n November 21, the presidents of Turkey, Azerbaijan and Georgia inaugurated the construction of the Baku-Tbilisi-Kars (B.T.K.) railway in Marabda, South Georgia. Linking Baku in Azerbaijan with Kars in eastern Turkey via Tbilisi in Georgia, the railway is scheduled to be completed in 2009-2010 and will transport goods, especially oil and passengers.

The project includes construction of a 29-kilometer (18 miles) segment in Georgia and a 76-kilometer (47 miles) segment in Turkey. There are plans to extend the railway corridor to Europe once a tunnel under the Istanbul strait becomes operational around 2012. According to Azeri officials, Kazakhstan and China are interested in the project, as the new railway would allow them access to Europe faster than the existing trans-Siberian route.

The B.T.K. railway is far from being an isolated project in the Eurasian context. After the breakup of the Soviet Union, the increase in trade between the former Soviet states and the need for new outbound intra-continental transportation corridors has prompted landlocked states to seek various forms of cooperation in developing a transnational infrastructure.

For Central Asian states, road and rail transportation corridors are indispensable vectors of regional and global integration. It also means manpower mobility and increased communication and cooperation among cultural communities and businesses.

Although there have been several attempts in the past to develop a railway corridor between Asia and Europe, they led to limited results. The European Union backed the Transport Corridor Europe-Caucasus-Asia (T.R.A.C.E.C.A.), founded in 1993, with the goal of providing support to the development of transport infrastructure in South Caucasus and Central Asian countries. But the absence of a coherent E.U. strategy, political disruptions, and the lack of funding and coordination between the 12 member countries contributed to a slowdown in the implementation of major projects. Other railway transportation projects are included in the European Neighborhood Policy (E.N.P.) and are supported by Georgia, Ukraine, Azerbaijan and Moldova (G.U.A.M.) members. A much older initiative is the Trans-Asian Railway (T.A.R.) established in 1960 by the United Nations with the goal of creating an integrated freight railway network across Europe and Asia.

It seems that 2007 was the year of a renewed interest in the revival of the old projects, in addition to new transnational initiatives backed by a complex mesh of geopolitical, national and economic interests that are emerging throughout the Central Asian and Caspian regions.

China and seven other Central Asian states announced in November a plan to build a modern version of the ancient Silk Road, which will include a network of highways, airports, rail lines and seaports connecting China with Western Europe.

Kazakhstan and Turkmenistan finalized an agreement to build a railway along the Caspian Sea; Turkmen President Gurbanguly Berdymukhamedov asked the Commonwealth of Independent States (C.I.S.) to create north-south and west-east transport corridors; and Russia announced a long-term plan to develop its transportation network, with a special focus on railways. Another upcoming T.R.A.C.E.C.A. project is the Poti-Baku-Aktau-Almaty railway corridor built mostly for container shipments, a joint project of Georgia, Azerbaijan and Kazakhstan

The B.T.K. Railway's Political Context

It was clear from the early stages of the project that Yerevan would oppose a transportation corridor that continues to isolate Armenia, consequently reinforcing its dependence on Georgia and Iran. Given the tense situation in Nagorno-Karabakh, there are fears that the future railway could be used to carry military equipment and weapons from Turkey to Azerbaijan. Even if Georgia's participation is not appreciated in Yerevan, it appears unlikely that this new triangular project will undermine future bilateral cooperation between the two countries.

Armenian leaders insisted that the existing railway between Kars and Gyumri in northeast Armenia would offer the best option. The railway has been closed since 1993 when, after the Nagorno-Karabakh conflict, Turkey closed its border with Armenia.

Initially, Armenia managed to produce a standstill. In 2005, the Parliamentary Assembly of the Black Sea Economic Cooperation (P.A.B.S.E.C.) supported Armenia's proposal to reopen the railway link with Turkey.

Then, in 2006, as a result of pressures from the Armenian lobby, the U.S. Senate banned American banks from financing the railway. Although the European Union has refused to include the B.T.K. railway in the E.N.P. or T.R.A.C.E.C.A., the project could not be stopped.

Azerbaijan and Turkey are strongly opposed to Armenia's participation in regional projects and asked Yerevan to withdraw its troops from Azerbaijan as a precondition for joining the project. Yet, there is practically no chance that in the foreseeable future Armenia will accept such a request.

The railway, estimated to bring US$50 million annually, is part of Azerbaijan's strategy of becoming a key segment of the transportation corridors on both the east-west and north-south axis. As the shortest way westward through Armenia is closed for an undeterminable period of time, Azerbaijan is maximizing the access to transport corridors via Georgia.

Given its pivotal role in the area, Azerbaijan wants the railway to become a catalyst for increased regional integration and to foster trade and foreign direct investment. Moreover, the new railway will allow Central Asian and Caucasus states to connect with Europe, bypassing Russia.

