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Image by İltun Huseynli


Building Connections for Development in
Azerbaijan and the South Caucasus

Unblocking the South Caucasus

While the 9-point ceasefire agreement that ended fighting in the 2020 Karabakh War omits any direct reference to a comprehensive settlement of the conflict, there are nonetheless some elements that allude to the need for one. The seventh point in the agreement, for example, refers to the right of refugees and internally displaced persons (IDPs) to return not only to the seven previously occupied regions of Azerbaijan, but also to the former Nagorno-Karabakh Autonomous Oblast (NKAO).

While that remains dependent on other developments, as well as on the timescale of reconstruction work, there is also the ninth point that requires the unblocking of regional economic and transportation routes. It is this that has especially preoccupied many regional analysts. As Carnegie Endowment Senior Fellow Thomas de Waal highlighted in November, many hope this can lay the foundations for future peace.

This was confirmed by Russian Deputy Foreign Minister Andrey Rudenko at the beginning of January 2022.

“In essence, we are talking about an opportunity for both countries to derive concrete practical benefits from peaceful coexistence. […] Within the framework of this mechanism, important preparatory work has been done to restore both railway and automobile roads in the region.”

On this, the European Union appears to be on the same page.

“On the railways, for example, an agreement was made tonight because it was very clear that they have a common understanding on what is needed to reopen those communication lines,” European Council President Charles Michel told reporters following a four-hour meeting between Azerbaijani President Ilham Aliyev and Armenian Prime Minister Nikol Pashinyan on the sidelines of the Eastern Partnership Summit in Brussels in December.

Aliyev confirmed the same in an interview with the Italian Il Sole 24 Ore the following day:

“Yesterday important decisions were made about the immediate activity by Armenia in order to start practical implementation of the railroad project. As far as we are concerned, we have already started.”

The main railway link between Armenia and Azerbaijan was constructed between 1899 and the 1940s, mostly along the southern border with Iran and Araxes river. However, it was closed during the first Karabakh war and fell into disrepair or was sold off for scrap. Reconstruction could benefit all parties, and not least Yerevan. The head of the Armenian Exporters Union even believes that reopening the Armenia-Azerbaijan route would make the country ‘the gateway to the Caucasus.’

The current situation is particularly detrimental for Armenia because of the closed railway to Russia via Georgia through Tbilisi’s own breakaway region of Abkhazia. At the same time, the railway from Armenia to Iran remains blocked because it passes through Nakhchivan.

Armenian Prime Minister Nikol Pashinyan has sounded enthusiastic about prospects to rectify this situation:

“It is profitable for Azerbaijan, because it will thereby get a communication link with Nakhchivan, and it is profitable for Armenia, because we must have a reliable railway and overland communication with the Russian Federation and the Islamic Republic of Iran. This means that the economy of our country can change significantly.”

At the end of last year, Prime Minister Nikol Pashinyan also said that preparation work is underway for the Armenian stretch of the railway. His Minister of Territorial Administration and infrastructure, Gnel Sanosyan, put early estimates of cost of this work at around $226 million and said that it could take as little as 10-12 months to be able to transport cargo through the Yeraskh-Julfa section of the route.

In particular, this could benefit exports for Armenia’s copper-molybdenum plants in Armenia’s southern Syunik region, as well as for some of Armenia’s main exports to Russia – brandy, textiles, fresh fruit, and vegetables. Shipping costs are currently high and goods are transported via Georgian ports or, as is the case for 80 percent of Armenia’s exports to Russia, through the Upper Lars crossing. This road connection often experiences long queues and temporary closure.

In his interview with Il Sole 24 Ore, Aliyev made the same point.

“We hope that relations with Armenia also will be normalized as we discussed yesterday with Prime Minister Pashinyan and President Michel. And then Armenia also will have a chance to become part of the regional transportation network, because now it is a deadlock. It doesn’t have a railroad connection with Russia, it will have, it doesn’t have a connection with Iran railroad, it will have, through Azerbaijan. And Azerbaijan through Armenia will go to its Nakhchivan Autonomous Republic. It is a win-win situation.”

At the end of December, Aram Sargsyan, also spoke favourably about the route. The Republic Party Chair is the brother of former Prime Minister and Defense Minister Vazgen Sargsyan who was assassinated in the 27 October 1999 parliamentary shootings.

The topic of restoring the Nakhchivan–Meghri–Baku railway is not new and was also part of discussions over transport links that took place within the framework of the OSCE Minsk Group, the official US-France-Russia co-chaired platform for talks between Armenia and Azerbaijan on Karabakh. It was then presented in Minsk Group documents as an important stage in any process to resolve the conflict.

Most recently, and just hours before the EU-facilitated meeting between Aliyev and Pashinyan in Brussels last month, NATO Secretary General Jens Stoltenberg also stated his support for such a development.

“We strongly believe that it is important to continue to normalize the relationship between Azerbaijan and Armenia. And NATO supports the efforts towards the normalization and dialogue between Azerbaijan and Armenia.”

