The Impact of Turkish, Georgian and Azerbaijani Infrastructure Projects on European and Asian Markets

On Wednesday the foreign ministers of Turkey, Azerbaijan and Georgia met in Ganja, Azerbaijan to discuss regional cooperation. This is the most recent step in the ongoing integration of the three countries which, amongst other things, links Caspian energy resources to the Mediterranean. This development is occurring at a time when the instability in Ukraine calls into question the viability of that country as a transit state for energy that is intended for Europe. After all the deep divisions between Eastern and Western Ukraine and the reality that the opposition movement is highly fragmented makes it questionable that today’s concessions by the Yanukovych administration will lead to long term political stability in Ukraine. Existing and proposed infrastructure in the Azerbaijan, Georgia, Turkey corridor could help offset disruptions that instability in Ukraine might produce.

In 2012 the Trabzon Declaration called for stronger economic, energy and political relations between Ankara, Tbilisi and Baku. This declaration formalized an existing pattern of relations between Turkey, Georgia and Azerbaijan which has resulted in several important infrastructure projects. The Baku-Tbilisi-Ceyhan (BTC) Pipeline transports crude oil from the Caspian Sea to the Turkish coast of the Mediterranean. This pipeline is complemented by the Baku-Tbilisi-Erzurum Gas Pipeline which aids the export of natural gas. The Baku-Tbilisi-Kars Railway is expected to be completed by the end of 2014. This corridor will connect Azerbaijan, Georgian and Turkish railways and will expand freight service which should make the export of raw material from Central Asia more economical. These projects can help develop the region and could serve as an important source of primary commodities for Asian and European markets.

Despite Turkey’s current political turmoil, the ability to serve as an energy corridor to the Mediterranean benefits whoever is in power in Ankara while the expansion of rail services would help Georgia and Azerbaijan’s exports. For these regions all parties have an incentive to cooperate.  Though Russia will not want to see its control over energy exports to Europe lessened it is important to note that Moscow could benefit from these projects.  For example, there are ongoing talks between Moscow and Baku to reverse the flow of oil through the Baku-Novorossiysk Pipeline with the intent of sending some of the oil through the Baku-Tbilisi-Ceyhan Pipeline which in theory could be a more economical manner for Russia to serve some of its European clients. There have also been proposals to link regional railways to Russian rail infrastructure which would aid Russian exports. Though it is likely that Russia would attempt to stop the development of an alternative energy source to Europe it is not unreasonable to think that the development of an alternative energy corridor in which Moscow has a degree of control would be allowed to progress without Russian interference. No matter what happens the development of pipelines and railways in the Azerbaijan, Georgia, Turkey corridor could lead to greater development in the region and serve as a reliable supply of raw materials to Asian and European (and potentially East and Southern African) markets.