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Reviving an Ancient Route? The Role of the Baku – Tbilisi – Kars Railway

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Though the initial idea about the Baku-Tbilisi-Kars (BTK) railway project was raised in the early 1990s, it was not taken seriously due to regional instability and economic difficulties. However, with the realization of the Baku-Tbilisi-Ceyhan oil and the Baku-Tbilisi-Erzurum gas pipelines in 2006, the idea of a railway connection became real once again.

The BTK, covering 850 km with a capacity of 5 million tons of cargo (upgradable to 15 million) per year and one million passengers (upgradable to three million), and connecting Azerbaijan, Georgia and Turkey, was launched in 2007 (Klimas and Humbatov, 2016:38; Uysal, 20 October 2014).It was launched without any international backing mainly because Armenia was left out due its occupation of nearly20 percent of Azerbaijani territory after a war in the early 1990s that ended in a cease-fire in May 1994.

Though initially the plan was to be completed in 2010, financial challenges as a result of falling oil prices meant that it became operational only on 30 October 2017. Azerbaijan was the driving force behind the BTK railway project.  The BTK is an important step in reviving the historical Silk Road. The Silk Road refers to an ancient network of trade routes that was used from 130 BC, when Han China opened trade with the West, to 1453 AD when the Ottoman Empire decided to end trade with the West and closed the routes. However, the term is far more recent. It was coined by the German geographer and traveler, Ferdinand von Richthofen, in 1877 AD, who designated this network of trade routes ‘Seidenstrasse’ (silk road) or ‘Seidenstrassen’ (silk routes) (Mark, 28 March 2014).

However, the trade routes carried far more than silk. Trade included textiles, spices, grain, vegetables and fruit, animal hides, tools, wood work, metal work, religious objects, art work, precious stones and a lot more. It carried ideas and people too(UNESCO, nd.). Ideas and culture were transmitted changing the face of Eurasia. Many of the cities along the Silk Road became hubs of culture and learning. It connected the Han Chinese Empire with the Roman Empire. Starting at Xi’an (Sian), the 4,000-mile (6,400-km) road, in reality a caravan tract, followed the Great Wall of China to the northwest, bypassed the TaklaMakan Desert, climbed the Pamirs (mountains), crossed Afghanistan, and went on to the Levant; from there the merchandise was shipped across the Mediterranean Sea. Not many merchants travelled the entire route. In fact, the trade was handled by a series of middle men (Encyclopedia Britannica, 30 October 2017).

With changing regional and geopolitical constellations, the historic Silk Road is on its way to revival, with a strong geo-political motive.In this respect, China’s Belt and Road Initiative (BRI), which plans to improve Chinese rail and sea transportation to better connect with the global economy, strengthens the future perspective of the BTK. The Belt and Road goes through 65 countries, includes 70% of the world’s population, three-quarters of its energy resources, a quarter of goods and services and 28% of global GDP—some $21 trillion (Campbell, 2017). 

Map of the Baku-Tbilisi-Kars Railway

btkr

Source: Twelves, R., 01 November 2017, From Baku with Love: The New Transcaucasian Railway.

Hence, the importance of the project is manifold, ranging from economic to strategic interests. Being a part of traditional Silk Road route plays an important role for freight and passenger transportation between Asia and Europe.The BTK increases the strategic importance of Azerbaijan by enabling it to become a transport hub between Europe and Asia. Azerbaijan has already secured its energy independence thanks to the Baku-Tbilisi-Ceyhan and Baku-Tbilisi-Erzurum pipelines, both supported by the West and transnational oil companies such as BP and ExxonMobil. However, the same support could not be secured for the BTK railway project.

The BTK has faced serious challenges including a lack of support from international donors or Great Powers. Indeed, under pressure from the Armenian lobby, possible funding from the USA was blocked for the BTK (Tsurkov 13 November 2017).Thanks to the decisiveness of Azerbaijan, the biggest hurdle, thelack of finances to carry out the construction/reconstruction works in Georgia was solved with Azerbaijan’s offer of a loan of $775 million with concessional terms to Georgia (Klimas and Humbatov, 2016:22). It is important to note that the total cost of the BTK was above $1 billion. Thus, Azerbaijan indeed took the lion’s share of responsibility in realization of the BTK project. This showed how important a small state could be in big regional projects without international backing. 