In parallel, Azerbaijan is actively looking for business opportunities in Georgia and Turkey. In November, the State Oil Company of Azerbaijan (S.O.C.A.R.) inaugurated an important oil terminal in Georgia's Black Sea port of Kulevi designated to facilitate the export of Central Asian and Caspian Sea energy to Europe. Continuing the series of foreign economic expansion, S.O.C.A.R. made an even more significant investment in Turkish petrochemicals company Petkim.

Both pipeline projects that have been developed so far in the region -- the Baku-Tbilisi-Ceyhan (B.T.C.) oil pipeline and the Baku-Tbilisi-Erzurum natural gas pipeline -- tested the reliability of the triangular partnership between Azerbaijan, Turkey and Georgia. Trying hard to balance Russia, both Azerbaijan and Georgia are strengthening their economic, cultural and military ties with Turkey, a safe gateway to Europe and a N.A.T.O. member.

Ankara, whose economy is now booming, is looking to increase its leverage in the region by participating in joint projects with its allies, especially with Azerbaijan where Turkish companies found a favorable business environment. Turkish investments in Azerbaijan are on the rise while political and military ties are getting stronger. Turkey is Georgia's largest trade partner and there are good prospects for even more growth after the signing of a free trade agreement on November 21. On the political side, the Turkish government supports Georgia in its dispute with separatists in Abkhazia and South Ossetia. The B.T.K. railway will not only strengthen Turkey's role as a "window" to Europe, but will also open a shorter corridor to Central Asia as an alternative to the railway link via Iran.

In the beginning, Georgia was reluctant to join the project, lacking the necessary funds and concerned that the activity of the Black Sea ports, Batumi and Poti, could be affected. But the Russian blockade and Azerbaijan's assistance in funding the construction work on Georgia's territory convinced the skeptical politicians to approve the project. Under the terms of the agreement, S.O.C.A.R. will provide a $200 million loan at a one percent annual interest rate within 25 years.

Tbilisi hopes that the railway will contribute to the economic development and stability of the turbulent Javakheti region where the population is predominantly Armenian. The local economy is now threatened after it was largely dependent on a Russian army military base, closed last November.

Transportation infrastructure is crucial to a key transit country like Georgia. Although the shutdown of the railway with Russia via Abkhazia is not beneficial for both sides, some observers think that once the railway is restored and Russia gets direct access to Armenia, its only ally in the region, Moscow will become more influential in the region.

This year it was announced that Parkfield Investment Ltd., a British management fund, took control of Georgian Railways for a period of 99 years. The privatization decree was controversial, as some politicians were concerned that Parkfield will fall into Moscow's hands. They denounced the lack of transparency that surrounded the negotiations. However, the deal finally failed and the privatization process was delayed until next year, leaving the door open to investors.

Conclusion

Although it is too early to predict how the future "iron" Silk Road will look, it seems that Russia will remain well positioned to play a major role on both the north-south and east-west axis.

The B.T.K. railway is a small but key segment of the emerging transcontinental corridor that may encourage other former-Soviet states to settle their disputes and join in. At the moment, the railway is rather a signal to Russia than a challenge to its domination over the railway networks between East and West. As a reaction, Russia will likely increase the pressure on Georgia; it will try other alternate routes to Iran via Azerbaijan, while bringing Armenia closer to Iran.

As the multidimensional cooperation between Azerbaijan, Georgia and Turkey has intensified, there may be an emergence of a new regional alliance led by Turkey. The military factor is not yet clearly defined because Turkey has a pragmatic regional policy toward Russia and Iran. In the absence of prospects of integration with either the E.U. or N.A.T.O., Azerbaijan and Georgia may hope to maximize the advantage of their geographical location through closer regional cooperation and joint projects.

The regional triumvirate that took shape is cemented by the Kremlin's tough stance on Georgia and Azerbaijan and sustained by the economic boom and close partnership of Turkey and Azerbaijan. Still, their alliance will be challenged by the ongoing instability in the region due to the "frozen conflicts," the unsolved status of the Caspian Sea, and other intra regional ethnic and religious tensions. Moreover, peace in the region depends also on external factors such as the relationship between the United States and Russia.

The European Union and the United States will remain supporters of an independent Central Asian-Caucasus hydrocarbon corridor and continue to promote energy cooperation among the regional actors. Yet they will be cautious about alienating Armenia. From a geopolitical perspective, the B.T.K. railway is a step toward reducing Moscow's influence in the region, a goal of the E.U. and U.S.

Although the three presidents present at the inauguration hailed the project as a "geopolitical revolution," and a key contribution to the security of the region and even of the world, there is still a ways to go until the region will achieve this level of security.

Report Drafted By:
Stefan Bocioaca

The Power and Interest News Report (PINR) is an analysis-based publication that seeks to, as objectively as possible, provide insight into various conflicts, regions and points of interest around the globe. PINR approaches a subject based upon the powers and interests involved, leaving the moral judgments to the reader. This report may not be reproduced, reprinted or broadcast without the written permission of inquiries@pinr.com. All comments should be directed to content@pinr.com.