also
means manpower mobility and increased communication and cooperation
among cultural communities and businesses.
Although there have been several attempts in the past to
develop a railway corridor between Asia and Europe, they led to
limited results. The European Union backed the Transport Corridor
Europe-Caucasus-Asia (T.R.A.C.E.C.A.), founded in 1993, with the goal
of providing support to the development of transport infrastructure
in South Caucasus and Central Asian countries. But the absence of
a coherent E.U. strategy, political disruptions, and the lack of
funding and coordination between the 12 member countries contributed
to a slowdown in the implementation of major projects. Other railway
transportation projects are included in the European Neighborhood
Policy (E.N.P.) and are supported by Georgia, Ukraine, Azerbaijan and
Moldova (G.U.A.M.) members. A much older initiative is the Trans-Asian
Railway (T.A.R.) established in 1960 by the United Nations with the
goal of creating an integrated freight railway network across Europe
and Asia.
It seems that 2007 was the year of a renewed interest in the revival of
the old projects, in addition to new transnational initiatives backed
by a complex mesh of geopolitical, national and economic interests
that are emerging throughout the Central Asian and Caspian regions.
China and seven other Central Asian states announced in November a
plan to build a modern version of the ancient Silk Road, which will
include a network of highways, airports, rail lines and seaports
connecting China with Western Europe.
Kazakhstan and Turkmenistan finalized an agreement to build a railway
along the Caspian Sea; Turkmen President Gurbanguly Berdymukhamedov
asked the Commonwealth of Independent States (C.I.S.) to create
north-south and west-east transport corridors; and Russia announced a
long-term plan to develop its transportation network, with a special
focus on railways. Another upcoming T.R.A.C.E.C.A. project is the
Poti-Baku-Aktau-Almaty railway corridor built mostly for container
shipments, a joint project of Georgia, Azerbaijan and Kazakhstan
The B.T.K. Railway’s Political Context
It was clear from the early stages of the project that Yerevan would
oppose a transportation corridor that continues to isolate Armenia,
consequently reinforcing its dependence on Georgia and Iran. Given
the tense situation in Nagorno-Karabakh, there are fears that the
future railway could be used to carry military equipment and weapons
from Turkey to Azerbaijan. Even if Georgia’s participation is not
appreciated in Yerevan, it appears unlikely that this new triangular
project will undermine future bilateral cooperation between the
two countries.
Armenian leaders insisted that the existing railway between Kars and
Gyumri in northeast Armenia would offer the best option. The railway
has been closed since 1993 when, after the Nagorno-Karabakh conflict,
Turkey closed its border with Armenia.
Initially, Armenia managed to produce a standstill. In 2005,
the Parliamentary Assembly of the Black Sea Economic Cooperation
(P.A.B.S.E.C.) supported Armenia’s proposal to reopen the railway
link with Turkey.
Then, in 2006, as a result of pressures from the Armenian lobby,
the U.S. Senate banned American banks from financing the railway.
Although the European Union has refused to include the B.T.K. railway
in the E.N.P. or T.R.A.C.E.C.A., the project could not be stopped.
Azerbaijan and Turkey are strongly opposed to Armenia’s participation
in regional projects and asked Yerevan to withdraw its troops from
Azerbaijan as a precondition for joining the project. Yet, there is
practically no chance that in the foreseeable future Armenia will
accept such a request.
The railway, estimated to bring US$50 million annually, is part of
Azerbaijan’s strategy of becoming a key segment of the transportation
corridors on both the east-west and north-south axis. As the shortest
way westward through Armenia is closed for an undeterminable period
of time, Azerbaijan is maximizing the access to transport corridors
via Georgia.
Given its pivotal role in the area, Azerbaijan wants the railway to
become a catalyst for increased regional integration and to foster
trade and foreign direct investment. Moreover, the new railway will
allow Central Asian and Caucasus states to connect with Europe,
bypassing Russia.
In parallel, Azerbaijan is actively looking for business opportunities
in Georgia and Turkey. In November, the State Oil Company of Azerbaijan
(S.O.C.A.R.) inaugurated an important oil terminal in Georgia’s Black
Sea port of Kulevi designated to facilitate the export of Central
Asian and Caspian Sea energy to Europe. Continuing the series of
foreign economic expansion, S.O.C.A.R. made an even more significant
investment in Turkish petrochemicals company Petkim.
