REGIONAL LEADERS SEAL KARS-AKHALKALAKI-TBILISI-BAKU RAILWAY DEAL

Last Saturday, January 13, representatives from the governments of Azerbaijan, Georgia, and Turkey took a significant step forward in the realization of the Kars-Akhalkalaki-Tbilisi-Baku railway project, which will link Asia and Europe through the Caucasus. Representatives of three parties met in the Georgian capital, Tbilisi, to finalize the negotiations over the project and sign a preliminary agreement.

Azerbaijan’s Ministry of Foreign Affairs issued a statement on January 16 welcoming the agreement and calling it “an important event in regional trade and economic cooperation” (Press Release, January 16). Georgian Prime Minister Zurab Nogaideli also welcomed the project by saying that the railway link will become “a bridge between Europe and Asia” (Day.az, January 19).

Under the terms of the negotiated agreement, Azerbaijan will issue a loan to the Georgian government in the amount of $220 million for construction of a vital segment of the railway. Georgian Minister of Economic Development Georgy Arveladze, however, put this number at $300 million (Day.az, January 18). The loan will be virtually interest-free and is to be repaid within a period of 25 years using the profits generated by the railway. The Turkish government, for its part, will improve some portions of the railway in its own territory, to bring it up to the required standards.

Azerbaijan’s minister of transportation, Ziya Mammadov, told ANS-TV on January 18 that construction would start in the second half of 2007 and be completed within two or three years. “I have no doubt that this project will be realized,” Mammadov added.

The project comes amid protests from the Armenian lobby and a prohibition put in place last year by the U.S. Congress on financing the project from U.S. government funds. While two other major Caucasus projects, the Baku-Tbilisi-Ceyhan oil pipeline and the Baku-Tbilisi-Erzurum gas pipeline, were strongly supported in U.S. political circles, the railway project received a cold shoulder, despite the fact that it will further deepen regional cooperation and expand the East-West trade corridor.

The reason for such a negative attitude is the Armenian lobby in the United States and its influence on U.S. policymakers. The railway, bypassing Armenia, further links Georgia and Azerbaijan to Western markets and puts Armenia behind the regional trade and economic cooperation. Last week, the Armenian Foreign Ministry expressed interest in joining the railway project, yet the Azerbaijani side responded by saying that Armenia must first liberate the occupied territories of Azerbaijan.

Nevertheless, despite opposition from Armenia and the lack of financial support from the United States, the Azerbaijani, Georgian, and Turkish governments are eager to move forward with the project. “The U.S. can issue any decisions it wants, but there will be no problems with financing the project. There are other sources,” said Georgian Minister of Foreign Affairs Gela Bezhuashvilli (Trend News Agency, January 10). The increasing revenues from Azerbaijan’s oil contracts with Western oil companies have provide the government with sufficient means to finance the project with its own funds.

Estimates set the cost of constructing the missing 98-kilometer section link of the Kars-Akhalkalaki-Tbilisi-Baku railway will cost around $400 million and raise the trade turnover by rail to 15-20 million tons per year. It will allow the direct shipment of goods and people between Asia and Europe and vice versa and further develop the regional infrastructure. It will be an essential part of the Silk Road strategy, which envisions the development of trade ties between the countries along the ancient Silk Road. China and Kazakhstan have also expressed interest in the realization of the railway project.

Given the recent political changes in Turkmenistan following the death of long-time President Saparmurat Niyazov, some analysts think that bilateral Azerbaijani-Turkmen relations will warm and revive regional trade and cooperation between these two Caspian states. If this scenario occurs, it will provide additional significance to the Kars-Akhalkalaki-Tbilisi-Baku railway.

Negotiations among Turkey, Azerbaijan, and Georgia are expected to resume in the next few days regarding the concrete details of the project. After this, the parliaments of these three countries will ratify the agreement and construction work will start. When completed, the project will be a major victory point for both Azerbaijan and Georgia, because both countries will increase their economic linkages and trade turnover, but even more importantly the railway will also reduce their dependence on Russian railways to ship goods to European markets.