Baku-Tbilisi-Kars: Carrying 21st century on tracksIn July 1993, following the war over Nagorno-Karabagh, Turkey shut down its borders with Armenia as a gesture of sympathy for Azerbaijan. As a result of this disassociation, the Kars-Gyumri-Tbilisi railway—then the only link between Caucasus and Turkey—ceased its years-long operation. After closure of the Kars-Gyumri rail line, Turkey, Georgia, and Azerbaijan launched considerations on how to reconnect Anatolia with Caucasus and improve their economic relations. After long discussions, in 2007, the three countries signed a trilateral treaty agreeing to construct a railroad by 2010 which would stretch from Baku to Tbilisi and terminate in Kars (BTK). 

Despite the initial optimism, the project failed to make a swift takeoff during first years of the agreement due to the lack of funding from the host countries. The Russian-Georgian war in 2008 left the economy of Georgia in doldrums and caused significant delays in the completion of BTK. With its finances torn by a devastating war, Georgia expressed reluctance to further invest into the construction of the railway, making the ambitious project seem rather unaccomplishable. However, with the State Oil Fund of Azerbaijan (SOFAZ) stepping in, the equilibrium changed to BTK’s favor. A $200 million loan repayable in 25 years was allocated to Georgia with a minute interest rate of 1%. Further, Azerbaijan, as the main initiator of the project, appropriated another loan of $575 million to Georgia with the annual interest rate of 5%.  The near-free low interest rates are symbolic of the non-profit nature of these loans.

The international support, on the other hand, was not very notable. As in the previous joint projects such as Baku-Tbilisi-Ceyhan (BTC) and Baku-Tbilisi-Erzurum (BTE) that too deepened the isolation of Russia and Iran and bypassed Armenia, United States and European Union demonstrated financial support, the party countries assumed that aid will be provided this time as well. However, the expectations proved false when the aid request was directly denied. The European Commission was especially disinclined to allocate funds to the project’s development. This was largely because of the imminent economic isolation of Armenia from the region, which was caused by the non-participation of Armenia in the Baku-Tbilisi-Kars railway rendered irreparable by Yerevan’s unwillingness to negotiate in the Nagorno-Karabagh conflict. The Commission, instead, insisted on reopening the disused, albeit shorter, Kars-Gyumri rail line rather than supporting the construction of a new and longer one bypassing Armenia. To follow the EU’s advice, it was imperative for Azerbaijan and Turkey to open their borders with Armenia. However, so long as the very root of the double-sided border closure—Armenian military presence in Nagorno-Karabagh—remained unresolved, EU’s advice remained far from reality. "Until Armenia liberates the occupied Azerbaijani territories, all transportation projects will bypass this country," asserted Azerbaijan’s President Ilham Aliyev during a meeting in Baku on January 22, 2007. Ankara’s posture remained just as Azerbaijan’s in spite of constant lobbying by local entrepreneurs. The firm position of Azerbaijan and Turkey, the Crimean War of 2014, and Ukrainian gas supply blackouts instigated by Russia further highlighted the importance of BTK as a viable alternative to the Russian trade routes and prompted Brussels to reconsider its standpoint. Finally, in a statement published on 30 October, 2017, the EU voiced its unilateral support for the Baku-Tbilisi-Kars railway, labeling it as “at the heart of its [EU’s] Eastern Partnership as well as of its Central Asia strategy.” 

Despite the subsequent accolades, the financial support still was not provided. As a result, the costs of the project were shared only by the host countries, first time in the history of post-Cold War South Caucasus, without any third-party support. According to initial estimates, the costs of project were projected to be $422 million, with $202 and $220 million of it to be used for Georgian and Turkey segments respectively. However, after a number of reevaluations the aggregate cost estimations neared $925-945 million.

In exchange for the stratospheric amount of financial outlays they had to endure, the party countries will reap considerable benefits. For Azerbaijan, BTK marks beginning of the country’s transformation into a regional transportation hub. With its economy heavily reliant on finite oil, Azerbaijan seeks to remedy its economy mainly through diversification of its income sources. According to Mahir Humbatov, an expert analyst at the Center for Strategic Studies under the President of the Republic of Azerbaijan, BTK is projected to provide the much needed source of income for the country by annually adding 300-400 million AZN, or 177-237 million USD, to the national budget. Additionally, the railway would stimulate local manufacturing since a number of free trade zones are agreed to be opened near the new ports. For Georgia, playing the role of a transit country, the project will also mean significant financial injections to the state budget. Also, BTK will lead to restoration of the links to the West lost during the Abkhazian conflict—an especially important benefit for a country that follows a strict policy of integration with Europe. Turning to Turkey, the project will boost its strategic importance for Europe. In the past, Turkey had asserted its importance for Europe by reselling Azerbaijani gas acquired from Baku-Tbilisi-Ceyhan and Baku-Tbilisi-Erzurum pipelines, to the European markets. BTC, carrying a huge volume and variety of goods, will increase Turkey’s role as a transit country and as an alternative to Russia, in effect turning it into an even more crucial factor in European politics.

