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

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 Gül, 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.