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THE CASPIAN CONNECTION
Silk Road Reporters
June 25 2014
by Joshua Noonan
June 25, 2014
The 826-kilometer (513-mile) Baku-Tbilisi-Kars (BTK) Railway is
expected to be completed by late 2015, according to Azerbaijani
Transportation Minister Ziya Mammadov who recently attended a
tripartite meeting of ministers from Turkey, Georgia, and Azerbaijan.
It is anticipated that this railroad will transport up to 1 million
passengers after its launch, ramping up to 3 million passengers and 15
million tons of freight within the first few months of operation. The
railroad is seen as the most important strategic infrastructure project
in recent history for the region, and will have major implications
for the three partners with secondary ramifications for Armenia and
Kazakhstan as East-West energy transport routes link the Caspian
Basin to Europe.
Azerbaijan and the cities of Baku, Sumgayit, and Gance will notably
benefit as their transportation links to Georgia and Turkey develop.
The metropolitan areas of these cities comprise at least 20%
of Azerbaijan's population and a large proportion of the economic
activity and foreign exchange earning power of the state. Although
there is already a Soviet-legacy Baku-Tbilisi passenger and freight
network, an improvement in the infrastructure from the dilapidated
Soviet legacy railroad will allow for the speedier delivery of goods
and transport of passengers.
The BTK is being coupled with the Nakhchivan-Kars Railway, which will
connect the politically important Azerbaijani exclave of Nakhchivan
with Kars. The deepening of links with Turkey and Georgia will provide
for the further westerly economic integration that the leaders of
the country seek that started with the Baku-Tbilisi-Ceyhan and the
Baku-Tbilisi-Erzurum oil and gas pipelines, signaling the development
of the Southern Energy Corridor.
This has continued recently with further Azerbaijan-driven investment
in the downstream distribution and sales of gasoline and diesel in
Georgia and the continued expansion of natural gas pipelines through
Turkey with TANAP and TAP, linking Greece, Albania, and Italy. These
mega-projects have been spearheaded by investors originating from
Azerbaijan, Turkey, and other partner countries. Politically, these
projects allow for the consolidation of Azerbaijani influence in
Georgia through its State Oil Company of Azerbaijan Republic (SOCAR)
service stations, while providing increased leverage over its adversary
Armenia through the deployment of its natural-resource-derived wealth
in the guise of SOCAR and State Oil Fund of Azerbaijan (SOFAZ).
Since the Rose Revolution in November 2003, Georgia has been seeking
inflows of foreign direct investment (FDI) through internal reforms,
cooperation with its neighbors, and integration into the Euro-Atlantic
Community. As the current Georgian government has prioritized and
campaigned on the promotion of rural development, market access that
will be granted through these improved transportation links if coupled
with subsequent reforms to the tariff and import regimes of Turkey
and Azerbaijan. Georgia ranked eighth in the World Bank Ease of Doing
Business Report in 2014. As labor costs increase in Turkey, Georgia
could become a source of intermediary-product production, with the
process speeded by the development of the BTK. This coupled with extant
trade links, geopolitical trends, and entrepreneurial opportunities
will assure the continued development of Georgia through this project.
Turkey will continue to develop its role as a hub-state for the
transportation of resources and a interconnector for Europe, Asia, and
the Middle East. In that role, actions involved with the development
of the BTK are quite useful. This mega-project will be paired with
the Marmaray Bosphorus Tunnel Project, which will cross the Bosphorus,
knitting the European and Asian sides of Turkey together. This action
will link the rails of the Absheron Peninsula with those in Berlin.
Continued investments in eastern Turkey, linking booming Azerbaijan
with this underdeveloped region, will allow for an accelerated
growth-path and increased market access for businesses from the
Caucasus, as well as provide additional export opportunities for this
less developed region while expanding access to cheap and reliable
natural gas, petroleum, foodstuffs, and commodities.
The last two countries are not transit countries for the BTK,
but rather adjacent countries. The first, Armenia, has protested
its exclusion from regional mega-projects. Though it would be
a shorter and cheaper route from Baku through Yerevan to Kars,
this possibility was forestalled by the over-20-year-old frozen
conflict in Nagorno-Karabakh. This has led to its continued regional
marginalization, and the BTK is only the latest example. Despite the
lack of direct investment, consumers and intermediaries in Armenia will
benefit from a more developed method of importing goods from Turkey,
all of which are currently transshipped via Georgia on semi-tractor
trailers. Moreover, exports from Armenia not bound for Russia or
Iran could benefit from transshipment from Tbilisi westwards to
European markets.
Kazakhstan as a major commodity and energy exporter may be able to
benefit from the export of commodities to Turkey and from there to the
Balkans via the Caspian. Issues concerning shipments on the Caspian,
including terminals, are starting to be rectified on both shores.
Nevertheless, a deeper East-West integration across the Caspian would
take additional political capital that the respective leaders do not
seem prepared to spend.
Nevertheless, as Europe and the Caucasus are knit together,
leaders across the Caspian will start to take due notice of these
opportunities.