There are still many uncertainties ahead the entire Belt Road project. It passes through some of the world’s most volatile borders—Iran-Turkey, Russia-Ukraine, and the de-facto border between Western and Eastern Ukraine. China expects countries like Vietnam and Malaysia, with whom it competes for maritime influence to co-operate on the project. Another problem is that this ambitious attempt to connect the world’s richest regions in the West and the East through a swathe of poorer territory might mean that China has to extend geopolitical commitments, including military, which may not be welcome (Bohl, 2017).

In addition, the new Silk Road project has the potential of upsetting China’s regional rivals such as Japan and India. In an indication that such a challenge would be addressed Japan and India recently announced the AAGC (Asia Africa Growth Corridor) an initiative led by a partnership between India and Japan to better integrate the economies of South, Southeast, and East Asia with Oceania and Africa. In contrast to the land based routes of the New Silk Route this will be series of intersecting sea based economic triangles interconnecting cities in Central Asia which is expected to have rapid economic growth (Shepard, 2017a)

Such moves risk upsetting the traditional power in Central Asia—Russia—which as a legacy of the Tsarist and Soviet Empires has considerable influence in the region. Russia has cooperated with India on its own continent-crossing plan the North-South Transport Corridor (NSTC). This 7,200-kilometer multimodal trade corridor is expected to run from India to Russia, linking the Indian Ocean and Persian Gulf to the Caspian Sea, improving India’s connections to Iran, Russia, the Caucasus, and Central Asia(Shepard, 2017b)

A Russia, no longer under sanctions, could become a serious rival for the BTK. Additionally, China should fully commit to send goods to Europe mainly through the historic Silk Road route rather than through the Suez Canal (Twelves, 1 November 2017). Furthermore, so-called ‘frozen conflicts’ in the region should be taken into consideration. A possible restart of an armed conflict can put regional projects into danger. Therefore, in the long term, some grave challenges remain.

However, standing up to these challenges could open up new perspectives. In other words, with full-fledged commitment by China and regional countries and the solution of threatening ‘frozen conflicts’, the BTK has the potential to bring back the trade potential of the historic Silk Road and substantially contribute to the development of economies lying along the route.

The main significance of the BTK is that it will reduce Russia’s monopoly on overland transportation and boost the travel between Asia and Europe. Most importantly, the transportation cost and time will be reduced substantially. Being a piece of historic Silk Road, BTK will transport goods from China to Kazakhstan, and then through the Caspian Sea to Baku, from where it will be taken to Turkey via BTK and finally to Europe, as far as London. The time required for the trip will be around 13-15 days which is almost twice as fast as sea transportation to the same destination. Moreover, it is 50 percent cheaper than air transport (Rick, 1 November 2017; Klimas and Humbatov, 2016:11). China has been strengthening the Central Asian part of the historic Silk Road. In terms of trade turnover with the Central Asian countries, China already overtook Russia in 2008. In other words, China is Central Asia’s biggest trade partner. In 2013 China achieved a trade balance of $ 50 billion, whereas Russia had $31.5. Interestingly, in 2001 China’s trade with Central Asia was only $1.5 billion (Muzalevsky, 27 April 2016).  In 2015, the Chinese president Xi Jinping mentioned that Chinese government aims at investing $46 billion in Central Asia in order to develop trade, transport and energy infrastructures (Muzalevsky, 27 April 2016). Until 2015 China have already invested nearly $40 billion to the Central Asian countries.Such a level of investment backs up the belief that Silk Road project is going to be revived in the coming few years. Benefiting from concessional loans from China and its own energy revenues, Kazakhstan have improved its transport infrastructure and build new railway connections which also includes the railway crossing the country from west to east.

Turkey is another country that eagerly supports the historic Silk Road expecting to become a transport hub between Asia and Europe. Apart from BTK, the famous Marmaray project is Turkey’s other contribution to the revival of historic Silk Road. The Marmaray project aims at connecting Europe and Asia by rail with a tunnel under the Bosphorus. This project, transporting both passengers and freight, is expected to be completed by February 2018 (Uysal, 4 July 2016).The BTK will be a crucial project to increase transport between Turkey and the CIS countries.

Initially Iran could lose out if the BTK project is realized as Turkey coulduse it to re-route goods that are currently transported to Iran via the CIS. However, in the long-run, if sanctions are liftedonce and for all, Iran will also benefit from the revival of historic Silk Road. Indeed, Iran has expressed its interest in building railway lines to Azerbaijan (Uysal, 20 October 2014).

