AZERBAIJAN, GEORGIA LAUNCH RAIL PROJECT
By Dmitry Avaliani in Tbilisi, Nurlana Gulieva in Baku and Diana Markosian in Tbilisi

Institute for War & Peace Reporting, UK
May 18 2006

As Azerbaijan hails a new railway project for the Caucasus, the mood
in Georgia is less enthusiastic, and the Armenians are openly hostile.

An ambitious new project to create a rail link between the Azerbaijani
capital Baku and Turkey has had a lukewarm welcome in Georgia, through
whose territory the line would run, while Armenia has expressed
opposition to the scheme.

“Construction of the Baku-Tbilisi-Kars railway may start in 2006,”
Azerbaijani president Ilham Aliev told a cabinet meeting on May 10.

“This railway is badly needed – it will connect Europe with Asia.”

The project envisages construction of a new railway between Kars in
eastern Turkey and the town of Akhalkalaki in southern Georgia, and
an upgrade to the existing Akhalkalaki-Tbilisi line. The Tbilisi-Baku
section already exists.

The project’s backers say it will create greater integration in the
south Caucasus, which is divided politically as well as economically,
and boost trade.

“Launching of this line will guarantee Azerbaijan’s national
interests,” said Aliev. “We are prepared to assume financial
obligations immediately.”

Turkey has been actively promoting the project and has played host
to the negotiations. However, the verdict on the economic rationale
for the plan has been cooler in Georgia, while Armenia’s reaction
has been extremely negative.

With the conflict over Nagorny Karabakh unresolved, major projects
undertaken in the region have bypassed Armenia. These include the
Baku-Tbilisi-Ceyhan oil pipeline inaugurated last year, and the
Baku-Tbilisi-Erzerum gas pipeline which has almost been completed.

Armenia objects that there is already a railway line in existence from
Kars via the Armenian city of Gyumri to Tbilisi. The line has been
closed since 1993, when Turkey formally closed its border with Armenia
because of the Karabakh conflict. But experts say that the railway
is in quite a good state of repair, despite the many years it has
stood idle, and that it could be refurbished with little difficulty.

“If there’s a railway which serves the same aim, building a new one
and spending so much money is simply pointless”, Armenian foreign
minister Vardan Oskanian said in January.

“If Turkey, guided by some political considerations, does not want
Armenia to earn profits from the operation of the existing railway,
we are prepared not to use it. But the service would promote trade
between the two countries.”

According to preliminary calculations, the new project is likely to
cost between 360 and 400 million US dollars, but many believe these
estimates will grow. One Georgian section of track, between Marabda
and Akhalkalaki, is in very poor condition and will probably need to
be replaced entirely.

Finance for the project has yet to be found, with only the Asian
Development Bank pledging funds so far.

Matthew Westfall, head of the bank’s Baku branch, recently told
journalists that “Azerbaijan has the highest rating among the South
Caucasus countries, and if the government applies to us for help,
the Asian Development Bank is prepared to provide a credit for
construction of this thoroughfare”.

After the latest round of talks about financing, held in Ankara on May
4-5, Georgian officials said several questions remained unanswered. “We
were interested in the Turkish side’s calculations about transporting
freight other than that belonging to Azerbaijan, Georgia and Turkey,”
Irakli Ezugbaia, head of Georgian Railways, told IWPR. “It’s still
premature to say what Georgian railways will get out of the project.”

Georgia, Azerbaijan and Turkey signed a declaration on creating an
international transport corridor last May, pledging that the new
railway would be put into commission in 2008.

“Technical work will continue until the end of 2006, and during that
period the financing issue will be resolved as well,” Nazim Kasumov,
a senior official in Azerbaijan’s transport ministry, told IWPR.

Armenian opposition politician Hovhannes Igitian said it was only
to be expected that his country was not involved in the project, as
“other states cannot afford to wait for Armenia to solve its problems
and start acting as a transit country”.

But others in Armenia highlight the dangers of drawing a new dividing
line across the Caucasus.

“If it’s a priority for the international community not to create
dividing lines in the region, but to ensure harmonious development,
it cannot agree to a railway being built that detours Armenia,”
said Gagik Minasian, who chairs the Armenian parliament’s finance
and budget committee.

There have also been vocal protests against the new railway in
Armenian-majority areas of the Georgian region of Samtskhe-Javakheti,
through which the line will run.

Many locals say they fear for their security if there is a growing
Turkish presence here. Another concern, voiced by Akhalkalaki mayor
Nair Iritsian, is that “people are afraid the Turks will buy up all the
land here, leaving the locals no other option but to work for them”.

Georgian economic expert Gia Khukhashvili is concerned that the new
railway could damage rather than benefit his country.

“The route cannot be profitable if the annual volume of freight carried
is less than ten million tons,” said Khukhashvili. “But I doubt that
ten million tons of dry cargo to meet that capacity can be found in
this region.

“If it’s a question of oil and petroleum products going to Europe
[from Azerbaijan], Georgia would make more of a profit by using its
Black Sea ports rather than building a new railway,” he said.

Khukhashvili said the railway would provide Georgia with a healthy
income only if Turkey shouldered all the construction and running
costs.

Turkish investments in Georgia have risen strongly over the past
year. Last June, the two countries signed an agreement to share use
of Batumi airport, which is now being rebuilt by the Turks.

Negotiations are also under way to hand over management of Batumi’s
port facilities to Turkish companies.

Some analysts argue that even if Armenia is not involved in the
project, it will still benefit indirectly.

Yerevan-based political analyst Alexander Iskandarian said he is sure
the Kars-Baku railway will at worst have no impact on the Armenian
economy, and could even have a positive effect.

“Roads between Armenia and Turkey are currently closed, and will
remain so for the next two to four years,” Iskandarian told IWPR.

“The new project will facilitate transportation of freight from Turkey
to Armenia and vice versa, as the highways [now in use] from Turkey
via Georgia are in a poor state”.

Iskandarian disagrees with those who say Armenia will find itself
totally isolated as an “island-state” once the railway comes into
use. “If the second railway works, that doesn’t mean the first one
can’t as well,” he said, referring to the now idle Kars-Gyumri-Tbilisi
line.

Georgian political analyst Paata Zakareishvili agreed, saying, “The
projects that are already under way cannot be stopped or changed even
if Armenia and Azerbaijan become reconciled with one another.

“But their success will beneficial to the entire region including
Armenia”.

Dimitry Avaliani is a correspondent with 24 Hours newspaper in
Tbilisi. Nurlana Gulieva is an independent journalist in Baku. Diana
Markosian is a correspondent for the A1+ television company in Yerevan.