BBC Monitoring Research,
19 November 2007

The leaders of Azerbaijan, Georgia and Turkey are to inaugurate the construction of a regional railway line on 21 November.

Following in the footsteps of the Baku-Tbilisi-Ceyhan oil pipeline and the Baku-Tbilisi-Erzurum gas pipeline projects, the Kars-Akhalkalaki-Tbilisi-Baku railway is the third major regional project resulting from the three countries' cooperation. It is the region's first major project not directly related to energy, and, like its predecessors, it bypasses Armenia.

The three leaders expect the project to bring stability and cooperation to the region along with billions of dollars in revenue. The railway will ensure the uninterrupted transport of passengers and freight. It is expected to lead to further development of the Europe-Caucasus-Asia transport corridor within the reconstruction of the ancient Great Silk Road.

"Geopolitical transformation"

The agreement on the construction of the railway line linking the eastern Turkish town of Kars with the Azerbaijani capital Baku, via the southern Georgian town of Akhalkalaki, was signed on 7 February 2007 in Tbilisi. The ceremony was attended by Georgian President Mikheil Saakashvili, Azerbaijani President Ilham Aliyev and Turkish Prime Minister Recep Tayyip Erdogan. At the signing ceremony Saakashvili described the opening of the railway as "a geopolitical transformation". In a speech on 19 November, he hailed the railway as "the project of the century" and said Georgia was undergoing a "geographical revolution" by connecting to the European railway network with this railway. His country has been looking for ways to reinforce its independence, after a worsening of relations with Russia and energy and transport sanctions introduced by Moscow in 2006.

The project is financed by Azerbaijan, Georgia and Turkey and will cost about 600m dollars. Under the agreement, Azerbaijan is to lend Georgia a total of 200m dollars at an interest rate of 1 per cent over 25 years in order to repair the section of the railway running through Georgia and extend it to Turkey. The International Bank of Azerbaijan disbursed the first 40m-dollar tranche in August. Georgia will repay the loan using profits from the railway's operations on its territory.

Initially, it was planned that the Azerbaijani and Georgian presidents and the Turkish prime minister would inaugurate the project in Tbilisi on 20 September 2007. However, the media later reported that the ceremony had been postponed until early October, because of changes made to the project by Turkey, adding that the ceremony would now be held on the Georgian-Turkish border. The reports did not give a specific date for the inauguration, though.

The ceremony did not take place in October either, though, while the media in the three countries quoted various sources as saying that it would take place "soon" or even in 2008. However, on 19 November Georgian President Mikheil Saakashvili said the ceremony would be held on 21 November, without specifying the venue.

Transit corridor

With Baku at the junction of the major North-South and West-East transport corridors, the launch of the railway could benefit Russia, Iran, Kazakhstan and Turkmenistan, as well as China and India, which have expressed interest in future involvement in the project. At the same time, plans are being considered to extend the pipeline from Azerbaijan to the Iraqi city of Basra and then on to the countries of the Persian Gulf. There are also hopes that in the future the railway will extend from China in the east to Europe in the west via Kazakhstan, Azerbaijan, Georgia and Turkey. Thus, Azerbaijan will play the role of a transit corridor between Europe and China via Turkey, the South Caucasus and Central Asia. The construction of the railway, with a capacity of up to 15m tonnes of freight a year, is expected to be completed within the next two to three years, and over the next two decades the annual amount of freight transportation will increase to 30m tonnes, including 3.5m tonnes of oil a year.

Local opposition

The project has faced opposition within the participating countries.

The People's Front of Azerbaijan Party criticized Azerbaijan's government for being too generous to Georgia, while the Baku-based Hurriyyat newspaper said Azerbaijan should have used the money to feed its population, which it said was suffering from "famine and poverty".

Salome Zourabichvili, Georgia's former foreign minister and currently leader of the opposition Georgia's Way movement, wondered why Georgia had had to take the loan. "I don't understand what it gives us. It is in the interests of Armenia and Turkey to carry cargo by the shortest route; we are interested in longer routes," she said in August following the decision by the Georgian authorities to hand management of Georgian Railways over to a British company for 89 years.

Armenia isolated?

The project has also prompted criticism from Armenia, which fears the transport link will increase its economic isolation.

Azerbaijani President Ilham Aliyev said in January that as long as Armenia continued to occupy the disputed territory of Nagornyy Karabakh, all communication links would bypass that country.

Facing isolation over the railway's construction, Armenian officials have repeatedly said that the project is not economic but political in nature. They argue that Turkey is deliberately trying to exclude Armenia, given that a railway between Kars and the Armenian town of Gyumri already exists but is not operating because the border between the two countries is closed.

Armenian Foreign Minister Vardan Oskanyan said on 7 February that the construction of the railway could not cause any economic damage to Armenia, but described the decision to construct it as politically short-sighted. He said Turkey and Azerbaijan were trying to pressurize Armenia into making unacceptable concessions over Nagornyy Karabakh. Later Oskanyan said that the decision to build the railway was a mistake. "We think that this is a political mistake. This investment is senseless. The same goal could have been reached with much less money. The existing railway line on Armenian territory could have been put into operation. This step does not have a political future," Oskanyan said in July. The Armenian president's press secretary, Viktor Soghomonyan, said in January that the railway "meets explicitly political interests and has no economic basis". Armenian Deputy Speaker Vahan Hovhannisyan said the project was "a purely political project, which has no economic ground and is aimed at reinforcing the blockade of Armenia".

"We clearly understand that this is a political project which has nothing to do with the economy and transport," he said.

He said he believed Armenia could prevent the project's implementation, and added that Armenia should try to persuade the European Union to introduce a ban on funding for the project.

US opposes Armenia's "exclusion"

The USA has already refused to help fund the project, objecting to the railway's bypassing of Armenia. In response, the project's initiators said they would fund it themselves. US Deputy Assistant Secretary of State Matthew Bryza, who is also one of the three mediators between Armenia and Azerbaijan in the Nagornyy Karabakh peace talks, said in Baku on 7 February that the United States does not support the project, but is not against it either. The US Congress believes that Armenia should not be excluded from projects in the South Caucasus, he added.

In December 2006, Georgia's Rustavi-2 TV, a private channel sympathetic to the government in Tbilisi, attributed the US stance to the power of Armenian lobbying.