Azerbaijan plays an important part in providing freight transport within the trade chain between Europe and China, which is estimated at USD 650 Billion, due to its position at the junction of large routes. To become the first choice in freight transit, Azerbaijan prepares its transport infrastructure with special focus on railways.
Pamela Luica is talking with… Javid Gurbanov, President of Azerbaijan Railways
The railway system development strategy includes the increase of the transit potential, the implementation of new tariff policies, financial management systems, as well as the extension of cooperation projects. Apart from these measures, the appropriate infrastructure and a modern rolling stock fleet become a must in attracting freight. For example, Azerbaijan Railways (ADY) will invest USD 400 Million in the acquisition of rolling stock – cars and locomotives – estimating to buy 50 locomotives for freight and passenger transport.
A railway infrastructure capable to meet mobility demands requires investments in construction and modernisation projects and ADY continues these projects in order to be able to provide efficient and performing transport services with increased capacity until 2020. The connection with Iran and Russia, through Astara – Astara line is of major importance due to its position on the North-South Corridor, the section to the Georgian border (Boyuk-Kasik) being already completed. Also included in the corridor is the Astara-Rasht-Qazvin line that will increase freight transit from the Persian Gulf to the Black Sea.
Baku-Tbilisi-Kars is another project which contributes to the increase of freight transit providing connection between Turkey, Azerbaijan and Georgia, the last two states having completed their projects. The railway will ensure freight transport from Turkey to the Caspian Sea Region, Central Asia and China.
International agreements play an important part in reducing tariffs, eliminating bureaucratic barriers and implementing infrastructure projects. An example is the recent agreement between Azerbaijan, Georgia, and Kazakhstan on setting a joint venture on the Trans-Caspian route. The project objective is to help reduce or eliminate all barriers in carrying out transport services. Companies from Turkey, China and Ukraine have expressed interest in this project too. The route crosses China, Kazakhstan, Azerbaijan, Georgia, then Turkey and Ukraine to Europe. Also, in April, Azerbaijan, together with Romania and Georgia, signed a memorandum to develop Europe-Asia transport corridor, through the Port of Constanta (Romania) and Batumi (Georgia). The new corridor will increase the turnover and the shipped freight volume, and the three countries are planning to promote this project as much as possible.
ADY faces various challenges in implementing its projects, one of the biggest challenges being additional payments for freight transit. To eliminate this problem, ADY has elaborated amendments to present to national authorities and is also collaborating with the large companies in the region while trying to reduce the barriers imposed by different factors.
Increasing the importance of railways in the transport system, the allocation of financing in developing the necessary infrastructure, the modernisation of existing assets, the consolidation of cooperation, these are only few of the measures and projects ADY implements in order to face the challenges imposed by traffic growth.
You can read bellow an interview with the President of Azerbaijan Railways, Javid Gurbanov, explaining the importance of increasing the rail transport share, the dynamics of trade between Europe and Asia, as well as the importance of projects in boosting national, regional and international trade.
Azerbaijan has a favourable geographical position for Europe-Asia freight transit. What methods are available to increase railway transit?
Javid Gurbanov: I would like to mention that the trade between Asia and Europe covers more than half of the global trade. Based on the results of the research done by Azerbaijan Railways we can say that shipment of freight from China to Europe is approximately 100 million tonnes. To be more concrete, freight turnover makes USD 650 billion. As you are already aware, Azerbaijan is situated at the intersection of the main economically profitable routes between Europe and Asia. The strategic importance of the region plays a vital role in the global economic growth. It is well known that each transit country is interested in restoration of Silk Road. The freight is mainly transported in three directions, due to distance and established tariffs the most advantageous one is through Azerbaijan. China, India and Europe are the main markets for Azerbaijan. When the missing part between Azerbaijan and Iran will be finished, we will be able to transport goods starting from India (Mumbai), passing through Azerbaijan from Bandar-Abbas port directed to Russia – Finland (Helsinki) – and at last Central Europe. At the same time the shipment could be done from Azerbaijan to Georgia, ports Poti and Batumi, directed through Constanta Port (Romania) to Europe.
