Baku-Tbilisi-Kars railway to solve financing and technical problems
03 February, 2011
Baku-Tbilisi-Kars railway to solve financing and technical problems

Georgia negotiates additional financing with Azerbaijan in the frames of the Baku-Tbilisi-Kars railway project. Azerbaijan has already expressed its political will on providing of preferential loan to Georgia but the volume and crediting details are confidential at the moment.

The project is put on the list of best 100 projects and is supposed to get through by 2012.
The Baku-Tbilisi-Kars railway (BTK), a regional rail link project to directly connect Turkey, Georgia and Azerbaijan goes ahead successfully – the Trilateral Coordination Council

[including Georgian, Azeri and Turkish transport ministers] concluded during its meeting in Tbilisi on January 25-26, 2011.
The delegations discussed the state of railway building, construction of the 4km tunnel on the Turkey-Georgia border, facilitation of customs procedures, and future plans.
Additional financing of construction works deployed at Georgian part of the railway also was one of the key issues of the agenda.
According to preliminary estimation construction of the Georgian passage of the railway trunk accounted to roughly USD 200 million, and Azerbaijan has already disbursed a 25-year preferential credit of USD 200 million under 1% of interest rate to Georgia to finance construction works on Georgian territory. However the budget increased later and negotiations over additional financing are going on between Georgian and Azeri sides. They  disclose neither the exact figure nor credit terms of extra financing been under discussion at the moment, but according to Azeri media credit terms are supposed to change.
“The beginning of the next phase in construction, project budget for this year, revising a loan agreement was discussed at the event. Revising the loan agreement envisages increase in interest rate. The Azerbaijan investment project is scheduled to earmark AZN 80 million to this railway this year,” Ziya Mammadov, Azeri Transport Minister is reported saying by Today.az on January 25, 2011.
Georgian media reported tentatively USD 50 million was supposed to be allocated to Georgia as extra financing. Bidzina Bregadze, the Head of Marabda-Kartsaxi LLC, assures the political will on additional financing is already granted and the loan figure will be much higher than the assumed USD 50 million but he does not disclose how much. Nor he speaks of change preferential credit rate.
“That’ the thing we are negotiating at the moment and we cannot disclose details of the commercial negotiations till it is through,” he told Georgian Journal. “Actually the USD 200 million was a tentative budget we needed to launch the BTK project and Azeri side knew that the budget was supposed to increase along with the construction works development. They have already approved additional financing on political level, but crediting details are still underway and we will report on them soon.” 
In total 98 kilometers of new line will be built between Kars and Akhalkalaki, with 68 km within Turkey and 30 km in Georgia in frames of the BTK project.
The Georgian passage of the rail is of 150 kilometers length totally. The 30 kilometers out of it will be a completely new track running from Kartsakhi [Georgian part] to Turkey. It includes a 4 km tunnel connecting Georgia and Turkey.  The existing line from Akhalkalaki to Marabda and on to Tbilisi and Baku will be modernized.
The new railway link is intended to provide an alternative route to the existing Kars–Gyumri railway line connecting Turkey and Armenia, which has been out of use since 1993, when Turkey closed its border with Armenia to support Azerbaijan in its conflict with Armenia following the Nagorno-Karabakh War. A multi-lateral accord to build the link was signed by the three countries in January 2005 but the European Union and the United States have said they will not assist in promoting or developing the line because it is designed to bypass Armenia.
And BTK partners finance the project completely based on their own resources. More precisely Azerbaijan and Turkey finance construction works on their own territories and as far as Georgia lacks due resources Azeri side agreed to disburse a preferential 25-year loan to Georgia. Georgian Railway is supposed to cover the loan from the incomes of the new railway after the BTK becomes operational. Georgian side believes it is quite possible as presumably the BTK railway line will transport a million passengers and 6.5 million tons of cargo in its initial stage. By 2030, this railway line would carry an estimated 17 million tons of cargo and about three million passengers. 
The most troublesome problem the BTK project has to tackle now is rather of technical than of financial nature. This is alignment of the old soviet-style railway standards adopted by Azerbaijan and Georgia with Turkish European-standard railway infrastructure.
There are 232 tunnels with total length of 51 km in Turkey that appear narrow for carriages of Azerbaijan and Georgia. That’s why the carriages must be set in accordance to the European standards. To this end a new railway station will be built in Turkey that will connect the European and post-soviet standards railway tracks, the Coordination Council decided in Tbilisi.
The ministerial participants assured that consensus was reached on all issues discussed at the meeting including the BTK completion date.
The project was originally to be completed by 2010 but the short-lived war with Russia in August of 2008 and environmental problems delayed the project. The project deadline was re-scheduled several times extending the date to 2011, 2012 and 2013 respectively. However the Trilateral Coordination Council meeting in Tbilisi put out 2012 as the project completion date.

 

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