Emmanuel Dreyfus and Jules Hugot note that both Baku and Yerevan have openly shown interest in restoring the railway link. They also say that the EU could play a major role in this, drawing from its experience in supporting border management elsewhere, including in the former Soviet Union, to “pave the way to a broader normalisation of relations between Yerevan and Baku.”

Dreyfus and Hugot also believe that this could provide momentum for the reopening of other connections, and most significantly the Gyumri–Kars railway between Armenia and Turkey. This could benefit trade between Nakhchivan and Turkey as well.

“Geopolitics aside, the additional cost caused by the crossing of Georgian territory is among the main impediments to Armenian exports to Turkey. The reopening of the Gyumri–Kars railway would be conditional on normalization of relations between Yerevan and Ankara, which Armenian and Turkish leaders have recently called to revive.”

Towards the end of last year, both Ankara and Yerevan appointed special envoys to take the first step towards embarking on such a process, and on 1 January 2022, Armenia also lifted its ban on Turkish imports a year after it was introduced in retaliation for Ankara’s support for Baku during the 2020 war. Radio Free Europe reported that the Ministry of Economy had received many requests for the ban to be lifted in order to benefit Armenian exports.

“Rail is cheaper than air freight, faster than maritime transport, and safer and better for the environment than road haulage,“ Andrew Grantham, news editor at Railway Gazette International, told Eurasianet last year. "All over the world countries are making efforts to get freight traffic off trucks and onto trains.”

While disagreement over borders and unblocking regional transportation has led to tension, most notably between Azerbaijan and Iran, an Araxes rail link could reduce it. The Meghri Free Economic Zone (FEZ), created in 2017 on Armenia’s border with Iran, could attract foreign investment benefitting from Armenia’s preferential access to Russia’s market via the Eurasian Economic Union (EAEU) and to Iran’s market through a free trade agreement under negotiation with the EAEU.

“If successfully implemented, the Araxes Rail Link would demonstrate that practical technical cooperation is feasible even between conflicting parties, thus contributing to broader peacebuilding in the South Caucasus and supporting regional stability and prosperity. Russia has undeniable clout over the Nagorno-Karabakh conflict, as enshrined in the ceasefire agreement. However, this does not exclude an EU involvement in its settlement.”

Dreyfus and Hugot argue that EU technical contribution to reopening the Armenia–Azerbaijan railway connection would focus on law enforcement agencies (LEA) in charge of border management as well as the development of confidence-building measures aimed at facilitating cooperation between these agencies, a necessary prerequisite for the resumption of secure train traffic.

According to the 2020 ceasefire agreement, any link between Azerbaijan and Nakhchivan would be overseen by Russian Border Guards so would necessitate clearly defined roles for the EU and the Russian Federal Security Service (FSB) in such a situation. Dreyfus and Hugot note that there is an important precedent for this along the boundary between the Transnistrian region and Moldova proper.

The EU has already set up several border management programs as part of its Common Security and Defense Policy (CSDP) framework. These include three European Union Border Assistance Missions (EUBAM) in Moldova and Ukraine, Rafah, and Libya. Since 2007, the EU has also provided border management support to Kosovo and Serbia through the European Union Rule of Law Mission in Kosovo (EULEX).

“EU involvement would be consistent with its thrust to support stability and prosperity in the framework of its Eastern Partnership,” Dreyfus and Hugot concluded.

While it is now clear that a process has started, a number of other disagreements still remain. Not least is the issue of customs and border checks on transit from Azerbaijan through Armenia. Baku points to the use of the word ‘unimpeded’ in the text of the ninth point of the 2020 ceasefire agreement and notes that there are no such checks on Armenian freight passing through Lachin to Karabakh.

Of concern, say some Armenian analysts and opposition figures, is the matter of whether any route would mean ceding sovereignty over the land on which it passes. This has already been dismissed by Pashinyan.

“We have ratified the agreement with the President of Azerbaijan on the restoration of railway transport. The railway will operate under the sovereignty and jurisdiction of countries, in accordance with internationally accepted border and customs regulations.”

But it is this reference to border and customs controls that remains a sticking point.

In a recent Daha Yaxşı interview with Benyamin Poghosyan, the Yerevan-based analyst says that this disagreement looks set to continue over the two to three years it will take to reconstruct the entire railway connection. At the heart of this problem lie different interpretations of what ‘reciprocity’ means. Nevertheless, and while it would be beneficial to resolve the matter now, this could be resolved over the coming years.

The disagreement was also confirmed by Aliyev. “We are ready for both options: Either no customs [regimes] on both, or both customs [regimes] on the two,” he stated.

Moreover, Russia, Azerbaijan, and Armenia are finalizing parameters for launching joint infrastructure projects through the trilateral working group according to the Russian Deputy Foreign Minister, Andrey Rudenko. That again was confirmed by comments from Aliyev prior to his meeting with Pashinyan in Brussels last year. It is also important to note that the reconstruction of a 108-kilometer section from Horadiz in Azerbaijan to the Armenian border has already started.

The Azerbaijani president has said that the new railway to the Armenian border will be completed by the end of 2023.


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