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Baku-Tbilisi-Kars Railway: New Trade Route between Europe and Asia

By Khatia Kardava
Friday, November 17
After years of delays, the Baku-Tbilisi-Kars (BTK) railway officially opened on October 30, connecting the Caspian Basin to eastern Turkey, with onward access to the European rail system.

The new railway was hailed by high profile officials in the region. Speaking at the inauguration, Azerbaijani President Ilham Aliyev stressed the railway’s completion was a result of the “brotherhood” of the three countries.

The Presidents of Turkey and Azerbaijan and the Prime Ministers of Georgia, Kazakhstan and Uzbekistan attended a ceremony at the Port of Baku to dispatch an inaugural freight train on the Baku – Tbilisi – Kars corridor.

“The Baku-Tbilisi-Kars railway is the shortest and most reliable way between Europe and Asia. In the beginning, five million tons of cargo will be transported via the BTK, and 17 million tons thereafter. The BTK is turning Eurasia into an important part of the transport map. The railway will serve to develop tourism, stability and security, increase the volume of mutual investment, and strengthen the geopolitical significance of our countries,” stated Azerbaijani President Ilham Aliyev as sited by JAMNews.

Turkish President Recep Tayyip Erdogan described the BTK as a “new Silk Road venture initiated to connect Asia, Europe and Africa.” He said shipments from China would be able to reach Europe in 15 days using the BTK route, and the initial capacity of 6-5 million tons of freight and 1 million passengers per year is expected to increase to 17 million tons and 3 million passengers per year in 2034.

The 849 km BTK programme is central to plans to create a rail corridor from the Caspian Sea to Europe via Turkey. It has involved upgrading infrastructure in Azerbaijan and Georgia, rehabilitating 153 km of unused 1 520 mm gauge line from Marabda to a break-of-gauge facility at Akhalkalaki, and building 110 km of 1 435 mm gauge line to Kars via a 4•4 km tunnel under the Georgia-Turkey border at Kartsakhi.

This completes the missing link between Georgia and Turkey and replaces a route through Armenia, which has been closed between Turkey and Armenia in 1993.

With further improvements of transportation links between Turkey and Bulgaria as well as between Azerbaijan and Central Asia, this project will provide a fast and reliable land connection between Europe and Asia along the ancient Silk Route.

The project, which will bring vitality to the region both in terms of employment and trade, is the third largest project implemented by all three countries after the Baku-Tbilisi-Ceyhan and Baku-Tbilisi-Erzurum projects in the energy sector.

Transportation between China and Europe will approximately take 15 days, twice as fast as sea routes, and at half the cost of air, with the completion of the Middle Corridor. The BTK railway project will be one of the main connectors in terms of transportation projects, which also include the EU-led Transport Europe-Caucasus-Asia Corridor (TRACECA) and the One Belt One Road Middle Corridor.

One of the biggest drivers of the BTK is Russia’s growing isolation since 2014. Following its annexation of Crimea, Russia was placed under an international trade embargo. In response, Russia has blocked food imports and transit from countries supporting sanctions, which includes European products en route to Asian markets.

The BTK now offers a route that allows products from Europe to bypass Russia: cargo can pass through Turkey and onto port facilities on Azerbaijan’s Caspian Sea coast. From there, goods can be ferried across the sea to Kazakhstan, and then onward to China.

The BTK railway will provide the final link in a China-to-Europe overland transport route via Kazakhstan that entirely bypasses the Russian territory, thereby breaking Moscow’s stranglehold over Eurasian commercial transport. Costing more than USD 613 million, the 513-mile BTK rail line is also expected to boost the total trade volume between Azerbaijan, Georgia, and Turkey to more than USD 10 billion per year.

BTK Overview

The BTK rail line, which extends from the bank of the Caspian Sea in Azerbaijan to the capital city of Georgia before carrying on to Turkey, where it feeds into the broader Turkish rail system to Europe beyond, was first envisioned in 1993. The idea was particularly backed up after an existing railway to Baku via Armenia was shut down due to the Nagorno-Karabagh conflict in 90ies. However, the decisive action wasn’t taken until 2007, when leaders of Azerbaijan, Georgia, and Turkey met in Tbilisi and signed an agreement to make the project come true. The project foresees rehabilitation and reconstruction of 178 km-long railway between Marabda and Akhalkalaki in Georgia and construction of a new railway from Akhalkalaki to the Turkish border.

The BTK has been over two decades in the making. First, it was anticipated the project would be completed in 2010, however, it took seven more years. The reasons for delay in implementation, cited at different times, varied from funding, geopolitics and changes in governments to complex mountainous terrain and climate conditions. Georgia’s brief war with Russia in 2008 knocked the project back. With Tbilisi’s economy in ruins, many doubted the BTK would ever be realized. In February 2016, though, a fifth and final trilateral meeting agreed that the project would be completed in 2017. As a result, this October the 846-kilometer long trade route has been commissioned and the first train started off. Its total cost surpassed USD 1 billion, with the bulk of the financing coming from Azerbaijan's state oil fund. Baku’s State Oil Fund (SOFAZ) offered Georgia a virtually interest-free loan. The first loan, was disbursed in 2007 and amounted to roughly USD 200 million with a one percent interest. The money was supposed to cover nearly all of the costs of constructing Georgia’s 178-kilometer railway section. But costs ballooned and later, SOFAZ offered another loan of about USD 600 million at a five-percent interest.

The impact of BTK railway

Beside providing additional revenue via transit fees, the railway is also expected to stimulate local manufacturing. A series of manufacturing centers have been built to take an advantage of the new transportation options. Georgia, as well as Turkey and Azerbaijan, have been setting up a network of free industrial zones along its section of the route.

Georgian economists believe the new railway can encourage lower trade costs. “It would be great to have more competition among the different transportation modalities and transport companies,” said Eric Livny, Director of the International School of Economics (ISET) at Tbilisi State University. “The result will be lower transport tariffs, better service, and higher volumes of transit cargo.”

Ultimately, cost competitiveness could help Georgia attract transit trade from other regions, such as Russia and Central Europe. If that happens, it could provide a boost for Poti, Georgia’s main Black Sea port, which is currently operating at about half of its capacity. “If prices go down and volumes increase – larger ships will sail there, reducing prices on the Black Sea section of the transport route,” Livny said.

However, while it is a fundamentally economic initiative, the BTK rail line is also rife with political dimensions, which are evident when you look at it on a map. The new railway conspicuously takes a roundabout route along the periphery of Armenia, a nation that Azerbaijan has been having a territorial feud with since the 1980s.

It is worth noting the geopolitical dimension of the BTK project as well. The institutionalization of trilateral presidential summits between Turkey, Georgia, and Azerbaijan has a significant geopolitical aspect. The public prominence that Turkey’s President Abdullah Gul gave to the BTK railway seems to signal an increased Turkish commitment to the collective security of Azerbaijan and Georgia.

According to Merab Janiashvili, economic analyst of the Public Broadcaster, the launch of the rail-line will increase further Georgia's transit function and therefore, the project is important for the economy as well as for development and regional stability.

"With this project, the connection between Europe and Asia will be much cheaper and much faster, from which we will benefit too, for instance, many countries will be interested in stability with us," said Janiashvili. "In addition, there will be economic benefits - investments and employed people," he continued.

On November 28-29, an international forum "Silk Road" will be held in the capital of Georgia, where representatives of public and private sectors from more than 40 states will participate to discuss the importance and potential of the Baku-Tbilisi-Kars railway in Tbilisi.