Georgian Times, Georgia
Feb 15 2007

ECONOMY
Friendship stretching 556 km to the East and 1441 km to the West

The visit by Turkish Prime Minister Recep Tayyip Erdogan and
Azerbaijani President Ilham Aliyev to Tbilisi on February 7 dominated
last week’s regional news as several documents were signed in
Tbilisi.

Georgian President Mikhail Saakashvili described the
Kars-Akhalkalaki-Tbilisi-Baku Railroad Project as a "momentous
geopolitical breakthrough’ after negotiating with visiting Turkish
and Azerbaijani leaders on February 7. He underlined that this new
regional railway will link Asia with Europe to become `a modern
version of the new Silk Road.’

Speaking at a joint news conference, Saakashvili said: `This is a
project that will lead to a geopolitical revolution in our region
because this will be a new line that will connect not only our three
countries, but that will also interlink the Asian and European
regions with each other.’ The project, which he said would cost
`several hundreds of millions’ of U.S. dollars, will bring `several
hundreds of billions’ in revenues.

Under the agreement between Azerbaijan and Georgia, Azerbaijan will
allocate USD 200 million to finance construction and rehabilitation
works for the Georgian portion of Kars-Akhalkalaki-Tbilisi-Baku
Railroad. Georgia will have to repay the loan with 1% annual interest
within 25 years. Tbilisi says the revenues from the
Baku-Akhalkalaki-Kars railway will be used to cover the loan. It is
estimated that the railway will have the capacity to transport 15
million tons of cargo annually.

While evaluating importance of the new railroad project, Saakashvili
also said that after their gloomy past, the South Caucasus countries
have only one alternative, which is to strive jointly for development
of the region. Not a single country of this region, he added, should
refrain from the global projects.

Here Saakashvili referred to Armenia, who voiced vigorous objection
to construction of the Baku-Akhalkalaki-Kars railway, claiming that
the project will further isolate landlocked Armenia. In 2006, as a
result of insistent lobbying by Armenian Diaspora groups, the US
Senate banned US-based Ex-Im Bank from financing the construction of
the project. As an alternative to the Baku-Akhalkalaki-Kars railway,
Yerevan is pushing for reopening the already existing
Kars-Gyumri-Tbilisi railway. Presently, the railroad between the
Turkish town of Kars and Armenia’s Gyumri is not operational because
of trade blockades imposed on Armenia by Turkey and Azerbaijan.

Objections to the Baku-Akhalkalaki-Kars railway have been expressed
in Georgia as well. Namely, some politicians – including Georgia’s
former Foreign Minister Salome Zourabichvili – expressed fears that
project will be economically unjustifiable in the long run as the
launch of the Baku-Akhalkalaki-Kars railroad will redirect the flow
of cargo from Georgia’s Black Sea ports of Batumi and Poti, which
could lead to significant financial losses for Georgia.

However, authorities downplayed these concerns. Georgian Economy
Minister Giorgi Arveladze has commented: `Additional transport routes
are of especial importance for us against the continuing economic
blockade from Russia.’

A 29 km-long railway will be constructed on Georgian territory from
Akhalkalaki to the Turkish border, and a 192 km section of already
existing railway infrastructure will be rehabilitated. According to
officials, project implementation will take about two and a half
years.

Georgia’s Gag Concerns and Neighbours’ Promises

Following talks with Georgian and Azerbaijani leaders in Tbilisi on
February 7, Turkish Prime Minister Erdogan said: `We are doing our
best to allocate 800 million cubic meters of gas to Georgia from the
Turkish share by this July. This is our promise.’

In recent months, Tbilisi has been striving to convince Turkey to
give up part of its Shah-Deniz gas quota in order to lessen Georgia’s
reliance on costly Russian gas, but a final agreement has not yet
been reached. As the Turkish media reports, Ankara is reluctant to
give the highly anticipated go-ahead because it already has
commitments to deliver part of its Shah-Deniz quota to Italy and
Greece.

However, Saakashvili said at the February 7 press conference that
Georgia would start receiving Turkey’s share of gas. `First, I want
to say that we will be receiving Turkey’s quota as soon as Shah-Deniz
is put into operation. At the same time, Azerbaijan will gradually
increase gas supplies to Georgia. This means that the share of more
reliable and cheaper gas in Georgia’s gas balance will increase,’ he
stated.

