At the culmination of the largest regional energy project called BTC the regional powers have unveiled the second ambitious initials, KATB, or the Kars - Akhalkalaki -Tbilisi - Baku railway link, which is another vital geopolitical proposal to expand transport corridor connecting Azerbaijan, Georgia, and Turkey.

Historically after delays from the mid-1990s the project was politically and financially revitalized in May 2005, after the successful launch of the world famous $3.2 billion BTC energy project. This was considered by some as a prerequisite for Azerbaijan, Georgia and Turkey, empowered by the Western countries, to start this second ambitious transport project.

Signing the "Baku Transport Declaration" in May 2005, the Turkish, Georgian and Azeri officials made a clear indication of their willingness to explore KATB as part of their multi-vector regional policies development, instead of promulgate "as another alternative to the existing south and north direction - via Russia and Iran accordingly". Azerbaijan, as the major driver of the project, has claimed that it does not consider KATB as any alternative to the North-South corridor, because it is on the crossing of these corridors and is interested in development of both of them. The major component of its evolving transport policies is that both Baku and Tbilisi are seeking as many transport links as possible in order to economically and politically secure their relatively newly gained independences.

From technical perspectives the project involves a new line between Kars (Turkey) and Akhalkalaki (Georgia), costing $200 million, and restoring the Akhalkalaki -Tbilisi section at a cost of $150 million . The overall costs are estimated about $300 million to $500 million. At the moment, there is no railroad connection between Georgia and Turkey. To provide funding for the project, Turkey, Georgia and Azerbaijan will establish a consortium. Experts believe that the largest part of the financing will be supplied by Turkey, who has already undertaken preparations for technical and economic feasibility studies of the project. It has been proposed to finance the project at the expense of the states-members and the participants of international organizations and private companies. According to preliminary estimations by the Transport Ministries of Georgia and Azerbaijan the KATB implementation will allow the transportation of three million tons of cargo in first years, mainly crude oil, with gradual rising up to five to eight million tons per year later on. At present, oil is transported via Azerbaijan from Kazakhstan and Turkmenistan to Georgia's Black Sea ports, which are limited in their capacities. The Azerbaijan State Railway Company has been repeatedly stated that there were cases when the Georgian Batumi port did not work and Baku is very much interested in the construction of an additional railroad that would help transfer their goods to the Turkish ports. Therefore KATB would fundamentally change the whole regional transit structure, making Azerbaijan a major business and trade hub

The major obstacle for the KATB implementation is Yerevan's "ethnic card" - the Armenian population of Georgia, which is concentrated along the railroad route, has become active in an anti-railroad campaign. And Georgian authorities recognize the fact that Georgian Armenians orchestrated from Yerevan, could pose a potential threat to Georgia's territorial integration by calls for administrative autonomy. On the other side the political leaders of the local Armenian community are underestimating those economic and commercial opportunities for the impoverished population of Georgia living in these regions. They believe the Georgian political leadership is pursuing its own strategic goals with regard to KATB project. However, this railway link could boost economic activity in Armenian populated region, develop local infrastructure, and contribute to the reintegration of the Armenia-oriented regions with Georgia. The Georgian President Mr. Saakashvili has underlined several times that full integration of those regions into Georgian state life is a compelling problem. He considers the new railway to be a tool to address this problem.

However Armenia and Georgia both recognize that Yerevan's ability to play the "ethnic card" against Tbilisi has its limits. Armenia's only land connection with Russia runs through Georgia so Armenia depends on Georgia's transportation links, not vice versa. In case of any kind of orchestrated artificial extremism of Georgian Armenians Tbilisi could easily isolate Yerevan if it feels vulnerable or threatened.

Regional observers have stated that apart from the local goals, the KATB railway is expected to serve Georgia's international interests, including strengthening Georgia's status as a transit country, developing a strategic alliance with Turkey and Azerbaijan, and likely curbing Armenia's regional ambitions, which Tbilisi has long considered a dangerous neighbor and the sole strategic ally of Russia in South Caucasus.

Although another regional superpower - Russia seems to be indifferent to the route that will connect Turkey with the South Caucasus, but in fact, it is not. By speeding up its transport strategy in the region via setting up the North - South Transport link and future rehabilitation of existing Kars-Gyumri (Armenia) railway Russia will try to minimize the economic justifications of KATB, providing cheaper but less secure transport links for the Caucasus Republics.

However the most disputed part of KATB project is that it bypasses Armenia, and Yerevan is strongly opposed to the new rail line. Armenia proposes using the century-old Russian-built Kars-Gyumr-Tbilisi railroad, instead of constructing a new one.

In fact the current railway line between these two countries, from Kars to Tbilisi goes through Gumri of Armenia, but this is not acceptable for several reasons. The first and most critical reason for Baku and Tbilisi is reallocation of the Russian military troops from Georgia to Armenian Gumri, so the possibility of any kind of intervening by Moscow into regional transport link is extremely high. Secondly the "Gumri" option is not acceptable for Turkey and Azerbaijan from political perspectives, like in the BTC project, because of the Armenian - Azeri war dispute over Daghlig Karabakh of Azerbaijan has resulted in millions of refuges and internally displaced people.

Implications:

Azerbaijan should implement a serious range of urgent measures in order to accelerate the construction of the Kars-Akhalkalaki railway that will positively influence the country's regional integration developments and the economic and political diversification of its hydrocarbon dependent future. In other words the KATB will provide the Caucasus' economy with its second largest incentive following the $3.6 billion Baku-Tbilisi-Ceyhan Energy Project.

This railway will strengthen Azerbaijan and Georgia's independence on regional powers' influence and improve the regional cooperation between Europe, the Caucasus and the Central Asian Republics. Due to the improvements of trade links in terms of customs, border harmonization and facilities this project will play a major impetus role for regional economies in transition like Georgia and Azerbaijan. It is also important to note that the KATB is recognized as a vital component of the EU-proposed Transport Corridor Europe-Caucasus-Asia (TRACECA) project that envisages a West-East transport corridor linking Europe and Middle East with the Black Sea and the Caspian Sea states.

Armenian resistance and lobby activities are to be expected through the Iranian and Russian diasporas, because it is in the line of Tehran and Moscow's views accordingly. For Russia the project will be, rather than a challenge, a critical issue to deal with. This is because the KATB will allow Turkey, potentially backed by Washington, to expand the geo-economic ties over the Caucasus and the Central Asian Republics, and to some extent reduce the Russian influence in Azerbaijan and Georgia. Besides that the KATB itself will allow Baku and Tbilisi to cement the countries' abilities in decision-making processes and maneuvering capacities in regional cooperation and securing the countries' long term sustainable development path.

Having quite enormous commercial impact over the regional integration and development of transportation routes in the complicated Caucasus region, the KATB will greatly contribute to the improvement of regional cooperation and simplification of transport related bureaucracies in customs, border and trade regimes

Indicative data unveiled by the Ministry of Transport of the Republic of Azerbaijan.