Tweet
Eurasia Daily Monitor
July 25, 2008 -- Volume 5, Issue 142
AZERBAIJAN, GEORGIA, TURKEY ADVANCE ON THE IRON SILK ROAD
by Vladimir Socor
Presidents Ilham Aliyev of Azerbaijan, Mikheil Saakashvili of Georgia,
and Abdullah Gul of Turkey inaugurated on July 24 in Kars the construction
work on the Turkish section of the Kars-Tbilisi-Baku (KTB) railroad. A
project of inter-continental significance, connecting Europe and Asia
through the South Caucasus, this `Iron Silk Road' is being built by the
region's countries through their own efforts.
Azerbaijan is the real motor of the KTB railroad, as well as in the
region-wide energy projects. Baku single-handedly finances the railroad's
construction on Georgian territory, drawing on early oil revenues to invest
in this strategic railroad. Azerbaijan rescued the project after the
European Union, international financial institutions, and Turkey for various
reasons had declined to finance the Iron Silk Road. According to Turkish
Transportation Minister Bineli Yildirim, `If Ilham Aliyev had not
demonstrated resolve, this project would not have been possible. Azerbaijan'
s decision to finance the Georgian section is the most important step in the
implementation of this project' (Trend Capital, July 14).
The KTB project involves construction of 105 kilometers of new rail
tracks from scratch, including 76 kilometers on Turkish territory to the
Georgian border and 29 kilometers within Georgia. It also necessitates
repair and upgrading of 183 kilometers of existing rail track on Georgian
territory. The overall costs are estimated (in 2007 U.S. dollar terms) at
$600 million, including $422 million for the railroad itself and nearly $200
million for associated infrastructure. The Turkish section will cost $241
million to build.
The International Bank of Azerbaijan has loaned $220 million for the
Georgian section on uniquely preferential terms: 25-year repayment period,
at only 1 percent annual interest. Georgia will repay the loan by using part
of the revenue generated by the railroad on Georgian territory.
Azerbaijan, Georgia, and Turkey signed the intergovernmental agreement
on KTB in February 2007. Construction work on the Georgian section started
in November 2007, with Azerbaijan's Azerinshaat Service company acting as
general contractor (see EDM, November 27 and 28, 2007).
Speaking at the groundbreaking event on the Turkish section on July
24, Saakashvili remarked that Azerbaijan is acting in practical terms as a
`guarantor of Georgia's independence,' financing the railroad now after
having supplied Georgia with low-cost gas during the Russian blockade of
January-February 2006. `The Georgian people will never forget this,'
Saakashvili stated (Kavkas-Press, July 24).
The railroad is scheduled for completion in 2011. It is expected to
carry 1.5 million passengers and 6.5 million tons of cargo per year during
the first three years of operation. Traffic is projected to increase to 3
million passengers and 15 million tons of cargo per year before 2015. This
could stimulate a substantial expansion in the capacity of Turkish State
Railways, which currently handles 19.5 million tons of cargo annually
(Anatolia Agency, Turkish Daily News, July 20, 21).
Functionally interrelated with the KTB, although a distinct entity, is
Turkey's Marmaray project to build a railroad tunnel under the Bosporus.
With completion expected by 2011, the tunnel will enhance the KTB railroad's
commercial attractiveness. Trains will be able to travel without
interruption from any point in Europe (e.g., London) continuously to the
Caspian Sea.
On the eastern Caspian shore, Kazakhstan is interested in a
trans-Caspian linkup with KTB's terminal in Baku. The KTB railroad will open
direct access for Kazakhstan to European Union territory for the first time.
Kazakhstan plans a massive increase in its commodity exports to Europe,
including grain exports. With this in mind, Kazakhstan is completing an
800,000-ton grain-handling terminal near Baku, for trans-shipment from
barges to the railroad.
Asked about Armenia's absence from the KTB project, President Gul
commented in general terms that countries wishing to participate in
region-wide projects should respect the territorial integrity of their
neighbors (Zaman, July 24). This diplomatic understatement reflects the
ongoing feelers between Turkey and Armenia about a possible high-level
meeting to ameliorate relations (see article by Gareth Jenkins below). In
fact, Yerevan had actively opposed the KTB project and worked with its
allies in the United States and Europe to block international funding for
it.
Yerevan had hoped to force a change of route, diverting the KTB line
from Kars to Gyumri in Armenia. This would have made no economic sense
inasmuch as the Kars-Gyumri line (existent, but closed by Turkey due to
Yerevan's occupation of Azerbaijani lands) is a sideline, of merely local
interest. Earlier, and similarly, Yerevan and allied groups in the West had
unsuccessfully opposed the Baku-Tbilisi-Ceyhan oil pipeline.
Thanks to KTB, Azerbaijan and Turkey will be linked with each other by
railroad for the first time, albeit through Georgia. In addition, Baku and
Ankara intend to connect Nakhchivan, the Azerbaijani exclave, with Turkey's
railroad system. President Aliyev and Turkish Prime Minister Recep Tayyip
Erdogan agreed during their recent meeting in Nakhchivan to go ahead with
this project (Trend Capital, July 14).
In a related development, Turan Air company in Baku inaugurated on
July 21 regular direct flights between Haidar Aliyev International Airport
and Kars (Day.az, July 21). Azerbaijan, Georgia, and Turkey are beginning to
form what amounts to a common economic region, increasingly connected with
Europe and potentially with Central Asia, on either side of this region's
territory.