Making all efforts to diversify its gas supplies, Georgia currently
receives gas from three suppliers: Russia’s Gazprom, at USD 235 per
cubic meters of gas; State Oil Company of Azerbaijan (SOCAR), USD
120; and Azerbaijan’s Shah-Deniz, USD 62.

Turkish Prime Minister Erdogan noted that Turkey, like Georgia and
Azerbaijan, faces energy-related problems. `But it is important to
solve these problems based on solidarity between these three
countries,’ he added.

Saakashvili pointed out that the most important thing is that the
three countries have managed to put into operation an alternative
energy supply route. `This is an alternative route for Europe (to
transport) oil and gas… That is why we call this cooperation (between
the three countries) historic.’

Shah Deniz gas is being pumped to Turkey, and onward to Europe
through Baku-Tbilisi-Erzurum pipeline. The USD 4.5 billion Shah Deniz
project started December of 2006 and is expected to produce 8.6
billion cubic metres of gas each year.

New terminal of Tbilisi International Airport Festively Opened

On February 7, Saakashvili, Aliyev and Erdogan solemnly cut red
ribbons at the new terminal of Tbilisi International Airport. The
leaders of all three countries noted that the airport of European
standards would be a precondition for the development of tourism and
business in Georgia.

Speaking at the inaugural ceremony last Wednesday, Saakashvili said,
"This is one of the best airports in Europe. Two years ago I promised
to have it and we have done it. This airport is much better than the
airport in Brussels, or the airport in Munich."

Construction of the new terminal began in January 2006. Teamed up
with the Turkish construction firm Urban, TAV Georgia, which is a
daughter company of Turkey’s TAV Airport Holding (Tepe-Akfen-Vie),
has been in charge of the construction. According to the deal struck
in the autumn of 2005, the Turkish company acquired the Tbilisi
Airport on BOT (Build-Operate-Transfer) terms with 15-year management
rights.

Overall, USD 90.5m has been invested in the project. EBRD and IFC
have well provided a 54 m Dollar credit to TAV Georgia for the
construction works. The latter has spent USD 65m on the reconstructed
airport, which the investor says is the biggest, and has the most
contemporary design in the region. The new glass-walled,
square-shaped airport will handle 1500 passengers an hour and 2.8 m
passengers a year. The new terminal has a total area of 24.000 square
meters and three passenger-boarding bridges. Equipped with three
telescopic platforms, it has a new round-the-clock checkpoint and a
new luggage check-in system.

TAV is also constructing a new airport in Batumi, Adjara Autonomous
Republic. The Turkish company has invested about USD 100 million into
the two projects.

President Aliyev, who returned to Baku after the opening ceremony,
was the first passenger to depart from the new airport.

New Project, New Memorial, New Triumph – Even in Football

On February 7, Azerbaijani, Georgian and Turkish leaders signed the
Tbilisi declaration on Common Vision for Regional Cooperation between
Azerbaijan, Georgia and Turkey. The declaration says that by
realizing major regional projects involving oil and gas pipelines and
a railway network, the three states are establishing `long-term and
predictable’ relations.

A declaration has been signed to launch the construction of an
electricity transmission line that will link Azerbaijan with Turkey
via Georgia. The document reads: `We agree to support the
construction of a new electricity transmission line from the Republic
of Azerbaijan through the territory of Georgia to the Republic of
Turkey, as well as other appropriate projects, which will enhance
electricity exchange between the Parties in future.’

On the right bank of the River Mtkvari in Tbilisi, Saakashvili and
his Azerbaijani counterpart inaugurated a 5-meter memorial board for
Heydar Aliyev, as a section of the river bank has been renamed after
Heydar Aliyev, late President of Azerbaijan and the father of Ilham
Aliyev. The monument is 556 km from Tbilisi to Baku and 1441 from
Tbilisi to Ankara.

Georgian Parliamentary Speaker Nino Burjanadze commented that Heydar
Aliyev was the political figure that "has contributed much in
boosting strategic ties between Azerbaijan and Georgia."

After participating in the inauguration of the New Airport Terminal,
Ilham Aliyev left for Azerbaijan, while the Georgian President and
the Turkish Prime Minister attended a friendly Georgian-Turkish
football match at the Boris Paichadze stadium, where Georgia’s David
Siradze scored the only goal of the game to defeat the Turkish
National Turkish team 1-0.

By Maia Edilashvili ,Georgian Times