On this axis, the largest share of freight volumes is shipped by sea. How could railways attract a higher freight volume considering the advantages and disadvantages of both transport modes? Do you believe that sea transport and railway transport should be rivals or partners?
Javid Gurbanov: Due to unique geostrategic position in the South Caucasus and significant economic growth, Azerbaijan is a substantial part of the “New Silk Road”. The geographical location and the absence of land border with Central Asian countries require development of effective maritime transport system. Baku International Sea Trade Port started the building of new port in the Alyat district, located 65 km away from Baku, in order to meet needs of increased trade and transport. In cooperation with Azerbaijan Railways, the new Port of Alyat (capacity 20 million tonnes) will be the reason for the transit freight transport and growth of shipment through the East-West and South-North corridors. Working together as maritime and railway transport systems, we could manage to achieve a lot. Starting from the 3rd of August 2015 the freight sent from China passing Kazakhstan, Azerbaijan and Georgia directed to Turkey through Baku International Sea Trade Port is an effective example. Based on all above mentioned I think we need to work in cooperation rather than being rivals, for the benefit of both transport systems.
At the moment, the international railway transport is still losing ground to road transport, although railway transport is known to be the transport mode that is capable to meet all needs (economic, mobility, environment etc.). How do you see the development of an efficient and performing transport system with railways as backbone?
Javid Gurbanov: By recent order of our president, it was clearly stated that whether sea, ports, railway or auto, in each sector works should be underway for price regulations. In accordance with this order, the Coordination Council was founded by the Ministry of Economy of Azerbaijan Republic. Our main goal as Azerbaijan Railways is attraction of cargo, and to implement this, we need to prove that we have tariffs which can compete with maritime and road transport. Currently, due to the global economic situation we are behind of road transport, but one of the main goals for us right now is to solve this problem.
How would you describe Azerbaijan’s railway transport?
Javid Gurbanov: The basis of first railway was founded in 1878 and the construction process was finished in 1880. The construction and development of the first railway was directly linked to the oil industry and transport, but lately we are more interested in the prosperity of Azerbaijan Railways to be connected with non-oil sectors. As you know CJSC “Azerbaijan Railways” is a commercial company and because of this, we need to be able to finance ourselves. Development and prosperity require building the foundation of what you are doing properly. On the basis of investments from government and international organisations there were huge changes in infrastructural development. As a result of featured amendments, in few years Azerbaijan Railways will be one of the main sectors of the Azerbaijan Republic with provision of stable revenue to the state budget.
What are the challenges ADY faces when implementing the projects aimed at increasing the railway transport share?
Javid Gurbanov: One of the main problems faced by Azerbaijan Railways in implementation of new projects is extra payments in the transport of transit cargo. To solve this problem and eliminate it we made amendments to the accumulated fees and reported to the President of our republic and relevant institutions. Hopefully this problem will be resolved in the near future. At the present time we are intensively working on conducting meetings with major companies in the Russian and Iranian markets, analysing reasons why they are not using the route through Azerbaijan and trying to find a solution to the problem.
What is the competitiveness level between transport modes and how do you provide logistics performance and port capacity growth?
Javid Gurbanov: Development of the transport system is of great importance for the Republic of Azerbaijan. Railways’ level of competition with other types of transport increases in case of tariff and price adjustment. In order to prevent an increase in inflation it is advisable to monitor the level of tariffs. In order to ensure high services for potential consumers, rates should be adapted to the market price. In order to compete with other modes of transport we need to ensure transparency of the market price and stabilizing prices by preventing changes in the tariffs for a period of time. I would like to mention the increase in port capacity, a new complex of 400 hectares is underway in construction, from which 100 hectares set aside and designed for the construction of the international transport logistics centre. The 80 thousand square meters of warehouse and special areas will be established, favourable conditions will be provided for the development of small and medium-sized businesses, storage of 100 thousand units of containers, for cargo owners and property maintenance. Position of this Centre in the country’s and region’s economy once again confirms the strategic importance of Azerbaijan.