Among others, the ministers of Kazakhstan, Uzbekistan, Tajikistan and Turkmenistan also attended the opening ceremony of the BTK railway in Baku (Mahmudov, 3 November 2017). This demonstrates the interests of all Central Asian countries to join the transportation route to transport their goods to the promising European market.

To conclude, the BTK will not only help the economies of Azerbaijan, Georgia and Turkey, it will also contribute to the trade between Asia and Europe bypassing Russia’s overland transportation monopoly. Therefore, it is not only an economical but also a strategic project. The major importance of the project is its positive impact on helping small countries to avoid Russian overland transport manipulations.

The BTK will increase both passenger and freight transportation between Asia and Europe outside Russian grip. It is the first regional non-energy project in South Caucasus connecting Azerbaijan, Georgia and Turkey. The BTK railway proved an alliance build around an infrastructure project involving small states can shape greater economic as well as political regional realities which impacts great players as well. Azerbaijan, taking the biggest responsibility for the completion of the BTK, will also take the lion’s share in terms of benefits. It will become a transport hub, if it further develops its transport infrastructures, and it will also get access better access to Europe by using the transportation infrastructures, e.g., ports of Turkey.

Previous energy projects have shaped the regional triangle between Azerbaijan-Georgia-Turkey, and BTK will further strengthen this network. BTK is a purely economic project. Yet, it certainly has political and cultural consequences as well; it can contribute to strengthening trust between nations. Historical mutual mistrust among the Chinese andCentral Asians can be challenged with growing people-to-people encounters due to trade and travel along the historic Silk Road.

Moreover, besides the establishment of new partnerships and better integration of Eurasian countries into global value chains, the BTK will also help in attracting Foreign Direct Investment to countries like Georgia and Azerbaijan. Last but not the least,the BTK will encourage construction of free economics zones and infrastructures along the route. 

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Eastern Europe

Latvia developed new tasks for NATO soldiers

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Member of the Latvian Saemas’ national association “Everything for Latvia!” and Freedom”/LNNK Jānis Dombrava stated the need to attract NATO troops to resolve the migration crisis. This is reported by la.lv.  In his opinion, illegal migration from the Middle East to Europe may acquire the feature of an invasion. He believes that under the guise of refugees, foreign military and intelligence officers can enter the country. To his mind, in this case, the involvement of the alliance forces is more reasonable and effective than the actions of the European border agencies. Dombrava also noted that in the face of an increase in the flow of refugees, the government may even neglect the observance of human rights.

The Canadian-led battlegroup in Latvia at Camp Ādaži consists of approximately 1512 soldiers, as well as military equipment, including tanks and armoured fighting vehicles.

Though the main task of the battlegroup in Latvia is country’s defence in case of military aggression, Latvian officials unilaterally invented new tasks for NATO soldiers So, it is absolutely clear, that Latvian politicians are ready to allow NATO troops to resolve any problem even without legal basis. Such deification and complete trust could lead to the full substitution of NATO’s real tasks in Latvia.

It should be noted that NATO troops are very far from being ideal soldiers. Their inappropriate behaviour is very often in a centre of scandals. The recent incidents prove the existing problems within NATO contingents in the Baltic States.

They are not always ready to fulfill their tasks during military exercises and training. And in this situation Latvian politicians call to use them as border guards! It is nonsense! It seems as if it is time to narrow their tasks rather than to widen them. They are just guests for some time in the territory of the Baltic States. It could happen that they would decide who will enter Latvia and who will be forbidden to cross the border!

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Eastern Europe

Changes are Possible: Which Reforms does Ukraine Need Now?

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Photo: Robert Anasch/Unsplash

The past 16 months have tested our resilience to sudden, unexpected, and prolonged shocks. As for an individual, resilience for a country or economy is reflected in how well it has prepared for an uncertain future.

A look around the globe reveals how resilient countries have been to the COVID-19 pandemic. Some have done well, others less so. The costs of having done less well are almost always borne by the poor. It is for this reason the World Bank and the international community more broadly urge—and provide support to—countries to undertake economic and structural reforms, not just for today’s challenges but tomorrow’s.

