LIFELINE

Russia's decisions to impose sanctions on Turkey for the downed Su-24 bomber have inflamed tension in the stand-off between these countries.

When the first official reactions by the parties in the conflict emerged on 25 November, Turkish trucks were stuck in a traffic jam at the Kazbegi-Verkhniy Lars checkpoint on the Georgian-Russian border. The trucks, carrying Turkish freight on its way to Central Asia, began to turn back towards Azerbaijan, which is an alternative transit route in this direction. From here, freight destined for Central Asia is sent via the Alat maritime port to the ports of Aktau in Kazakhstan and Turkmenbashi in Turkmenistan.

Until now Turkish vehicles have not been using the Azerbaijani route because of the relatively high tariffs and the need for a sea crossing, preferring to send their freight through Russia. In the current situation Azerbaijan has simplified the potential for the transit of Turkish freight destined for Central Asia.

It is worth noting that in the event of a high flow of freight Azerbaijani, Kazakh and Turkmen transport operators will be able to reduce their tariffs somewhat, making transit more beneficial for Turkish operators. According to Akif Mustafayev, national secretary of TRACECA, conditions will be made available at border posts for the unhindered entry of Turkish trucks entering Azerbaijan. In an interview for the Trend agency, he pointed out that Azerbaijan's strategic decisions with the aim of attracting freight flows were made before the start of the Russian-Turkish stand-off. "Allowing wide latitude to Azerbaijani Railways over the question of freight transportation, especially bearing in mind that the Baku-Tbilisi-Kars railway line will be commissioned in 2016 and the setting up of a coordinating council, which will resolve difficult problems, including tariffs - these decisions were taken long before relations between Russia and Turkey became exacerbated. The situation has reached the point where freight flows are now being directed via Azerbaijan. They are not being allowed through Russia, Turkey's relations with Iran are not very warm and the only and shortest route in this situation is the Turkey-Georgia-Azerbai-jan-Caspian-Central Asia corridor. I am sure that decisions will be taken soon on reducing tariffs and conditions for freight transportation across the border. We need to create conditions whereby in the future, when relations between Russia and Turkey start to improve, freight will be transported to Asia via Azerbaijan." Mustafayev said.

He added that Azerbaijan is prepared for such an increase in freight flows. "Out of the 200,000 Turkish trucks transporting foodstuffs, agricultural produce and other goods, only about 30,000 travelled via Azerbaijan. The remaining 170,000 travelled via the Georgian-Russian border to Russia. If they are re-directed Azerbaijan will have the opportunity to allow this amount of freight to pass through its territory. The Caspian also has a sufficient number of ferries to handle such volumes," the national secretary said.

Mustafayev believes that the increase in freight flows will help to considerably increase revenues for Azerbaijan. "Today the revenue from transportation through the Europe-Caucasus-Asia corridor is about 350m dollars annually. But now, because of the sharp increase in transportation, it could increase 4-5 times. It's difficult to give precise figures because we don't yet know how the freight will be distributed," he said.

The Azerbaijani Caspian Shipping Company CJSC reacted promptly to the situation, reducing its tariffs on transportation by the Baku-Aktau route by 20 per cent. "The reduction in tariffs is aimed at increasing the attractiveness of the maritime transportation of goods vehicles travelling from Turkey to Kazakhstan," the report says. The new tariff was fixed at 1,200 dollars for one standard vehicle and trailer (TIR length 16.5m) in one direction (Baku-Aktau and Aktau-Baku). The tariff with transportation to both ends is 2,100 dollars.

Incidentally, major transport and logistics operators of Azerbaijan, Turkey, Kazakhstan and Georgia have agreed to establish a consortium for the transportation of freight from China to Europe, a Georgian Railways report says. The agreement was reached during a presentation in Istanbul of the prospects of the China-Turkey-Europe Transcaspian transport route. "The founders of the consortium will be Minsheng Logistics (China), KTZ Express (Kazakhstan), the Azerbaijani Caspian Shipping Company, the Azerbaijani company Karvan Logistics and Trans Caucasus Terminals (Georgia). Turkey will be represented in the consortium as an associate member," the report said.

According to Akif Mustafayev, the member-countries of this consortium (the route passes through China, Kazakhstan, Azerbaijan, Georgia and Turkey, and then on to Europe) will be able to earn about 1 billion dollars on freight transportation in the first few years, and the profits of Kazakhstan, Azerbaijan, Georgia and Turkey from transportation along this route will increase.

Of course, the conflict between the two neighbouring states does not suit Azerbaijan at all. Official Baku has never placed instant benefit above strategic relationships. In this instance, Azerbaijan's opportunities could help the warring sides to minimize their losses from a sanctions war. For example, a significant amount of Turkish fruit and vegetable freight could find a market in Azerbaijan. And Azerbaijani farm produce could replace Turkish on empty Russian shelves, albeit partially.

Besides this, Azerbaijan could become a consumer not only of Turkish vegetables and fruit, but textiles, too. Today, Turkey's largest city, Istanbul, is a kind of mega-market, in which citizens of the European Union and Russia trade. But from the beginning of next year the situation could change appreciably for the Russian people, because from 1 January Turkish citizens will not be able to visit Russia without a visa. There is every likelihood that Turkey will take "reflex" steps against Russian citizens. For enterprising Azerbaijanis this will create additional opportunities to develop "shuttle business". The recent authorization to import goods to the sum of up to 10,000 dollars duty-free could facilitate this. Although this decision concerns private goods, it is clear that in certain cases the re-sale of imported goods, and also their "shuttle" re-export to Russia, is also possible.

Of course, Azerbaijan is not in a position to keep for itself the whole flow of freight and tourists from Russia to Turkey. According to the most modest calculations, Turkey has received 10bn dollars from Russian tourists, which it would be unrealistic for Azerbaijan to assimilate in a short period of time. But it should not be forgotten that there are large Azerbaijani communities in both Turkey and Russia who, with the correct business organization, could help Turkish and Russian business to overcome the crisis in inter-state relations with minimal losses. At the same time, Azerbaijan itself could partially make up the losses from the reduced world oil prices.