What is the railway company’s (ADY) strategy regarding the development and promotion of railway transport? What about the system integration at regional and international level?
Javid Gurbanov: An integral part Azerbaijan Railways’ strategy is the development of transit potential of the transport system, increase the share of export and import cargo. We need to expand our economic and political relations, due to the fact that development of the Azerbaijan Railways is directly associated with the development of the neighbouring countries. We already have done a lot to implement regional cooperation projects. We would not be a transit country without the other close regional co-operation partners and neighbours located on the shores of the Caspian Sea. One of the major projects carried out by Azerbaijan Railways is application of financial management system on the database of International Financial System (IFRS). With this system, each department of Azerbaijan Railways will be able to work in cooperation with each other. Also, I would like to add that, the participation of our employees at international conferences, forums, seminars and projects is part of the communication.
What is the current structure of the rolling stock fleet? Does it meet both existing and future traffic demands? What can you tell us about new rolling stock (freight and passenger) acquisitions? What is the value to be allocated to these acquisitions and when will new projects be announced?
Javid Gurbanov: Azerbaijan Railways are intending to invest nearly USD 400 million in purchasing of new wagons. Exploitation of current electric locomotives exceeds 30 years and we are actively purchasing new wagons and locomotives for utilization. An additional acquisition of 50 electric locomotives is expected by 2020, of which up to 10 are for passengers, while 40 are designed for freight transport. 4,000 units of wagons have been received and put into operation. As I said, the rolling stock fleet of Azerbaijan Railways will further expand in the near future and delays in transport will be eliminated.
What are the railway projects underway and what is the value of investments for 2016-2020?
Javid Gurbanov: Azerbaijan Railways is playing an important role in the economy of Azerbaijan and is of strategic importance for the country. As a result, the funds spent on the railways can be considered important. Signalling, communication and power farms are being renovated. Reconstruction of rolling stock fleet and purchasing of new wagons is on-going. Of course, the main regional projects are the Baku – Tbilisi – Kars and TRACECA and their implementation continues. In addition, in cooperation with our partners, we are actively participating in restoration of the North-South corridor that remained passive for many years. We truly believe that, Azerbaijan Railways, with 150 years of history, will continue working in the future with renovation. The reasons for this development are that a railway in comparison with other modes of transport is economically favourable and ecologically clean. We, as Azerbaijan Railways, are planning to be one of the best in the region.
What is the development stage of the North-South Corridor? How is Azerbaijan involved in developing the project, next to its partner countries, Russia and Iran?
Javid Gurbanov: The North-South corridor is irrepressible in freight transport in the region. This corridor has potential to be one of the main routes heading from India to Europe. I would like to add that we already have reconstructed the railway from Baku to Boyuk-Kasik (Georgian border). The main problem for future development is that 8 km route is under construction from Astara (Iran) to Astara (Azerbaijan). The construction process of the mentioned segment started as of April 20th. Of course, this segment is important for Azerbaijan, Russia and Iran, but location below the sea level is making the construction process a little more difficult. We believe that the construction work will be finished in the next 7-8 months and will be an important factor for Azerbaijan to become the logistics centre in the region.
What are the traffic estimates on this corridor and how do you see its competitiveness with the Suez Canal, as the North-South Corridor is expected to cut costs and travel times?
