BAKU-TBILISI-KARS: GEOPOLITICAL EFFECT ON THE SOUTH CAUCASIAN REGION

Journal of Turkish Weekly
July 24 2008
Turkey

View by Rovshan Ibrahimov – On November 21, 2007 in Georgia, near
the station Marabda, the official ceremony was held related with the
beginning of construction of a railway Baku-Tbilisi-Ahalkalaki-Kars,
which was attended by the presidents of Azerbaijan, Turkey and
Georgia. This project, the aim of which is to connect the Caucasus and
respectively the Asian region through the Caspian Sea, with Europe, is
the fruit of the efforts of those countries that are directly involved
in this project, in other words, Azerbaijan, Turkey and Georgia.

It is noteworthy that the development and funding of the project is
carried out without any involvement of international organizations or
third countries. Thus the construction of 105 km of railway track,
29 km of which will pass through the territory of Georgia, and 76
km through Turkey, consortium members have decided to implement its
own. In particular, Turkey will fund a section of road which passes
through its territory, while funding for the Georgian segment assumed
Azerbaijan. For instance, Azerbaijan has allocated for the project,
whose total cost is 600 million dollars, 200 million dollars, as
the government loan to Georgia for a term of 25 years under 1% per
annum. In few days the International Bank of Azerbaijan will provide
the first trance of the loan, which amount will be 40 million dollars.

It is expected that after completion of the construction of this road
will be carried on 15 million ton goods per year.

The importance of this road is that it will become an alternative, the
existing Trans Siberian line, in fact a monopoly in rail transport
between major countries in Europe and Asia. After construction
conclusion of the tunnel passing under the Turkish straits, will be
available unobstructed movement of trains from the Chinese cities up
to London.

This project is crucial for all three countries involved in
its implementation. It is noteworthy that this is not the first
regional project, uniting political and economic interests of the
three countries. The realization of Baku-Tbilisi-Ceyhan oil pipeline
and Baku-Tbilisi-Erzurum gas pipeline, as well as their successful
exploitation, has provided the ground for ideas of Azerbaijan, Turkey
and Georgia on further deepening of their relations, and the result of
which was the Baku-Tbilisi-Kars railroad project. It is noteworthy that
the President of Turkey Gul, during the official visit to Azerbaijan,
said that is to think about setting up a special economic zone between
the three regional countries.

This project has already attracted interest of such countries as
Kazakhstan and China, which has expressed a desire to use the railway
Baku-Tbilisi-Kars, with the aim of transporting their goods to European
markets. Provided with these facts, it possible to stress that this
project will be profitable and funds invested in it pays off in the
shortest possible time.

Implementation of this project will have implications not only for
Azerbaijan, Georgia and Turkey, but also for other countries in the
region. In summary, try to consider the possible implications for
the region.

Azerbaijan

Azerbaijan is the initiator of this project. Following the success
of its energy projects, both in terms of oil and gas and its
transportation to the world markets, Azerbaijan has become a major
supplier of energy in the Eurasian space, which has been able to
strengthen its independence. At this stage, Azerbaijan, using its
favorable geopolitical situation, also wants to become a transit
country for transportation of goods between Europe and Asia.

It should be noted that Azerbaijan already has transported oil products
from Kazakhstan and Turkmenistan on its territory and continue to
Georgian ports of Poti and Batum. However, with the realization of
the railroad Baku-Tbilisi-Kars, Azerbaijan will also receive an
opportunity to carry to the Georgian ports goods from China for
European markets and, if possible, at the prospect, to transport
goods and in the opposite direction.

Another political motive for Azerbaijan the implementation of the
project serves is the protracted Nagorno-Karabakh conflict between
Azerbaijan and Armenia. In the event of this project implementation,
Armenia will be finalized on the sidelines of ongoing regional projects
that for a country with poor natural resources and without exit to
the open seas, could have dire consequences, not only economically
but also politically. Having have problems in the relations not only
with Azerbaijan but also with Turkey and Armenia forced to review
its policy towards its neighbors. Otherwise, the country may face a
problem of exclusion in the region.

>>From an economic perspective, this project could serve as a serious
alternative to the oil and gas sector, which is at the core of today’s
date for the Azerbaijani economy. In addition, as increasing revenues
from oil projects Azerbaijan has been actively pursue projects outside
the republic. In particular, Azerbaijan State Oil Company acquired
in the Georgian Black Sea terminal at Kulevi, which Azerbaijan is
planning to export finished oil products to the countries of the
Black Sea basin. Azerbaijan Oil Company also is a major supplier of
oil products and natural gas on the territory of Georgia and has been
actively deploying its own filling stations in the country. SOCAR
is also participating in the tender for the privatization of gas
distribution lines on Georgian territory.

