REVIEW

The Fast Track

Focused on several regional and domestic mega projects, Azerbaijan is investing heavily in its air, road, and rail networks to secure its place as a regional transport hub.

As a conduit between Europe, Central Asia, Russia, and the Middle East, it is only natural that an extensive and high-quality transportation network be a top priority for Azerbaijan. Having been a Soviet republic, the Eurasian nation has a full complement of transportation facilities. With the development of its oil and gas resources and the opening of the Baku-Tbilisi-Ceyhan oil pipeline in 2006, Azerbaijan has emerged as an alternative to Russia and Ukraine as an energy corridor to Europe. Despite these advances, however, much of Azerbaijan’s transportation infrastructure requires extensive upgrading and investment to meet international standards. A number of projects are already underway, such as the Baku-Tbilisi-Kars railway link and the renovation of Heydar Aliyev International Airport. With the completion of these efforts, Azerbaijan may yet reach its goals of becoming a popular tourist destination and Eurasian transshipment hub.

AIR

Azerbaijan has 35 airports in total, of which 27 have paved runways. According to the State Statistical Committee, 1 million passengers passed through the country’s airports in 2010—an increase of more than 941,000 the previous year, but a figure still well below pre-crisis levels. During the same year air travelers accounted for 1.6 million passenger kilometers. Approximately 80% of air passengers in 2010 traveled internationally.

The largest airport in the country is Heydar Aliyev International, located northeast of Baku. Azerbaijan Airlines (AZAL) has contracted British design firm Arup to redesign and expand Aliyev International. A new terminal is under construction to handle international flights, while the existing terminal will remain in use for domestic flights. The new 58,000 square meter terminal will be able to handle 3 million passengers per year. The runway will be 4,000 meters long and the complex will have the capacity to process eight aircraft at the same time. Redevelopment plans have been expedited to handle the influx of international visitors expected for the 2012 Eurovision Song Contest.

In January of 2011 the European Economic Chamber of Trade, Commerce and Industry awarded national carrier AZAL the European Standard of Service. AZAL has a fleet of 24 planes with five on order. In 2014 the firm will take delivery of two Boeing 787 Dreamliners, which will allow direct flights to the US. The airline connects directly with major European cities, as well as regional and Middle Eastern destinations. In 2011, AZAL highlighted Azerbaijan’s oil and gas connections by opening a direct flight to the European and UK oil hub, Aberdeen. Most international carriers that fly to Azerbaijan are based out of Central Asia and connect Azerbaijan with other CIS member states. European airlines that serve Azerbaijan include Lufthansa, Turkish Airlines, BMI, Austrian Airlines, and Air Baltic. Qatar Airways, Iran Air, and Fly Dubai link Azerbaijan with the Middle East and beyond.

RAILWAYS

For a small country, Azerbaijan has an extensive rail network. Currently there are 2,079 kilometers of total railway, of which 1,251 kilometers are electrified. While 4.8 million passengers used the state railway system in 2010, only 317,000 people traveled internationally. One reason for this is that the Azerbaijani rail network largely dates back to the Soviet period and uses the wider Russian gauge, which it only shares with Russia, Georgia, and other former Soviet states.

An important development that will increase rail connections to Azerbaijan is the construction of the Baku-Tbilisi-Kars railway line. Turkey shares only a direct border with the Azerbaijani enclave of Nakhchivan, and both countries have a closed border with Armenia. Thus, the most logical connection is through Georgia. The project was first discussed during the 1990s but only became a concrete reality after the opening of the BTC pipeline. The Baku-Tbilisi rail line is already in regular use employing the wider Russian gauge track. The project entails building a 105-kilometer rail line between the Turkish town of Kars and the town of Akhalkalaki in Georgia. The construction includes a 4.2-kilometer tunnel at the Turkish-Georgian border and a bogie-exchange facility at Akhalkalaki that will bridge the break-of-gauge between the standard gauge used in Turkey and the broader Russian gauge used in both Georgia and Azerbaijan.

The Baku-Tbilisi-Kars railway line takes on added significance when one considers the Marmaray tunnel beneath the Bosphorus strait nearing completion in Istanbul. When both lines are fully operational, passengers and cargo will be able to be transported directly between Europe and Azerbaijan by rail. This development will benefit both tourism and shipping. Thus, with such a clear interest in the success of this project, Azerbaijan is loaning Georgia the money to make it happen. According to the Ministry of Transportation, the International Bank of Azerbaijan (IBA), through its agent in Georgia, has already provided a loan of $775 million at 1% interest that must be repaid in 25 years. A further loan of $575 million with an interest rate of 5% has been offered to defray the effect of rising costs. Work on the project began in 2007 and was scheduled for completion in 2010. However, the South Ossetia conflict between Georgia and Russia caused significant delays, and the project is now expected to be completed by the end of 2012.