Javid Gurbanov: Through this route, only between Iran and Russia, a minimum of 4 million tonnes of cargo can be transported, also we are currently working on this corridor to accept more loads. In comparison with maritime transport the railway was always safer and also the loads carried by sea need considerable time. It should also be noted that the Suez Canal was paralyzed by the movement of large ships, waiting time for transition and a large amount of payment. If we consider all the mentioned factors, I believe that the route through Azerbaijan will be more attractive for customers. In other words, the North-South corridor will attract loads itself as a faster, safer and the most important cheaper way of transport.
The Baku-Tbilisi-Kars line is vital for railway connection to Turkey and Georgia, but also to accelerate freight transport between East and West. The commissioning of the line has been announced for this year or the next one, at the latest. What can you tell us about the stage of works?
Javid Gurbanov: The project of Baku-Tbilisi-Kars is one of the crucial projects in the region and it is the big step forward in the economic growth. At present, the work is completed in Azerbaijani and Georgian sides and from 2015 the line was successfully used for transport of diesel locomotives. However, the construction process on the Turkish side is still on-going and we believe that untill the end of current year it will be finished. The route of BTK is an important project for our neighbouring countries, for Turkey it is more convenient access to the East and Central Asia and the Georgian side is strengthening its existing infrastructure and get the chance to have a more influential economy in the region.
In April 2016, Azerbaijan, Georgia and Kazakhstan signed agreement on the establishment of a JV to provide transport on the Trans-Caspian route. How will this JV influence the rail market structure and what are the opportunities of this multimodal corridor?
Javid Gurbanov: This consortium is an important project for Azerbaijan and its partners. Turkish, Chinese and Ukrainian trade companies have already shown their interest in the project. The main goal of the consortium right will lead to reducing of tariffs, elimination of bureaucratic barriers and infrastructure shortcomings. Until 2020, the Trans-Caspian corridor will have a capacity of 300,000-400,000 containers. It should also be noted that, by holding a strong position in the free market economy along with our partners, we are becoming a powerful force in the global transport system. This consortium is an efficient platform between three countries in order to resolve existing problems and create favourable conditions for customers. Once again, I must emphasize that this consortium is a breakthrough not only for railways, but also for all shipments on the Caspian Sea.
In April, Azerbaijan, Georgia and Romania signed a memorandum on the development of Europe-Asia-Europe transport corridor, via de Port of Constanta and the Port of Batumi. What are the next steps to consolidate this corridor and how will this project affect freight transport to the West, since there are also other corridors that provide transport to the same final destinations (West)?
Javid Gurbanov: It is important to note that Romania has substantial economic relations with Iran, China and Central Asia. Romania’s economic turnover with Iran is USD 117.2 million with China USD 4 billion, with Turkmenistan USD 43.5million, with Pakistan USD 194.2 million. The transport of these goods through Azerbaijan is considered to be best option and representatives of Romania have showed interest in this route. It has to be highlighted that in order to increase our country’s transit potential, Azerbaijan Railways has negotiated with various parties to attract more cargo and improve existing rail corridors. Romania also is interested in the East-West and North-South routes. As you might know on March 15-16, a working group has met in Baku and the East- West Trans Caspian consortium was established. Moreover, on January 12thn Baku also hosted the North-South transport corridor forum where participants from private and public sectors signed agreements and established common tariffs. We believe that Azerbaijan should be the guarantee of stability of freight transport from Asia to Europe.
What are the “missing links” (infrastructure, services, management etc.) on the Europe-Asia transport axis and how could they be approached to eliminate barriers and provide efficient transport services?
Javid Gurbanov: From China to the coast of Black Sea and Bosporus, people are constructing road bridges and other infrastructures. Nations from Asia to Europe are signing cooperation agreements. All of the transit countries must closely work together, because we understand that working together, removing bureaucratic barriers and by sharing information all of the transit countries might get their share from the global transport system.
As you have mentioned earlier Azerbaijan, Georgia and Kazakhstan created a consortium and we want to cooperate with other countries and with the private sector too. Hopefully, the global economic stagnation and crisis in Eastern Europe would not hinder the current development in global transport.
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