Both pipeline projects that have been developed so far in the
region — the Baku-Tbilisi-Ceyhan (B.T.C.) oil pipeline and the
Baku-Tbilisi-Erzurum natural gas pipeline — tested the reliability
of the triangular partnership between Azerbaijan, Turkey and Georgia.
Trying hard to balance Russia, both Azerbaijan and Georgia are
strengthening their economic, cultural and military ties with Turkey,
a safe gateway to Europe and a N.A.T.O. member.
Ankara, whose economy is now booming, is looking to increase its
leverage in the region by participating in joint projects with its
allies, especially with Azerbaijan where Turkish companies found a
favorable business environment. Turkish investments in Azerbaijan
are on the rise while political and military ties are getting stronger.
Turkey is Georgia’s largest trade partner and there are good prospects
for even more growth after the signing of a free trade agreement
on November 21. On the political side, the Turkish government
supports Georgia in its dispute with separatists in Abkhazia and
South Ossetia. The B.T.K. railway will not only strengthen Turkey’s
role as a "window" to Europe, but will also open a shorter corridor
to Central Asia as an alternative to the railway link via Iran.
In the beginning, Georgia was reluctant to join the project, lacking
the necessary funds and concerned that the activity of the Black Sea
ports, Batumi and Poti, could be affected. But the Russian blockade
and Azerbaijan’s assistance in funding the construction work on
Georgia’s territory convinced the skeptical politicians to approve the
project. Under the terms of the agreement, S.O.C.A.R. will provide
a $200 million loan at a one percent annual interest rate within
25 years.
Tbilisi hopes that the railway will contribute to the economic
development and stability of the turbulent Javakheti region where
the population is predominantly Armenian. The local economy is now
threatened after it was largely dependent on a Russian army military
base, closed last November.
Transportation infrastructure is crucial to a key transit country like
Georgia. Although the shutdown of the railway with Russia via Abkhazia
is not beneficial for both sides, some observers think that once the
railway is restored and Russia gets direct access to Armenia, its only
ally in the region, Moscow will become more influential in the region.
This year it was announced that Parkfield Investment Ltd., a British
management fund, took control of Georgian Railways for a period
of 99 years. The privatization decree was controversial, as some
politicians were concerned that Parkfield will fall into Moscow’s
hands. They denounced the lack of transparency that surrounded the
negotiations. However, the deal finally failed and the privatization
process was delayed until next year, leaving the door open to
investors.
Conclusion
Although it is too early to predict how the future "iron" Silk Road
will look, it seems that Russia will remain well positioned to play
a major role on both the north-south and east-west axis.
The B.T.K. railway is a small but key segment of the emerging
transcontinental corridor that may encourage other former-Soviet states
to settle their disputes and join in. At the moment, the railway is
rather a signal to Russia than a challenge to its domination over the
railway networks between East and West. As a reaction, Russia will
likely increase the pressure on Georgia; it will try other alternate
routes to Iran via Azerbaijan, while bringing Armenia closer to Iran.
As the multidimensional cooperation between Azerbaijan, Georgia and
Turkey has intensified, there may be an emergence of a new regional
alliance led by Turkey. The military factor is not yet clearly defined
because Turkey has a pragmatic regional policy toward Russia and
Iran. In the absence of prospects of integration with either the
E.U. or N.A.T.O., Azerbaijan and Georgia may hope to maximize the
advantage of their geographical location through closer regional
cooperation and joint projects.
The regional triumvirate that took shape is cemented by the Kremlin’s
tough stance on Georgia and Azerbaijan and sustained by the economic
boom and close partnership of Turkey and Azerbaijan. Still, their
alliance will be challenged by the ongoing instability in the region
due to the "frozen conflicts," the unsolved status of the Caspian Sea,
and other intra regional ethnic and religious tensions.
Moreover, peace in the region depends also on external factors such
as the relationship between the United States and Russia.
The European Union and the United States will remain supporters of an
independent Central Asian-Caucasus hydrocarbon corridor and continue
to promote energy cooperation among the regional actors. Yet they will
be cautious about alienating Armenia. From a geopolitical perspective,
the B.T.K. railway is a step toward reducing Moscow’s influence in
the region, a goal of the E.U. and U.S.
Although the three presidents present at the inauguration hailed the
project as a "geopolitical revolution," and a key contribution to
the security of the region and even of the world, there is still a
ways to go until the region will achieve this level of security.
Report Drafted By: Stefan Bocioaca
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