Azerbaijan Stimulates Regional Development: $100 Million Investment to Georgia for Baku-Tbilisi-Kars Railway Infrastructure
Dec 5, 2022
On November 25, during the international conference titled “Along the Middle Corridor: Geopolitics, Security and Economy” at the ADA University, an Azerbaijan state-run university, Azerbaijan’s President Ilham Aliyev announced an additional $100 million in funding for the Georgian section of the Baku-Tbilisi-Kars (BTK) Railway project. Aliyev noted that due to an “increase in the volume of cargo transportation through our country,” it is necessary to continue developing and modernizing the railway infrastructure, logistics, and transshipment capacity of the rail system. He explained, “A new geopolitical situation has developed," and thus, he expects a “significant increase in cargo transportation through the territory of Azerbaijan.” Both passenger and cargo transport are expected to increase in the upcoming years, demanding an increase in “capacity of the railway to five million tons of cargo per year.”
Also in attendance at the November 25 conference was Deputy Minister of Digital Development and Transport of the Republic of Azerbaijan, Rahman Hummatov, who expanded on the importance of the added $100 million funding to the BTK railroad. Hummatov highlighted Azerbaijan’s economic boom in its transit sector this past year, adding that, within this decade, cargo volume transit will increase along the “North-South corridor by 15 million tons, on the East-West corridor by 9-10 million tons, and on the East-West-Zangezur corridor by 5-8 million tons.”
This development follows a recent announcement from ADY Express LLC., a subsidiary of Azerbaijan Railways CJSC that reported an 800% increase in rail freight transport between Kazakhstan and Azerbaijan. There are two routes for cargo movement between Kazakhstan and Azerbaijan: the Middle Corridor sea route and the Samur-Yalama rail system, which both lead to the BTK railway. With 950,000 tons of rail freight cargo entering Baku between January and October 2022, the BTK route must be expanded to accommodate this $10 million increase in cargo.
Because there is an additional Kazakhstan-Georgia-Azerbaijan railway system currently under legal and diplomatic negotiations, according to Batyr Kotyrev, the Chief engineer of the Kazakhstan Temir Zholy (Kazakhstan Railways) company, freight cargo volumes through Georgia and Azerbaijan are expected to see a massive influx in the future. To achieve the economic potential of the Middle Corridor, the International North-South Transport Corridor, and the Trans-Caspian International Transport Route (TITR), Kotyrev added, increased railway capacity “will also help decrease the rates for customers and keep tariffs stable.” Considering the limited number of Russia-bypassing transit routes between China and Europe, the growth of BTK freight capacity can help alleviate some of the financial strains that Europe is experiencing, especially with the logistical crisis stemming from Russia’s war in Ukraine.
Transit infrastructure updates along the 183 km Akhalkalaki-Tbilisi railway section of Georgia are expected to conclude within the next 18 months as both the freight cargo and capacity of Baku’s seaport have required urgent adaptation. Rapid completion of updated BTK infrastructure has become essential because of the looming demand for transit along routes bypassing Russia and the upcoming completion of Southern Belt and Road Initiative (BRI) routes from China to Europe via Kazakhstan, the Caspian Sea, on to Turkey and the Black Sea Ports to the southern European Union (EU) members, Bulgaria and Romania.
As Europe's relations with Russia have deteriorated since the Ukraine invasion, leading to significant European divestment from energy and economic dependence on Russia, Azerbaijan has gained new economic opportunities and trade relations. Development of Azerbaijan's transit routes is becoming increasingly vital as, according to Aliyev, "other leading players” must “also consider this route as reliable, safe, and economically attractive.” In order to adapt to the changing global environment, routes leading to Europe must quickly expand cargo capacity in order to accommodate Azerbaijan’s cargo transit volumes. Otherwise, the Caspian region risks losing out on the new economic climate.
Despite recent economic uncertainty, Aliyev’s announcement on November 25 shows an opportunistic approach to this vital transitory period in the global economy. In light of Russia's invasion of Ukraine, Azerbaijan's position along the Middle Corridor has allowed it to strengthen its regional presence. Having developed solid infrastructure and diplomatic ties with Europe, Azerbaijan has become a regional economic development navigator. Providing additional infrastructure investment to less-economically-integrated countries in the Caspian region, Azerbaijan is becoming a leading player in ensuring regional connectivity.