-- Vladimir Socor
July 25, 2008 -- Volume 5, Issue 142
AZERBAIJAN, GEORGIA, TURKEY ADVANCE ON THE IRON SILK ROAD
by Vladimir Socor
Presidents Ilham Aliyev of Azerbaijan, Mikheil Saakashvili of Georgia,
and Abdullah Gul of Turkey inaugurated on July 24 in Kars the construction
work on the Turkish section of the Kars-Tbilisi-Baku (KTB) railroad. A
project of inter-continental significance, connecting Europe and Asia
through the South Caucasus, this `Iron Silk Road' is being built by the
region's countries through their own efforts.
Azerbaijan is the real motor of the KTB railroad, as well as in the
region-wide energy projects. Baku single-handedly finances the railroad's
construction on Georgian territory, drawing on early oil revenues to invest
in this strategic railroad. Azerbaijan rescued the project after the
European Union, international financial institutions, and Turkey for various
reasons had declined to finance the Iron Silk Road. According to Turkish
Transportation Minister Bineli Yildirim, `If Ilham Aliyev had not
demonstrated resolve, this project would not have been possible. Azerbaijan'
s decision to finance the Georgian section is the most important step in the
implementation of this project' (Trend Capital, July 14).
The KTB project involves construction of 105 kilometers of new rail
tracks from scratch, including 76 kilometers on Turkish territory to the
Georgian border and 29 kilometers within Georgia. It also necessitates
repair and upgrading of 183 kilometers of existing rail track on Georgian
territory. The overall costs are estimated (in 2007 U.S. dollar terms) at
$600 million, including $422 million for the railroad itself and nearly $200
million for associated infrastructure. The Turkish section will cost $241
million to build.
The International Bank of Azerbaijan has loaned $220 million for the
Georgian section on uniquely preferential terms: 25-year repayment period,
at only 1 percent annual interest. Georgia will repay the loan by using part
of the revenue generated by the railroad on Georgian territory.
Azerbaijan, Georgia, and Turkey signed the intergovernmental agreement
on KTB in February 2007. Construction work on the Georgian section started
in November 2007, with Azerbaijan's Azerinshaat Service company acting as
general contractor (see EDM, November 27 and 28, 2007).
Speaking at the groundbreaking event on the Turkish section on July
24, Saakashvili remarked that Azerbaijan is acting in practical terms as a
`guarantor of Georgia's independence,' financing the railroad now after
having supplied Georgia with low-cost gas during the Russian blockade of
January-February 2006. `The Georgian people will never forget this,'
Saakashvili stated (Kavkas-Press, July 24).
The railroad is scheduled for completion in 2011. It is expected to
carry 1.5 million passengers and 6.5 million tons of cargo per year during
the first three years of operation. Traffic is projected to increase to 3
million passengers and 15 million tons of cargo per year before 2015. This
could stimulate a substantial expansion in the capacity of Turkish State
Railways, which currently handles 19.5 million tons of cargo annually
(Anatolia Agency, Turkish Daily News, July 20, 21).
Functionally interrelated with the KTB, although a distinct entity, is
Turkey's Marmaray project to build a railroad tunnel under the Bosporus.
With completion expected by 2011, the tunnel will enhance the KTB railroad's
commercial attractiveness. Trains will be able to travel without
interruption from any point in Europe (e.g., London) continuously to the
Caspian Sea.
On the eastern Caspian shore, Kazakhstan is interested in a
trans-Caspian linkup with KTB's terminal in Baku. The KTB railroad will open
direct access for Kazakhstan to European Union territory for the first time.
Kazakhstan plans a massive increase in its commodity exports to Europe,
including grain exports. With this in mind, Kazakhstan is completing an
800,000-ton grain-handling terminal near Baku, for trans-shipment from
barges to the railroad.
Asked about Armenia's absence from the KTB project, President Gul
commented in general terms that countries wishing to participate in
region-wide projects should respect the territorial integrity of their
neighbors (Zaman, July 24). This diplomatic understatement reflects the
ongoing feelers between Turkey and Armenia about a possible high-level
meeting to ameliorate relations (see article by Gareth Jenkins below). In
fact, Yerevan had actively opposed the KTB project and worked with its
allies in the United States and Europe to block international funding for
it.
Yerevan had hoped to force a change of route, diverting the KTB line
from Kars to Gyumri in Armenia. This would have made no economic sense
inasmuch as the Kars-Gyumri line (existent, but closed by Turkey due to
Yerevan's occupation of Azerbaijani lands) is a sideline, of merely local
interest. Earlier, and similarly, Yerevan and allied groups in the West had
unsuccessfully opposed the Baku-Tbilisi-Ceyhan oil pipeline.
Thanks to KTB, Azerbaijan and Turkey will be linked with each other by
railroad for the first time, albeit through Georgia. In addition, Baku and
Ankara intend to connect Nakhchivan, the Azerbaijani exclave, with Turkey's
railroad system. President Aliyev and Turkish Prime Minister Recep Tayyip
Erdogan agreed during their recent meeting in Nakhchivan to go ahead with
this project (Trend Capital, July 14).
In a related development, Turan Air company in Baku inaugurated on
July 21 regular direct flights between Haidar Aliyev International Airport
and Kars (Day.az, July 21). Azerbaijan, Georgia, and Turkey are beginning to
form what amounts to a common economic region, increasingly connected with
Europe and potentially with Central Asia, on either side of this region's
territory.
-- Vladimir Socor