Central Asia’s market to open with Baku-Tbilisi-Kars railway

Analysis Materials 22 October 2012 14:40 (UTC +04:00)
The Baku-Tbilisi-Kars railway more clearly turns into the route of the historical Silk Road as far as the construction process reaches its completion.
Central Asia’s market to open with Baku-Tbilisi-Kars railway

Azerbaijan, Baku, Oct 22 /Trend/

Ellada Khankishiyeva, Trend Analytical Centre Head

The Baku-Tbilisi-Kars railway more clearly turns into the route of the historical Silk Road as far as the construction process reaches its completion.

The project was originally designed to connect the transportation systems of Azerbaijan, Georgia and Turkey. Already it is gaining the interest of a growing number of countries wishing to join the route.

The project was initially supported by Kazakhstan and China. They expressed interest in transporting their products to European markets via this route. At present Turkmenistan and Uzbekistan are seeking to implement the Navoi-Turkmenbashi transport corridor by joining the Baku-Tbilisi-Kars railway and Afghanistan which is considering the transportation corridor to the Black Sea through Turkmenistan, Azerbaijan, Georgia and certain part of Turkey as an alternative route to the sea ports, has joined them.

The Central Asian countries have something to compete for in the global market. The region has large reserves of natural resources. Their development and diversification form the basis for the economic growth of the Central Asian countries.

According to the data published in the report of the Organisation for Economic Cooperation and Development (OECD 2011), Kazakhstan has oil reserves for at least 65 years and coal reserves for 308 years. Moreover, it is a major wheat exporter.

Turkmenistan has the largest natural gas reserves lasting for 223 years (the ratio of gas volume to the production volume). Kyrgyzstan and Tajikistan have great potential in hydropower and deposits of precious metals. Uzbekistan has significant natural gas reserves. It is the largest exporter of cotton. Afghanistan has huge reserves of iron, copper, cobalt, gold and lithium. Arable areas of the Central Asian countries annually bring about 25 million tons of wheat.

The attraction of the Baku-Tbilisi-Kars railway for Asian countries means that first of all it will be the shortest of the existing routes of delivering the goods from Asia to Europe. Moreover, this way it is being upgraded with the relevant infrastructure in the form of ports, tunnels, terminals, rail sections. This will facilitate direct transportation to Europe. After the construction is completed, the transport chain forming China-Central Asia-South Caucasus-Turkey-Europe or the so-called transportation corridor East-West, will be intensified.

Being built in the modern era, the Baku-Tbilisi-Kars railway will certainly be provided with the latest railway technology. A modern wagon fleet with roomy speed platforms for transporting international containers will appear. This significantly speeds up the delivery process.

The only negative feature is the repeated crossing of borders and customs points of transit countries. It could be helped by a flexible tariff policy and improved customs procedures.

The relative political and economic stability in the region, as well as joint work to improve the level of service conducted by ports and railways, shipping companies, foreign and domestic freight forwarders with the possible creation of a major multi-modal operator, will also contribute to the growth of cargo flow via the Baku-Tbilisi-Kars railway. The matter rests in organising the optimal transportation, administrative and technological procedures of customs and border control and introduction of harmonised approaches in the field of transport law and new technology at the borders.

There is an acute need for the Central Asian countries to deliver the goods to the European market in a quick, cheap and quality manner.

Uzbekistan with its growing economy from year to year has no route to the sea, therefore the railway has a special role. Afghanistan is also in this situation. Besides the existing transit routes in the east and west via Pakistan and Iran, it is promoting the idea of creating the Black Sea corridor through the Baku-Tbilisi-Kars railway. Turkmenistan plans to transport liquefied natural gas in special containers and export its second competitive product Turkmen textiles to the European market via the railway.

Kazakhstan has even suggested the preliminary volume of freight transportation via this route as bearing 10 million tons of cargo a year. It should be stressed that Kazakhstan has used the Azerbaijani and Georgian rail transport systems for a long time to transport oil products and grain. After the Baku-Tbilisi-Kars railway is commissioned, Kazakhstan will abandon the Russian direction of grain delivery and will deliver the product to Europe through the territory of Azerbaijan. Moreover, the Kazakh grain terminal is located in Baku.

China's cargo base is the most important prerequisite of the demand for the Baku-Tbilisi-Kars railway. Developing and transferring the production facilities of household appliances, cars, electronics, clothing and footwear from developed countries to China also promotes a large scale growth of Chinese exports to various parts of the world and stipulates the search for new ways to world markets. According to the official data of the country, the trade turnover between China and Europe reached $410.99 billion in January-September 2012. The potential for future years is about $1 trillion.

Thus, the combination of a flexible tariff policy and customs procedures upon the European standards with a shorter route for cargo transportation rather than sea routes from Asia to Europe, turns a relatively small project into one of the priority and strategically important in terms of international trade.