Turning, Turkey, the SOCAR together with the Turkish company Tupraz
planned construction of oil refinery in the port of Ceyhan with a
production force to 10 million tons of oil a year. SOCAR addition, in
conjunction with other associates won a tender for the privatization
of the Turkish largest petrochemical company Petkim, which produces up
to 25% of chemical products to Turkey. Therefore, Baku-Tbilisi-Kars
project, the construction of the Georgian part of which the company
transferred to the Azerbaijani Azerinshaatservis will allow Azerbaijan
to strengthen its position in the region politically and economically.

Turkey

As a candidate for full membership in the EU, Turkey hopes to
strengthen its position by becoming a transit country for the
supply of energy from the Caspian basin to the EU. Following the
introduction into service the Baku-Tbilisi-Ceyhan oil pipeline and
the Baku-Tbilisi-Erzurum gas pipeline, the strategic significance of
the parties has increased, and Turkey has become the main alternative
Russia, link in the supply of energy resources to world markets.

After November 17, 2007 was put a gas pipeline between Turkey and
Greece, became the first Azerbaijani gas to enter the European Common
Market. Turkey also hopes to increase its income from transit per
resale Azerbaijani gas to the European markets.

Baku-Tbilisi-Kars railroad project is important for Turkey so that
this country will receive unimpeded path to the countries of South
Caucasus and Central Asia. Without doubt this way will increase trade
with these countries. Already, the country has set itself the goal
to increase trade with Azerbaijan to 3 billion dollars, which is
currently about 1 billion dollars.

Georgia

Participation in regional projects plays a great importance for
Georgia. From these projects, Georgia receives significant infusions
to the budget, and she is not opposed to increasing them, which would
become possible after the project Baku-Tbilisi-Kars. For Georgia,
which has a policy of integration with European organizations,
the project is perceived as one of the concrete steps to translate
its goals. Through this route will be possible direct link with the
European countries through Turkey. Country actually lost owns rail
link with the Western countries because of Abkhazian conflict and it
will be able to recover after realization this project.

Moreover, given the current onerous political situation in Georgia,
formed after disperse demonstrators protesting against the Saakashvili
government, the start of theis project was timely and could contribute
to increasing president rating to the extraordinary presidential
elections to be held in early January this year.

Russia

Economically Russia is not interested in construction of the
Baku-Tbilisi-Kars railroad, since it would compete with existing
actually in the Eurasian space only by rail, Trans Siberian line. While
the annual pass from this line, compared with the Russian will be
not so significant, new road can change direction goods delivered
from Central Asia to Europe. In addition, Georgia and Azerbaijan
will be increasingly integrated into the European structures at the
same time reducing the political and economic dependence on Russia,
which could not arrange northern neighbor. In principle, a loss of
influence over the countries of the South Caucasus Russia should blame
only themselves. After independence, Azerbaijan and Georgia, Russia in
the relations with these countries followed a policy of sticks. Russia
although supported the separatist movements in these countries, when,
during the first Chechen war closed borders with these countries,
what in the short term heavily effected economy of these countries
but in a prospective led to economies of Azerbaijan and Georgia have
become more independent from Russian economy. Nowadays, these two
countries, carious about possible pressure from Russia, are trying
to protect themselves by creating new ways with the outside world.

Armenia

This country, because of the conflict with Azerbaijan and the historic
dispute with Turkey, in fact, does not have any economic relations
with its closest neighbors. Because of unresolved Karabakh conflict
Baku-Tbilisi-Ceyhan oil pipeline and Baku-Tbilisi-Erzurum gas pipeline
were built bypassing of this country, although the territory of Armenia
is provide the shortest route. Now in the case of the completion of the
project construction of the railway, Armenia will be finalized in the
economic impasse. Although official Yerevan called for the resumption
of existing work from Soviet times, the railway between Kars and Gumri,
and the lack of resolution of conflicts with its neighbors making
these desires utopist. In turn, Armenia, in order to maintain its
own economy, forced to transfer its strategic facilities in Russia
property or management. Moreover Armenia increasingly compelled to
seek increased cooperation with Iran, a country with serious problems
with the Western countries, because it has developed nuclear program.

Kazakhstan

Kazakhstan is interested in the emergence of alternative ways to
penetrate world, particularly to European markets. Construction
of the new railway could in fact coincide with his wishes. It is
noteworthy that this country has already used the Southern Caucasus
regions as transit route for the transport of oil products and other
strategic product-grain. Already in Baku grain terminal put into
operation with the capacity to 800 thousand tones of grain per year,
which is planned to store the Kazakh grain to further its exports to
world markets. In the future, Kazakhstan plans to export this route
to 5 million tons of grain per year. In this case the construction
of the railway Baku-Tbilisi-Kars could contribute to the expansion
of exports of grain from Kazakhstan to world markets.