All eyes on transportation

/By AzerNews/

By Gulgiz Dadashova

Oil prices are falling relentlessly, despite rare and isolated cases of price surges. The economy of China, previously thought to be unstoppable, is showing signs of slowing. Europe’s economy faces the risk of standstill in the background of doubts about the euro and the so-called Grexit. Russia is in an economic crisis. The CIS countries are devaluing their currencies for the second time this year. Turkey has been hit by terrorist attacks. While it seems as if it is only Iran that appears hopeful following the recently nuke deal, decreasing energy prices do not give mercy to anyone.

Azerbaijan, the energy exporting country of the South Caucasus, on the one hand is trying to minimize the effects of bad economic performance from its partner countries to its own domestic economy. On the other hand, the country is searching for ways to diversify the energy-oriented economy to ensure economic growth, as energy incomes will surely be lower than in previous years.

Currently, the government is working to compensate the state budget with revenues from the non-oil sector. Among the options for Azerbaijan’s economy, transportation occupies a lion’s share.

Reviving traditional routes

To say that Azerbaijan lives in a unique geopolitical location for being transportation hub is an understatement. Transit through Georgia and Turkey provides the country access to the Black Sea and the Mediterranean. Due to its location at the intersection of the East-West and the North-South transport corridors, short transport linkages cross Azerbaijan, providing connectivity from Scandinavian countries to Persian Gulf, and from Europe to Central Asia and China.

Retaining its position as the South Caucasus’ most important transport location, Azerbaijan has over the past decade built 6,835 miles of new roads, about 300 bridges, and has renovated all of its main roads connecting to the neighboring countries- Georgia, Russia, and Iran.

The government, which is well aware of the benefits that transit can bring, began to heavily invest in road, rail, and air networks to attract rising Eurasian trade.

Azerbaijan invested $2.5 billion in its transportation sector in 2014 alone, including $ 1.9 billion directed to the development of road and transport infrastructure, according to Azerbaijani Transport Minister Ziya Mammadov. Over the past 10 years, the volume of cargo moved by the Azerbaijani transport sector increased by 5.7 percent, passenger use grew by 3.7 percent, and transit cargoes increased by 3.4 percent.

Shipping - Railway - Air

This year marks some major milestones for the transport infrastructure of Azerbaijan, the first of which was the arrival of the first container train at the Baku International Sea Trade Port from China via the Trans-Caspian international transport route on August 3.

The train, consisting of 82 containers and 41 platforms, departed from China’s Shihezi city on July 28. It traveled more than 4,000 kilometers, passing through the Kazakh port of Aktau.

An agreement creating a coordinating committee to develop a Trans-Caspian International Transport Route was signed by Kazakh, Georgian, and Azerbaijani representatives in late 2013.

Container shipments along the China-Kazakhstan-Azerbaijan-Georgia-Turkey railway are made possible using Kazakhstan’s new Zhezkazgan-Beineu rail line to the Aktau port in conjunction with the Baku-Tbilisi-Kars rail line. The route in its initial operations will be able to transport up to 5.5 million tons of cargo annually, rising to 13.5 million tons per year by 2020. Azerbaijan Railways JSC can earn $600-700 million from transit traffic by 2020.

The volume of trade between China and Europe, which today amounts to around $600 billion, is forecasted to exceed 170 million tons by 2020. Currently, goods from China are transported either via expensive air routes or by lengthy sea routes.

After fully establishing the new transit corridor from China to Europe, cargoes will be delivered to European consumers via a shorter, faster, and cheaper route.

Another big day in 2015 will surely be the opening of the 826-kilometer Baku-Tbilisi-Kars (BTK) railway by the end of the year. The railway line is expected to expand Azerbaijan’s multi-modal transportation opportunities and ensure the growth of passenger and freight transportation.

Through connecting Turkey, Azerbaijan, and Georgia, the new line will initially carry 6.5 million tons of freight and 1 million passengers annually. The route will eventually boost carrying capacity to 15 million tons and 3 million passengers.

The route, which will be an alternative to the Silk Road, will give Azerbaijan direct access to certain international transportation corridors along with Turkey, making it possible to arrive in Kars in a day and Istanbul in less than 3 days. Also, a Free Trade Zone is expected to be developed in Kars, which will bring more dividends to Azerbaijan and the region.

In addition, Azerbaijan is upgrading its maritime infrastructure.

The new Baku International Sea Trade Port ferry terminal in Alat, 40 miles south of Baku, was launched in 2014, while the Baku Sea Port has begun upgrades and will be ready for commissioning later this year.

The estimated transshipment volume for the new port complex is up to 10 million tons of cargo and 40,000 TEU containers at the first stage, up to 17 million tons of cargo and 150,000 TEU containers at the second stage, and up to 25 million tons of cargo, and 1 million TEU containers at the third stage of the project. In addition to the logistics center, a free economic zone is planned for this area in the future.

Another major investment in maritime infrastructure was the launch of the Baku Shipyard, jointly developed by SOCAR, Azerbaijan Investment Company (AIC), and Keppel O&M.

The 62-hectare shipyard, launched in 2013, is capable of constructing a wide range of specialized vessels and merchant ships including subsea vessels, anchor handling tug/supply vessels, and multi-purpose offshore support vessels, such as platform supply vessels, as well as tankers and cargo vessels. The yard also has ship repair and conversion capabilities.

Another Baku-backed transport initiative is the 4,500 mile-long “North-South” international transport corridor, linking the Indian Ocean and Persian Gulf to the Caspian Sea via Iran onward to northern Europe via St. Petersburg in Russia. Azerbaijan plays an integral role here, providing a route connecting Iranian transport networks with Azerbaijan and Turkey on to Russian and European markets.

Taking into account India’s strategic interests in the West and the Central Asian region, and the need for greater economic and energy cooperation between the Central, South, and West Asian region, New Delhi has repeatedly voiced interest in this project. Thus, the sides are working to create a favorable atmosphere to reactivate and realize the full potential of the “North-South” route.

Azerbaijan is also upgrading its facilities to become a major Eurasian air hub. A new passenger terminal has opened at Heydar Aliyev International Airport, the busiest airport in Azerbaijan and the Caucasus.

The Heydar Aliyev International Airport currently handles approximately 1 million passengers a year. Described as “a new door to the Caucasus,” with a total area 65,000 square meters, the new terminal is capable of transiting more than six million passengers each year and serving as a memorable gateway to the country and the wider Caucasus region. Azerbaijan’s aerial network is already extensive, with more than 35 international routes worldwide.

Flying via Baku actually provides for a shorter distance. In fact, flying to Beijing or Shanghai from Heathrow via Baku adds just 16% and 12% to the distance than flying to these points direct from the UK. Compare this to the 39% and 29% increase in the distance that travelling via Dubai produces, and you have a truly great location for a global hub.