Weekly economic review (27.06- 1.07.2011)

Analysis Materials 7 July 2011 10:39 (UTC +04:00)

A loan agreement was signed on July 1 in Baku allocating $575 million to the "Baku-Tbilisi-Kars" railway project, designed to connect the Azerbaijani, Georgian and Turkish railway systems.

Additional funds for a second loan will be allocated by Azerbaijan for construction and rehabilitation in Georgia. These will allow for work to be complete, as envisaged within the project.

Azerbaijan has allocated $575 million to Georgia for 25 years at an interest rate of five percent to construct the Georgian section of the Baku-Tbilisi-Kars railway.

Regardless of interest payments or commission fees worth 0.5 percent (50 basis points), a maximum of 20,000 lari will be paid.

The allocated funds will be spent to construct and rehabilitate the railway section of Tetritskaro-Akhalkalaki to construct the railway station in Akhalkalaki and another railway infrastructure.

This loan has been allocated to the Kartsakhi-Marabda company. It is not a public debt. The loan will be returned from the project's profit, after the railway will be commissioned.

The first tranche, worth $200 million, has also been allocated to the Georgian side for 25 years at an annual rate of one percent.

According to amendments made to an agreement signed between the Azerbaijani and Georgian governments with regard to work on funding, design, construction, reconstruction and rehabilitation of the Marabda-border with Turkey (Kartsakhi) railway section, the total amount of credit line amounted to $775 million.

The State Oil Fund of Azerbaijan (SOFAZ) finances the construction and rehabilitation of the Georgian section of the Baku-Tbilisi-Kars railway.

A new 105-kilometer railroad branch will be constructed as part of the Baku-Tbilisi-Kars Railway. About 76 kilometers will stretch via Turkey and 29 kilometers through Georgia. Moreover, an Akhalkalaki-Tbilisi-Marabda railway section will be reconstructed in Georgia to increase transport capacity of up to 15 million tons of cargo a year. A point of train transition from the existing train tracks in Georgia to the European tracks is planned to be built in Akhalkalaki.

Completion of construction work is planned for late 2012. The corridor will be fully commissioned in early 2013.

The corridor's peak capacity will reach 17 million tons. Initially, its capacity will reach 1 million passengers and 6.5 million tons of cargo.