In addition to financing a railway link with Turkey, the Ministry of Transport is also investing to expand rolling stock numbers. Ten companies have tendered for the contract to supply 50 new electrified locomotives. While international and major inter-urban rail lines will use these electric engines, rural areas are still serviced by diesel-powered locomotives, and there are even indications of a few steam locomotives still in service. The capital city of Baku is served by its own underground metro. Built in 1967 the Baku Metro is a gem of Soviet architecture, featuring ornately decorated underground stations. The government has several expansion plans for the metro, a handful of which are currently being implemented. In June of 2011 the metro’s operator announced that cheaper light rail links would be constructed to connect the airport and Sumgayit with Baku. Within the city seven subway lines have been designed and tunneling is underway.

ROADS

The total length of Azerbaijan’s road network in 2010 was 21,688 kilometers, of which 18,977 kilometers were paved. There are three principle international arteries, including the M1, which links Baku with Tbilisi; the M2, which connects Baku with Russia; and the M3, which runs from Baku to the Iranian border. There are 982,000 vehicles in Azerbaijan, 60% of which are located in Baku. There were 2,721 accidents in 2010, 34% of which were fatal.

Much of the road network was constructed during the Soviet era and is in need of upgrading, particularly in rural areas. As part of the Azerbaijan Rural Investment Project (AzRIP), supported by the World Bank and IBRD, these roads are being dramatically upgraded to boost agricultural development. As the project rehabilitated rural roads, travel time to schools and markets was reduced by 47% and 26%, respectively. Moreover, farmers in project villages now bring 78% of farm products to markets themselves, eliminating costly intermediaries. The Asian Development Bank (ADB) is also working to develop rural infrastructure and expanded its involvement with an October 2007 decision to help finance a comprehensive road network program that will ensure sustainable economic expansion by increasing trade flows and lowering transport costs. The ADB is supporting the Ministry of Transport’s Road Network Development Program 2006–2015, which is estimated to include developments at a cost of $3.4 billion. The program involves constructing, upgrading, and rehabilitating about 9,500 kilometers of 124 priority roads. It will also assist in developing regulations and operational procedures; encourage private sector participation in construction and maintenance; and improve building capacity for planning, monitoring, evaluation, and reporting. The ADB will provide a $500 million loan facility that will be available in stages. The first tranche, amounting to $200 million, involves constructing 59 kilometers of a new expressway between Masalli and Astara on the southern corridor, rehabilitating local roads in the project area, installing a vehicle-weighing station along the new expressway, and providing project support and building capacity for road network management. Alongside these international organizations, the Azerbaijani government is investing heavily to bring the road network up to international standards, particularly in Baku. In 2010 the Ministry of Transportation invested $1.9 billion in highway construction, with a further $920 million budgeted for 2011. In 1Q 2011, 175 kilometers of roads were constructed, along with six bridges. With respect to road quality and safety, the Ministry of Transportation is developing a program to meet European emissions standards.

SEA

Azerbaijan has direct marine connections with the four other countries that border the Caspian Sea: Russia, Iran, Kazakhstan, and Turkmenistan. Through the Volga-Don canal, however, ships can pass through Russian territory into the Black Sea and on to Europe and the high seas. The overwhelming bulk of sea travel is for cargo transportation. At present there are no regular Caspian ferries and only 12,000 people traveled to and from Azerbaijan by sea in 2010. Even with the construction of the BTC pipeline, the bulk of maritime cargo is comprised of oil and petroleum products. Altogether, 11.7 million tons of cargo was transported into, out of, or through Azerbaijan in 2010.

Baku International Sea Trade Port is the busiest port on the Caspian Sea. It has been in operation for over a century and is a critical transshipment point on the Trans-Caucasus Corridor (TRACECA). Between April and November the port offers a connection between the Caspian Basin and the Black and Mediterranean seas. Baku Port has taken on added significance with the development of Azerbaijan’s offshore oil and gas assets as most upstream cargo is delivered to offshore facilities by sea. In November of 2010 work began on expansion of the port. Dutch firm Kaskoning developed the plan in conjunction with the Ministry of Transportation. Two construction companies are working on the project: Dutch contractor Van Oord and Azerbaijani firm Azerkorpu. Work is scheduled for completion in 2013.