There are still many hurdles for the project to clear - both technical
and politcal - but when this project is finished and finally goes
online, the world will behold an important realignment of how it
interacts and trades with this once-distant region.
http://www.silkroadreporters.com/2014/06/25/caspian-connection/
Silk Road Reporters
June 25 2014
by Joshua Noonan
June 25, 2014
The 826-kilometer (513-mile) Baku-Tbilisi-Kars (BTK) Railway is
expected to be completed by late 2015, according to Azerbaijani
Transportation Minister Ziya Mammadov who recently attended a
tripartite meeting of ministers from Turkey, Georgia, and Azerbaijan.
It is anticipated that this railroad will transport up to 1 million
passengers after its launch, ramping up to 3 million passengers and 15
million tons of freight within the first few months of operation. The
railroad is seen as the most important strategic infrastructure project
in recent history for the region, and will have major implications
for the three partners with secondary ramifications for Armenia and
Kazakhstan as East-West energy transport routes link the Caspian
Basin to Europe.
Azerbaijan and the cities of Baku, Sumgayit, and Gance will notably
benefit as their transportation links to Georgia and Turkey develop.
The metropolitan areas of these cities comprise at least 20%
of Azerbaijan's population and a large proportion of the economic
activity and foreign exchange earning power of the state. Although
there is already a Soviet-legacy Baku-Tbilisi passenger and freight
network, an improvement in the infrastructure from the dilapidated
Soviet legacy railroad will allow for the speedier delivery of goods
and transport of passengers.
The BTK is being coupled with the Nakhchivan-Kars Railway, which will
connect the politically important Azerbaijani exclave of Nakhchivan
with Kars. The deepening of links with Turkey and Georgia will provide
for the further westerly economic integration that the leaders of
the country seek that started with the Baku-Tbilisi-Ceyhan and the
Baku-Tbilisi-Erzurum oil and gas pipelines, signaling the development
of the Southern Energy Corridor.
This has continued recently with further Azerbaijan-driven investment
in the downstream distribution and sales of gasoline and diesel in
Georgia and the continued expansion of natural gas pipelines through
Turkey with TANAP and TAP, linking Greece, Albania, and Italy. These
mega-projects have been spearheaded by investors originating from
Azerbaijan, Turkey, and other partner countries. Politically, these
projects allow for the consolidation of Azerbaijani influence in
Georgia through its State Oil Company of Azerbaijan Republic (SOCAR)
service stations, while providing increased leverage over its adversary
Armenia through the deployment of its natural-resource-derived wealth
in the guise of SOCAR and State Oil Fund of Azerbaijan (SOFAZ).
Since the Rose Revolution in November 2003, Georgia has been seeking
inflows of foreign direct investment (FDI) through internal reforms,
cooperation with its neighbors, and integration into the Euro-Atlantic
Community. As the current Georgian government has prioritized and
campaigned on the promotion of rural development, market access that
will be granted through these improved transportation links if coupled
with subsequent reforms to the tariff and import regimes of Turkey
and Azerbaijan. Georgia ranked eighth in the World Bank Ease of Doing
Business Report in 2014. As labor costs increase in Turkey, Georgia
could become a source of intermediary-product production, with the
process speeded by the development of the BTK. This coupled with extant
trade links, geopolitical trends, and entrepreneurial opportunities
will assure the continued development of Georgia through this project.
Turkey will continue to develop its role as a hub-state for the
transportation of resources and a interconnector for Europe, Asia, and
the Middle East. In that role, actions involved with the development
of the BTK are quite useful. This mega-project will be paired with
the Marmaray Bosphorus Tunnel Project, which will cross the Bosphorus,
knitting the European and Asian sides of Turkey together. This action
will link the rails of the Absheron Peninsula with those in Berlin.
Continued investments in eastern Turkey, linking booming Azerbaijan
with this underdeveloped region, will allow for an accelerated
growth-path and increased market access for businesses from the
Caucasus, as well as provide additional export opportunities for this
less developed region while expanding access to cheap and reliable
natural gas, petroleum, foodstuffs, and commodities.
The last two countries are not transit countries for the BTK,
but rather adjacent countries. The first, Armenia, has protested
its exclusion from regional mega-projects. Though it would be
a shorter and cheaper route from Baku through Yerevan to Kars,
this possibility was forestalled by the over-20-year-old frozen
conflict in Nagorno-Karabakh. This has led to its continued regional
marginalization, and the BTK is only the latest example. Despite the
lack of direct investment, consumers and intermediaries in Armenia will
benefit from a more developed method of importing goods from Turkey,
all of which are currently transshipped via Georgia on semi-tractor
trailers. Moreover, exports from Armenia not bound for Russia or
Iran could benefit from transshipment from Tbilisi westwards to
European markets.
Kazakhstan as a major commodity and energy exporter may be able to
benefit from the export of commodities to Turkey and from there to the
Balkans via the Caspian. Issues concerning shipments on the Caspian,
including terminals, are starting to be rectified on both shores.
Nevertheless, a deeper East-West integration across the Caspian would
take additional political capital that the respective leaders do not
seem prepared to spend.
Nevertheless, as Europe and the Caucasus are knit together,
leaders across the Caspian will start to take due notice of these
opportunities.
There are still many hurdles for the project to clear - both technical
and politcal - but when this project is finished and finally goes
online, the world will behold an important realignment of how it
interacts and trades with this once-distant region.
http://www.silkroadreporters.com/2014/06/25/caspian-connection/