Opening Borders between Turkey and Armenia: Does Game of Light Stand for Ankara?

Business Materials 5 September 2008 16:55 (UTC +04:00)
Opening Borders between Turkey and Armenia: Does Game of Light Stand for Ankara?

Vagif Sharifov - Trend , director

Under the conditions of the close economic partnership of Turkey and Azerbaijan, official Ankara will lose greater than it will acquire from re-establishment of railway communication and actually opening the land border with Yerevan, which has been closed for already 15 years. The media actively comments on the news onhe forthcoming visit of the President of Turkey, Abdullah Gul, to Armenia and the parallel statements of official Yerevan regarding the plans of renewal of the railway Kars (Turkey) - Gumri (Armenia).

Turkey, being the importer of fuel from many sources, obtains transit tariff from the transportation of Azerbaijani oil via Baku-Tbilisi-Ceyhan pipeline, buys gas via Baku-Tbilisi-Erzurum pipeline, builds railway Baku-Tbilisi-Kars together with Azerbaijan. The State Oil Company of Azerbaijan invests in the creation of large petrochemical complex in Turkey. Ankara lays large hopes also for Kazakhstan oil, which will pass by transit through the territory of Azerbaijan, and gas pipe Nabucco, of which beginning will be established in Turkey, will be filled up with the Azerbaijan gas and fuel from central Asia, which will pass through Baku.

Because of its aggressive policy with regards to Nagorno-Karabakh, which is integral part of Azerbaijan, Armenia was found in the total dependence on three countries: Iran, Russia and Georgia, which mainly acted as transit country for delivery of Russian goods to Yerevan. The present desire of Armenia to re-establish activity of the route Kars-Gumri is completely explainable: Georgian-South Ossetian conflict, which burnt in August, made Armenia more dependent on the import, but now already only on one source - Iran. The recent rupture of diplomatic relations between Georgia and Russia actually means that Russian goods can not arrive in Yerevan through Tbilisi, but there is no other economically attractive route.

This means that according to elementary market laws, the Iranian goods will grow in price for Armenia, whose economic position even will more deteriorate in light of the last events in Caucasus. Due o the situation created in Caucasus, the question of diversifying the import of energy resources critically stands for Armenia, and the statements of official Yerevan regarding the plans of renewal of railway communication with the partner country for Azerbaijan - Turkey - proceed from this. Official Ankara hardly will go to such in the essence political step.

Opening roads - indicating relaxation of the 15-year position of official Ankara, will allow Turkey to trade only with Armenia because Turkish goods can not fall to the market of Russia through Georgia because of the recent conflict and break of diplomatic relations. Moreover, Turkey does not need to trade with Iran or Georgia through Armenia because Turkey has state borders with these countries and economic operations have been fixed long ago.

According to the data provided by US Energy Information Administration (EIA), the fuel consumption in Armenia from 1992 to 2007 averaged 34,000 barrels per day (1.7mln tons per year). According to data by EIA, Armenia does not have own oil refinery, own production of hydrocarbons and main oil pipelines. Armenia repeatedly declared its desire to construct oil refinery in its territory, with a capacity of 7mln tons per year, which is estimated at $2bln. However, no one will buy gasoline from this refinery because it will prove to be very unattractive because of the high prime cost of oil refining. Imported Kazakhstan or Turkmen oil (by transit via the territory of Iran) for the refinery in Armenia will cost very expensive, and export and distribution of oil products are complicated by the absence of main oil product pipelines and, as a consequence of this, by high transport expenditures. Yerevan will not be able to buy Iranian oil because Teheran itself buys raw material from Russia, Turkmenistan and Kazakhstan for its oil refineries, located on the north of the country,.

Azerbaijan has solid geo-political position in South Caucasus, possessing convenient and infrastructurally fixed transit territory for exporting both its hydrocarbons and from central Asia to Europe. Due to the present high prices for oil and gas, Turkey obtains significant benefits from the co-operation with Azerbaijan, whose raw material goes to the Port of Ceyhan.

And Kazakhstan will supply part of its own oil from Kashagan Field via Baku- Tbilisi-Ceyhan. Kazakhstan possesses oil terminal in the Port of Batumi in the Black sea in Georgia, loads for which are supplied through the territory of Azerbaijan. Economic factor and solid fixed partner agreements with Azerbaijan, in all likelihood, must be more accepted by Turkey against the background of the possibility of opening borders with Armenia.

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