Caspian Business News, 23 August 2004

By Gulnaz Guliyeva

BAKU, Azerbaijan - Rail freight is 50 percent of all cargo transported as part of the TRACECA transport corridor, connecting Europe and Asia through the South Caucasus. Most of this is transit cargo that is carried, working in conjunction with the corridor, through Azerbaijan and Georgia.

For the period of January through June, the total volume of cargo transportation through Azerbaijan along the Eurasian route was 19.4 million tons. Rail transport carried 48.3 percent of the freight, motor transport 29.4 percent and water methods 22.3 percent.

Transit traffic was 38.7 percent of the total 7.5 million ton amount, according to the State Statistical Committee of Azerbaijan.

TRACECA was initiated by Armenia, Azerbaijan, Georgia, Turkmenistan, Uzbekistan, Kyrgyzstan, Kazakhstan, Tajikistan, Ukraine, Bulgaria, Moldova, Turkey, and Romania. Ten years ago, the countries signed the Basic Multilateral Agreement with the purpose of restoring the ancient Silk Road route, which would be shorter and have lower tariffs and favorable infrastructure for cargo transport. TRACECA members continue to seek new routes for transportation within this corridor and make the route more attractive to freight companies.

Last week, the prime minister of Turkey, Recep Tayyip Erdogan, discussed the issue with Georgian President Mikheil Saakashvili during an official visit to Tbilisi. The goal of construction would be the establishment of a railroad linking the countries to increase trade volumes.

Georgia and Turkey have released a plan to build a 120-kilometer railway link between the cities of Kars, Turkey, and Akhalkalaki, Georgia - 90 kilometers on Turkish territory and 30 kilometers in Georgia. Another new project has been discussed in high-level meetings between Azerbaijan and Georgia during the official visit of the president of Azerbaijan, Ilham Aliyev, to Tbilisi in mid-June. Aliyev called for an international consortium to build the railroad between Georgia and Turkey.

"Azerbaijan supports this project," Aliyev said during the visit. "The railway connection between Georgia and Turkey is of interest to the entire region and to Azerbaijan in particular. Taking into account the fact that the project will have vital importance for regional development, Azerbaijan is willing to cooperate in that direction."

The Kars-Akhalkalaki rail line would take the place of the non-operating link between Kars and Gumri in Armenia, which was once the only rail connection between the Soviet Union and Turkey. If the proposed project is implemented, the countries of the Caspian region will be able to carry cargo and passengers over this direct route to Europe, with links in the opposite direction to India and the Far East. Saakashvili said that the "new line would connect the Turkish railway network with China through Georgia, Azerbaijan and Central Asia, and would be the shortest route."

"A short time after the launch of the new railway connection, the turnover of goods would be from $1 million to $3 million," reported the Russian newspaper Vremya Novosti after trilateral meetings in Ankara, Turkey, at the beginning of this month.

The Turkish Transportation Ministry brought together representatives of the transport ministries of Turkey, Georgia and Azerbaijan in the Turkish capital to address the double-track project. Ziya Mammadov, minister of transport of Azerbaijan, told Azeri journalists after the meeting that the three delegations had signed a memorandum on the implementation of the project. "Each side will start to draw up feasibility studies and seek financial resources to put the project into practice. We have not yet determined the cost of the project," Mammadov said.

"Currently, the governments of Georgia and Turkey are seeking the necessary funds. This project is a priority for the Turkish government," Saakashvili said.

The sides are planning to take a loan from international markets to finance the construction of the Kars-Akhalkalaki line, which is estimated to cost between $500 million and $700 million. Turkey's feasibility study will cost $1 million. The project has been included in Turkish Railways, Seaports and Airports Construction Directorate General's investments portfolio for 2005.

Akif Mustafayev, the national secretary of Azerbaijan's intergovernmental commission in TRACECA, told CBN that this project will enable Turkey to get involved in railroad freight activity within the Eurasian transport corridor. According to Mustafayev, Turkey's current activities involve mostly motor and water transport.

"After the launch of the railway connection with Georgia, Turkey will be able to participate in railroad freight activity, which makes up the bulk of cargo transportation via the TRACECA route," Mustafayev said. "In every aspect, this project offers great opportunities."

Mustafayev said the railroad would be attractive to forwarders due to the low tariffs agreed for cargo transportation. Azerbaijan, Georgia and Turkey have signed an agreement to cut up to 50 percent of railroad tariffs for freight forwarders. Since 2000, discount tariffs have been in place in Azerbaijan and Georgia. This year, Azerbaijan and Georgia also reduced tariffs by $1 per ton of freight and cut the average tariff on crude oil to $7 and oil products to $6.

For Azerbaijan, this could become an important alternative route to the European market. Also, through Azerbaijan, Turkey will be able to connect not only with Asian countries but also with Russia. However, some Azeri experts have said that the implementation of the project would depend on the ability of Georgia to find financial resources to fund construction. Estimates have put the Georgian portion of the costs at $200 million.