The impact that the Baku-Tbilisi-Kars railway will have on the economic and geopolitical interrelation of South Caucasian countries, especially on that of informal AGT (Azerbaijan-Georgia-Turkey) region, is groundbreaking as well. First of all, the railway will immensely facilitate and boost the trade as well as passenger exchange among the party countries. During the first year of its operation, BTK will carry 1 million passengers and 6.5 million tons of freight. This number is projected to increase progressively year by year, hitting 3 million passengers and 17 million ton freight by 2037. More importantly, the railway has the capacity to diversify the nature of the three countries’ mutual engagement. If previously the only link that integrated AGT was oil pipelines and provision of their security, now the relationships within the region will be orientated towards goods transportation, passenger circulation, and political engagement, which also greatly benefited from prolonged mutual cooperation on the project. Furthermore, BTK would increase demonstrated investor interest in all three countries, which would, in turn, result in an increased FDI value for each country. 

BTK also produced huge political repercussions. This project divided the political landscape of South Caucasus into two country groups: the participant countries—Azerbaijan, Turkey, and Georgia—and the non-participant countries—Armenia, Russia, and Iran. While the participant countries are likely to reap the aforementioned benefits from BTK, the outcomes for non-participant countries are not as promising.  Armenia, which is already rather isolated due to its 1300 km-long borders with Azerbaijan and Turkey and its lack of water boundaries, is only able to export or import goods through Georgia. Georgia, positioned in an economically favorable situation, enjoys its monopoly of trade with Armenia and manipulates high tariffs on the shipped goods. The exclusion of Armenia from another significant regional project would further marginalize Armenia in an economic spectrum and perpetuate its isolation. Russia too can have its trade monopoly diminished after the inauguration of BTK. 

The railway is also considered to be a very significant portion of the China’s $900 billion the Belt and Road initiative planned since 2013. The Belt and Road, or One Belt One Road (OBOR) initiative is an ambitious project which aims to restore the ancient Silk Road by generating aland trade route that would stretch from London to Beijing. The main goals of this project are to increase global economic cooperation with China, draw the excess production out of country, and ensure the safest and fastest delivery of goods to European markets. To accomplish this goal, China has to cooperate with 65 countries that the project will span. One of the routes included as a part of this Silk Way includes BTK as well. From China, the goods are planned to be shipped to Central Asia before being unloaded to ships in the Caspian Sea near Kazakh ports. Through the Caspian Sea, the goods will then be shipped to Azerbaijan and join BTK to be further carried to Georgia, Turkey, and eventually, Europe. This route is planned to abridge the time frame needed to transport goods to Europe by two times from current 30 days to 12-15. When compared to other routes proposed by OBOR—one crossing through the politically turbulent Iran and Middle East and another through historically monopolistic Russia—the safety BTK provides indeed becomes more apparent.  

 

 

Sources and further reference:

1. Lussac, Samuel . "The Baku-Tbilisi-Kars Railroad and Its Geopolitical Implications For The South Caucasus." Caucasian Review of International Affairs volume 2, no. 4 (Fall 2008). https://d-nb.info/993911617/34/.

2. Full Steam Ahead: Long-Awaited Baku-Tbilisi-Kars Railway Opens." EurasiaNet.org. October 29, 2017. Accessed November 05, 2017. http://www.eurasianet.org/node/85776.\

3. "Azerbaijan, Georgia and Turkey: Building a Transportation Triumvirate?" EurasiaNet.org. Accessed November 08, 2017. http://www.eurasianet.org/departments/insight/articles/eav020707.shtml.

4. "Baku-Tbilisi-Kars railway will enhance connectivity in Eurasia." Baku-Tbilisi-Kars railway will enhance connectivity in Eurasia - Opinion - Chinadaily.com.cn. Accessed November 05, 2017. http://www.chinadaily.com.cn/opinion/2017-11/02/content_34030157.htm.

5. "Case study: the Baku-Tbilisi-Kars railway | ITE Transport & Logistics." ITE Transport and Logistics. Accessed November 05, 2017. http://www.transport-exhibitions.com/Market-Insights/Case-study-the-Baku-Tbilisi-Kars-railway.

6. Bakı-Tbilisi-Qars dəmir yolu layihəsi barədə məlumat: Azərbaycan Respublikasının Nəqliyyat Nazirliyi. Accessed November 05, 2017. http://mot.gov.az/az/content/431#.Wf7ONluCzIU.

7. Ibrahimov, Rovsan. "Baku-Tbilisi-Kars: Geopolitical Effect On The South Caucasian Region." Turkish Weekly, December 23, 2007. http://www.gab-bn.com/IMG/pdf/Re6-_Baku-Tbilisi-Kars_-

_Geopolitical_Effect_On_The_South_Caucasian_Region.pdf. 

8. "Baku-Tbilisi-Kars railway will be fully operational in 2017." Agenda.ge. Accessed November 05, 2017. http://agenda.ge/news/52315/eng.

9. Phillips, Tom. "The $900bn question: What is the Belt and Road initiative?" The Guardian. May 11, 2017. Accessed November 06, 2017. https://www.theguardian.com/world/2017/may/12/the-900bn-question-what-is-the-belt-and-road-initiative.

 

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