One country where the dialogue on reform has been longstanding and intense is Ukraine. This is particularly true since the economic crisis of 2014-2015 in the wake of the Maidan Revolution, when the economy collapsed, and poverty skyrocketed. Many feared the COVID pandemic would have similar effects on the country.

The good news is that thanks to a sustained, even if often difficult, movement on reforms, Ukraine is better positioned to emerge from the pandemic than many expected. Our initial projection in the World Bank, for example, was that the economy would contract by nearly 8 percent in 2020; the actual decline was half that. Gross international reserves at end-2020 were US$10 billion higher than projected. Most important, there are far fewer poor than anticipated.

Let’s consider three reform areas which have contributed to these outcomes.

First, no area of the economy contributed more to the economic crisis of 2014-2015 than the banking sector. Powerful interests captured the largest banks, distorted the flow of capital, and strangled economic activity. Fortunately, Ukraine developed a framework to resolve and recapitalize banks and strengthen supervision. Privatbank was nationalized and is now earning profits. It is now being prepared for privatization.

Second, COVID halted and threatened to reverse a five-year trend in poverty reduction. Thanks to reforms of the social safety net, Ukraine is avoiding this reversal. A few years back, the government was spending some 4.7 percent of GDP on social programs with limited poverty impact. Nearly half these resources went to an energy subsidy that expanded to cover one-in-two of the country’s households.

Since 2018, the Government has been restructuring the system by reducing broad subsidies and targeting resources to the poor. This is working. Transfers going to the poorest one-fifth of the population are rising significantly—from just 37 percent in 2019 to 50 percent this year and are projected to reach 55 percent in 2023.

Third, the health system itself. Ukrainians live a decade less than their EU neighbors. Basic epidemiological vulnerabilities are exacerbated by a health delivery system centered around outdated hospitals and an excessive reliance on out-of-pocket spending. In 2017, Ukraine passed a landmark health financing law defining a package of primary care for all Ukrainians, free-of-charge. The law is transforming Ukraine’s constitutional commitment to free health care from an aspiration into specific critical services that are actually being delivered.

The performance of these sectors, which were on the “front line” during COVID, demonstrate the payoff of reforms. The job now is to tackle the outstanding challenges.

The first is to reduce the reach of the public sector in the economy. Ukraine has some 3,500 companies owned by the state—most of them loss-making—in sectors from machine building to hotels. Ukraine needs far fewer SOEs. Those that remain must be better managed.

Ukraine has demonstrated that progress can be made in this area. The first round of corporate governance reforms has been successfully implemented at state-owned banks. Naftogaz was unbundled in 2020. The electricity sector too is being gradually liberalized. Tariffs have increased and reforms are expected to support investment in aging electricity-producing and transmitting infrastructure. Investments in renewable energy are also surging.

But there are developments of concern, including a recent removal of the CEO of an SOE which raised concerns among Ukraine’s friends eager to see management independence of these enterprises. Management functions of SOE supervisory boards and their members need to remain free of interference.

The second challenge is to strengthen the rule of law. Over recent years, the country has established—and has committed to protect—new institutions to combat corruption. These need to be allowed to function professionally and independently. And they need to be supported by a judicial system defined by integrity and transparency. The move to re-establish an independent High Qualification Council is a welcome step in this direction.

Finally, we know change is possible because after nearly twenty years, Ukraine on July first opened its agricultural land market. Farmers are now free to sell their land which will help unleash the country’s greatest potential source of economic growth and employment.

Ukraine has demonstrated its ability to undertake tough reforms and, thanks to the COVID-19 pandemic, has seen the real-life benefits of these reforms. The World Bank looks forward to providing continued assistance as the country takes on new challenges on the way to closer European integration.

This article was first published in European Pravda via World Bank

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Eastern Europe

Liberal Development at Stake as LGBT+ Flags Burn in Georgia

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Photo: Protesters hold a banner depicting U.S. Ambassador to Georgia Kelly Degnan during a rally against Pride Week in Tbilisi, Georgia July 1, 2021. Credit: REUTERS/Irakli Gedenidze

Protests against Georgia’s LGBT+ Pride parade turned ugly in Tbilisi on July 5 when members of the community were hunted down and attacked, around 50 journalists beaten up and the offices of various organizations vandalized. Tensions continued the following day, despite a heavy police presence.

On the face of it, the Georgian state condemned the violence. President Salome Zourabichvili was among the first with a clear statement supporting freedom of expression, members of parliament did likewise and the Ministry of Internal Affairs condemned any form of violence.

