Guy Borisov: the lifting of the anti-Iranian sanctions has triggered “transit war” in the South Caucasus

Azerbaijani President Ilham Aliyev’s recent visit to Iran has opened a new page in Azerbaijani-Iranian relations. Both sides have qualified the visit as fruitful.

They have signed over ten cooperation agreements, including ones concerning infrastructure projects. For the Armenians, who hope to help Iran to get access to the Eurasian and European markets, some of the agreements signed by Aliyev and Rouhani were a knock-back. 

One of such agreements is the plan to build a railway from Iranian Kazvin to Azerbaijani Astara. After his meeting with Aliyev, Rouhani said that this railway is the hit of this year and will be a part of China’s Silk Road project.

According to Armenian New Time newspaper, this railway will be a direct rival to the Iran-Armenian railway. And even though the newspaper doubts that the Iranian-Azerbaijani project will be carried out this year, it is sure that the Iranian-Armenian project will be delayed.

There are a number of reasons for this. The Iranian-Azerbaijani project costs $400mn, while the Iranian-Armenian one is expected to cost no less than $3bn. Besides, the latter project may turn out to be four times longer as this railway will have to go through 60 tunnels and 64 bridges. One more argument against the Armenian railway is that it will be able to carry cargoes only to the Georgian ports but not to Russia. No surprise that former CEO of Russian Railways Vladimir Yakunin has called the Iran-Armenian railway unviable. “This is like opening a window to nowhere... to the wall of the adjoining house,” he said.

This year Azerbaijan, Georgia and Turkey are planning to launch Baku-Tbilisi-Kars railway, which is also a part of the Silk Road. Together with the Iranian-Azerbaijani railway, it will make the Armenian project senseless, which means that the railway blockade Armenia has faced for 20 years already will become full and will last till any solution to the Nagorno-Karabakh conflict is found. This will also minimizes hopes for restart of the Abkhazian railway.

But this does not however mean that Azerbaijan has driven Armenian out of all regional transport projects. Neither Russia nor Iran would like to see Turkey, Azerbaijan and Georgia enjoying transport monopoly in the region. So, they will try to draw Armenia into some regional projects should there will favorable political and investment conditions. One such project, the North-South highway, is already being built with the financial support of the Asian Development Bank. This road is supposed to connect the north of Iran with the Black Sea ports in Georgia. China is keen to see this project carried out as it will make cargo deliveries from the Gulf to Batumi much quicker.

So, even though the Armenians are disappointed with the Azerbaijani-Iranian deals, they still have chances to become a transit country.

A similar “battle for transit” is going on in the gas sector. Once the sanctions were lifted, the Iranians announced plans to enlarge their gas exports via Armenia and Georgia to Europe. For this they have a whole network of gas pipelines. In the meantime, Gazprom is actively working to restart supplies to Georgia.

The Georgians are not against to great displeasure of former President Mikheil Saakashvili’s United National Movement. While the government is trying to diversify gas imports, the opposition is crying that Gazprom is “a gas chamber for Georgian liberty.” The Georgian authorities’ talks with Gazprom have alarmed not only the opposition but also the Azerbaijanis, who do not lose a market. As a result, their SOCAR is ready to sell the Georgians 500mn c m more gas a year and to charge a lower price for this.

Even if we assume that this is true and that this will make Georgia stop buying Russian gas, the “Iranian scenario” is still quite appropriate. So, we can expect Iran to try to enlarge its share on the South Caucasus gas transit market.

Thus, Iran’s very first step to go back into the global economy has triggered a “battle for transit” in the South Caucasus. Here all sides will pursue their own interests. In this context, Russia might use Armenia for more deeply involving Azerbaijan and Georgia into the Eurasian Economic Union, especially as local societies favor this project.

Guy Borisov, political analyst at EADaily