Azernews.Az

BAKU – Azerbaijan has allocated an additional $575 million for the construction of the Georgian section of a major railway that will link the two countries with Turkey.

The allocation, agreed upon during Georgian Minister of Regional Development and Infrastructure Ramaz Nikolaishvili’s visit to Baku this week, will bring Azerbaijan’s total lending to the neighboring country under the Baku-Tbilisi-Kars railway project to $775 million.

Under the agreement reached, the two countries made relevant amendments to their intergovernmental agreement on implementing the project.

The new loan was allocated for 25 years, with 5% annual interest rate, according to Azerbaijan’s Transport Ministry.

The first tranche of Azerbaijan’s loan to the neighboring South Caucasus republic, worth $200 million, was also disbursed for a 25-year period, but with 1% interest rate. The funds were desginated to finance operations under the project carried out in Georgia since 2007.

The allocation of the second tranche to Georgia is reportedly due to factors including the rising cost of raw materials in world markets in past years and a recent re-evaluation of the condition of the Marabda-Kartsakhi rail line stretching to the border with Turkey.

Azerbaijani Transport Ministry official Sadraddin Mammadov said the disbursal of additional funds for the Baku-Tbilisi-Kars project was necessitated by an altered route of the railway in its 25 km section that lies from Akhalkalaki in Georgia to the Turkish border.

"Geological surveys have revealed that this is an area prone to landslides and that it will not be possible to route several kilometers of the railway stretching to the Turkish border through the mountains, as expected," Mammadov said. "Therefore, for safety considerations, it was decided to replace that section with a tunnel to be laid under the mountains. The 4 km tunnel will be built on the Georgian-Turkish border, with about half of it going through Georgia and the other half via Turkey."

Mammadov also said that an upgrade of the 160 km Marabda-Akhalkalaki section of the railway was initially planned. "But shortly before the work was to begin, it became clear that the rail line is in deplorable condition and is therefore not ready to transport cargo under the project. As a result, a decision was made not to overhaul it, but essentially to rebuild it. All this has affected the cost of the project."

The Baku-Tbilisi-Kars project was initially valued at $420 million, but the estimate was later increased to $600 million. However, with the latest allocation, the figure will reach $1.2 billion.

Under the project, a 105 km rail line will be built, including 76 km in Turkey and 29 km in Georgia.

Construction of the railway was earlier due to be completed in the first half of 2012, but the parties involved are seeking to speed up the process and wrap up most of the operations by the end of 2011.

The throughput capacity of the railway will peak at 17 million tons of cargo per year. Initially, the capacity
will be 6.5 million tons of consignments and 1 million passengers.