Publication: Eurasia Daily Monitor Volume: 5 Issue: 142

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 locomotive in the KTB railroad, 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 International Bank of Azerbaijan has provided a $200 million loan for the project 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.

Speaking at the inauguration of work 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 commented (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 until 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, though a distinct entity, is Turkey’s Marmaray project to build a railroad tunnel under the Bosporus. With completion expected by 2010, 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 comment 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 (, 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.