CONSTRUCTION OF THE STRATEGIC KARS-AKHALKALAKI RAILWAY TO START IN 2007
By Taleh Ziyadov
Eurasia Daily Monitor, DC
Nov 9 2006
For almost a year, officials from Azerbaijan, Georgia, and Turkey
have been engaged in intense discussions about ways to finance the
construction of the strategic Kars-Akhalkalaki railway system. This
rail link will bridge the gap between the Georgian and Turkish rail
networks, permitting an uninterrupted flow of cargo from markets in
Asia to Europe or vice versa.
Earlier this year, a Turkish firm completed a feasibility study of the
Kars-Akhalkalaki project. Soon after, Turkey announced that it would
finance the construction of the 68-kilometer portion of the railway
on its territory ($200 million). Azerbaijan also stated its readiness
to allocate funds for the project, while Georgia remained undecided.
It took several high level-meetings and intense negotiations among
the three countries to hammer out the remaining differences. The
major problem has been the source of funds for the construction and
rehabilitation work in the Georgian segment of the railway.
A 220-kilometer (137 mile) portion of the railroad (from the
Georgian-Turkish border to Tbilisi) runs through in Georgia. Some 30
kilometers (18 miles) of this rail link will be built from scratch,
while the remaining 190 kilometers needs modernization. The estimated
cost of the Kars-Akhalkalaki project is $450 million, of which $220
million will be spent for work in Georgia.
In a September 25 interview with a local newspaper, a high-ranking
Turkish diplomat complained that Tbilisi "intentionally delays
the construction of the [Kars-Akhalkalaki] railroad" (Azeri Press
Agency, September 25). "Georgia is posing bureaucratic obstacles to
the construction of the railway. We cannot understand [Georgia],"
stated the unnamed diplomat.
The reason for delay, however, is related to negotiations between
official Baku and Tbilisi. Because the major construction and
rehabilitation work is to take place in Georgia and Turkey, the
Georgian government had to bear at least half of the cost of the
project. This created financial problems for Georgia, which does
not have vast natural resources like Azerbaijan or a strong economy
like Turkey.
The issue became more complicated when the Georgian government’s
major financial donor, the United States, was taken out of the
funding picture.
On September 30, Armenian lobbying groups managed to include a
prohibition provision (Section 11) in the U.S. Senate resolution S.
3938, the Export-Import Bank Reauthorization Act of 2006. The bill
prohibits the U.S. ExImBank from extending a credit or participating
in "any railway connection or railway-related connection [project]
that does not traverse or connect with Armenia," thus eliminating
any possibility of credit from the U.S. government to Georgia.
Nonetheless, on September 12, the general director of JSC Georgian
railways, Irakly Ezugbaiya, declared that Azerbaijan had agreed
to allocate a credit in the amount of $220 million to the Georgian
government.
Confirmation of this offer came after Georgian Minister of Economic
Development Irakli Chogovadze visited Baku on October 12-14. After
trilateral discussions with Turkish and Azerbaijani officials,
Chogovadze confirmed that the Georgian government would finance the
project using long-term and zero-interest credit from Azerbaijan
(Trend, October 13). The funding will come from the International
Bank of Azerbaijan and the Azerbaijani government. The amount of the
credit will be determined in early 2007 (Sharg, October 14).
In addition to Azerbaijan’s credit to Georgia, China has offered a
13-year loan with a 5.5% interest rate to Turkey. But Ankara declined
the offer, stating that it has sufficient funds to finance the project
by itself (Trend, August 28).
The construction of the railway is scheduled to begin in 2007 with
an expected completion date at the end of 2008. Georgia alone is
expected to earn $150 million annually from the cargo shipments via
the Kars-Akhalkalaki rail connection (Today.az, September 7).
According to Turkish Minister of Transportation, Binali Yildirim,
the railway system could accommodate a transfer of as much as 20
million tons of cargo per year (Trend, August 28). Other estimates
put the volume of cargo in the initial stage at 2-4 million, with a
potential to increase up to 8-10 million in the following three years
(BakuToday.net, April 20).
Besides the strategic importance of the Kars-Akhalkalaki rail
connection, linking the railway networks of Azerbaijan, Georgia, Turkey
— and potentially Europe, Central Asia, and China — the project
has a great significance for the development of the regional economies.
Due to the landlocked geography of the Caspian Basin, strengthening the
non-oil economies of countries like Azerbaijan, Georgia, Kazakhstan,
and Turkmenistan depends on increased volumes of intercontinental
container trade via their territories. Moreover, initiatives
such as creating free-economic zones in Azerbaijan, Georgia, and
other countries along the Caspian Sea coast will also depend on the
successful development of the infrastructure and interstate rail and
highway systems in these countries.
From: Emil Lazarian | Ararat NewsPress