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Economy

'Iron silk road' threatens to sidetrack Russia

Trilateral rail project offers southern route for China's Belt and Road initiative

Azerbaijani President Ilham Aliyev,far right, joins Turkish President Recep Tayyip Erdogan, next in front row, at the opening ceremony for the Baku-Tbilisi-Kars railway in Baku on Oct. 30.

BAKU -- The leaders of Turkey, Azerbaijan and Georgia officially opened Baku-Tbilisi-Kars railway here in the Azerbaijani capital on Monday, opening the possibility of a southern route for trade between China and Europe.

"Today we are opening an important component of the new silk road connecting Asia to Europe," Turkish President Recep Tayyip Erdogan said at the opening ceremony. "We announce today that China to London railway link is established."

The BTK rail line connects Baku, the Azerbaijani capital on the Caspian Sea, to the Turkish border city of Kars, via Tbilisi, the capital of Georgia. The three countries are pitching the project as an alternative route for China's Belt and Road Initiative that aims to connect China and Europe. The BTK line would bypass a Russian railway route to the north.

The roughly 830km BTK railway is a combination of existing lines, newly built lines and rehabilitated ones. At the initial stage, BTK will have the capacity of serving 1 million passengers and 6.5 million tons of freight volume per year and it is envisaged that passenger volume will increase to 3 million people and freight volume to 17 million tons until 2034.

China was not involved in financing or building the BTK line. Turkey's section cost 1.6 billion Turkish lira ($420 million). Construction of Georgia's section was financed by energy-rich Azerbaijan. The total cost of the rail link has not been disclosed but is estimated above $1 billion.

Avoiding Russia

The three partners hope the new route will serve as another path for Chinese exports to Turkey and Europe, and help European agricultural and food products reach China, circumventing a Russian embargo on such exports from certain European Union members. Since 2014, Russia has barred food and agriculture products from these EU members in response to US-EU sanctions on Russia over the Ukraine conflict.

China has already overtaken Russia as Turkey's largest source of imports, selling goods worth around $25 billion a year to Turkey for the last two years. Chinese diplomatic sources in Turkey told The Nikkei Asian Review, "China welcomes any transportation project connecting countries of the region together."

This is the first freight train of the China Railway Express running from Rizhao to Central Asia before it departed Rizhao port in China's eastern Shandong Province on Sept. 12.   © Getty Images

The new "iron silk road" will connect China to Europe via Turkmenistan and Kazakhstan routes, reaching Baku by train ferries crossing the Caspian Sea from the ports of Turkmenbashi in Turkmenistan and Aktau in Kazakhstan.

From Baku, trains will cross Georgia and enter Turkey at the eastern border city of Kars. They will then travel the length of the country to the Marmara Sea on the west coast. From there, cargo will again be transported by train ferry to the European side of Turkey. Shunting engines will pull the wagons to the port where they will resume their journey, entering Bulgaria, passing through Serbia, Hungary and Austria, and into Germany and beyond. Using the BTK and connecting routes, the journey from China to Germany would take 15 days.

The rival route from China to Germany via Russia's Trans-Siberian Railway takes 15-17 days. The China-Turkey route via the BTK rail line is expected to take half the time required to ship goods by sea, and cost less than half as much as air transport. It is thus seen as a potential "middle way" for certain products.

Food and energy

The BTK route might be better suited for transporting food and agricultural products, as well as other temperature-sensitive goods to China from Europe, compared with the Trans-Siberian route, which is very cold in winter, according to Erdin Erengul, railway operations manager with Turkish logistics company Mars, a subsidiary of Hitachi Transport System. Erengul expects that the new route will provide China the opportunity to export many products to countries along the route, as well as allow Azerbaijan and Kazakhstan to export oil and petrochemical products to Turkey and Europe.

Azerbaijan's state-owned energy company SOCAR has been investing billions of dollars in Turkey, where it owns the largest petrochemical maker, Petkim, in the Aegean port city of Izmir. It is planning to open a massive refinery in the same area next year. SOCAR has already invested more than $6 billion in the project.

Meanwhile, the attendance of the prime ministers of Kazakhstan and Uzbekistan as well as ministers from Turkmenistan and Tajikistan at the ceremony showed Central Asian countries' interest in the new route.

In the other direction, Erengul expects European countries to be able to send perishables, such as food and agricultural products, to China, while Turkey will be able to export construction materials, food, chemicals, white goods and other items to the Caucasus and Central Asian states, where Turkish contractors and companies have a large presence. "We are very much interested in the BTK line and we want to utilize Turkey's strategic location in the east-west corridor. We are currently studying the route," said Erengul.

Turkey is planning to further strengthen its own Eurasian rail links, with construction projects slated for completion in Istanbul by the end of 2018. Freight trains will use a new railway tunnel under the Bosporus. At present, the tunnel, built by Japanese contractor Taisei in 2013, handles only passenger traffic. Some freight forwarders have expressed doubts, however, pointing to technical and capacity constraints in the tunnel for freight trains.

In the longer term, Turkey aims to connect its Asian and European railways in Istanbul over the Third Bosporus Bridge, which was built by South Korean companies including SK E&C and Hyundai E&C and opened in 2016. The bridge was designed to carry a rail line as well as vehicle traffic.

Altay Atli, a research associate at the Istanbul Policy Center of Sabanci University, told NAR: "The BTK route will greatly contribute to diversifying Turkey's export routes, as Turkey is struggling to reach certain Middle Eastern markets like Syria, Iraq, Egypt, etcetera, due to geopolitical problems."

Turkish President Recep Tayyip Erdogan was one of the 29 heads of state to attend the Belt and Road Forum in Beijing on May 14-15.   © Pool Photo via AP

The BTK route was initially planned in the 1990s. In 2008, the three states began construction on the BTK route, bypassing Armenia, to reconnect the regions. The project took on a broader significance after 2013, when China announced its Belt and Road Initiative.

In 2015, at a G-20 summit in Turkey, Turkish and Chinese officials signed a memorandum of understanding aligning the Chinese Silk Road Economic Belt and Maritime Silk Road for the 21st Century project with Turkey's "Middle Corridor Initiative," which aims to create economic corridors between Turkey, China, Georgia, Azerbaijan, Turkmenistan, Kazakhstan, Afghanistan and Pakistan.

Turkish President Recep Tayyip Erdogan and his Chinese counterpart, Xi Jinping, witnessed the signing of the document. Erdogan attended the Belt and Road Forum for International Cooperation in Beijing in May 2017 and endorsed the initiative, saying the BTK line is complementary to the Chinese initiative.

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