But behind the scenes, another less tolerant message had been spread before the attacks. Anxiety about this year’s events had been rising as a result of statements by the government and clergy. Prime Minister Irakli Garibashvili suggested the march “poses a threat of civil strife.” The Georgian Orthodox Church meanwhile condemned the event, saying it, “contains signs of provocation, conflicts with socially recognized moral norms and aims to legalize grave sin.”

For many, these statements signified tacit approval for the abuse of peaceful demonstrators. Meanwhile, the near-complete absence of security at the outset of the five-day event was all too obvious in Tbilisi’s streets and caused a public outcry. Many alleged the government was less focused on public safety than on upcoming elections where will need support from socially conservative voters and the powerful clergy, in a country where more than 80% of the population is tied to the Georgian Orthodox Church.

The violence brought a joint statement of condemnation from Western embassies. “Violence is simply unacceptable and cannot be excused,” it said. The Pride event was not the first and had previously been used by anti-gay groups. Violence was widespread in 2013 — and the reality of attacks against sexual minorities in Georgia remains ever-present.

In a socially conservative country such as Georgia, antagonism to all things liberal can run deep. Resistance to non-traditional sexual and religious mores divides society. This in turn causes political tension and polarization and can drown out discussion of other problems the country is marred in. It very obviously damages the country’s reputation abroad, where the treatment of minorities is considered a key marker of democratic progress and readiness for further involvement in European institutions.

That is why this violence should also be seen from a broader perspective. It is a challenge to liberal ideas and ultimately to the liberal world order.

A country can be democratic, have a multiplicity of parties, active election campaigns, and other features characteristic of rule by popular consent. But democracies can also be ruled by illiberal methods, used for the preservation of political power, the denigration of opposing political forces, and most of all the use of religious and nationalist sentiments to raise or lower tensions.

It happens across Eurasia, and Georgia is no exception. These are hybrid democracies with nominally democratic rule. Armenia, Georgia, Kyrgyzstan, and others have increasingly more in common, despite geographic distance and cultural differences.

Hungary too has been treading this path. Its recent law banning the supposed propagation of LGBT+ materials in schools must be repealed, European Commission President Ursula von der Leyen said on July 7. “This legislation uses the protection of children . . . to discriminate against people because of their sexual orientation . . . It is a disgrace,” she said.

One of the defining features of illiberalism is agility in appropriating ideas on state governance and molding them to the illiberal agenda.

It is true that a mere 30 years since the collapse of the Soviet Union is not enough to have built a truly liberal democratic state. Generations born and raised in the Soviet period or in the troubled 1990s still dominate the political landscape. This means that a different worldview still prevails. It favors democratic development but is also violently nationalistic in opposing liberal state-building.

Georgia’s growing illiberalism has to be understood in the context of the Russian gravitational pull. Blaming all the internal problems of Russia’s neighbors has become mainstream thinking among opposition politicians, NGOs, and sometimes even government figures. Exaggeration is commonplace, but when looking at the illiberal challenge from a long-term perspective, it becomes clear where Russia has succeeded in its illiberal goals. It is determined to stop Georgia from joining NATO and the EU. Partly as a result, the process drags on and this causes friction across society. Belief in the ultimate success of the liberal agenda is meanwhile undermined and alternatives are sought. Hybrid illiberal governments are the most plausible development. The next stage could well be a total abandonment of Euro-Atlantic aspirations.

Indeed what seemed irrevocable now seems probable, if not real. Pushback against Georgia’s Euro-Atlantic choice is growing stronger. Protesters in front of the parliament in central Tbilisi violently brought tore the EU flag. Twice.

The message of anti-liberal groups has also been evolving. There has been significant growth in their messaging. The anti-pride sentiment is evolving into a wider resistance to the Western way of life and Georgia’s Western foreign policy path, perhaps because it is easily attacked and misrepresented.

To deal with this, Western support is important, but much depends on Georgian governments and the population at large. A pushback against radicalism and anti-liberalism should come in the guise of time and resources for the development of stronger and currently faltering institutions. Urgency in addressing these problems has never been higher — internal and foreign challenges converge and present a fundamental challenge to what Georgia has been pursuing since the days of Eduard Shevardnadze – the Western path to development.

Author’s note: first published at cepa

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