Our Analytics 2 february — 17:36

Turkey is one step closer to Russia through Azerbaijan (Our analysis)

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BY ALEXANDER KARAVAYEV, RESEARCHER AT ECONOMICS INSTITUTE OF RUSSIAN ACADEMY OF SCIENCES, EXCLUSIVELY FOR AZERI DAILY

For the first time, a train of 15 carriages with a cargo of more than three thousand units of household appliances left Turkey for the Kaluga region of Russia, in transit through Baku. From now on, a railway route through Azerbaijan has been added to the routes of road transportation through the EU countries and sea trans-shipment through the ports of the Black Sea.

This small news piece from the field of macroeconomics has both far-reaching implications and serious grounds from the experience of the economic partnership between Russia and Turkey.

The first export train from Turkey to Russia on the Baku-Tbilisi-Kars railway

Bilateral trade turnover of about $25 billion per year and more than 20 million tonnes of freight traffic between the two countries, in fact, is a good breeding ground for building trans-regional partnerships. Some in this matter try to bulldoze in, trying to impose on the weaker ones positions advantageous to themselves in trade agreements right away -- this, in fact, can be seen from the agreements between the US and the EU; and in its own turn, the European Union, from the position of a stronger entity, dictates to the former Soviet republics in the Eastern Partnership scheme. Moscow and Ankara, however, are moving towards this reality in a different way -- gradually, overgrowing with lines of industrial corporation; and in some of their components they will involve Azerbaijani companies. In this case, we are talking about the interests of Azerbaijan Railways and ADY Express, as well as a number of manufacturers in industrial parks.

One of the main transport projects in this trans-regional integration program is the interconnection of the railway network. Therefore, in May 2019, the heads of the national railways of Turkey, Azerbaijan and Russia signed a memorandum providing for the provision of regular transportation along the Baku-Kars route, including the establishment of economically feasible tariffs and the attraction of a new cargo base. It was decided to start construction of the second railway track on the 1520 gauge in the Akhalkalaki (Georgia) - Kars section with a length of 76 kilometres across Turkey and an additional terminal and logistics centre in Kars, which will make it possible to quickly change train wheels from the Russian to the European gauge, and to reload part of the cargo to other types of transportation. Over the past 18 years, Turkey has invested $23.2 billion in the development of its railways, trying to increase the share of rail freight in total land transportation from 5% to 10%.

What to carry?

This is really the main question. But already having an answer in various areas of business.

Coal

For example, Turkey, Morocco and Pakistan are leading in terms of the growth of purchases of Kuzbass coal in 2020. And although the total volume of exports of Kuzbass as a result of the pandemic decreased by 16.5%, a number of countries significantly increased it -- Turkey 1.5 times (from 9.5 million to 14 million tonnes). Considering that the terminals in Novorossiysk work at some times at the loading limit, it makes sense to carry out part of the delivery, for example, to consumers in Africa through Turkish ports.

Kuzbass coal

Metallurgy

In 2018, the Magnitogorsk Iron and Steel Works, with the assistance of ADY Express, developed a route for the delivery of up to 250 thousand tonnes of hot-rolled coils to MMK Metalurji (MMK's subsidiary in Turkey), which is about a third of the company's annual demand. Such diversification in terms of shorter delivery times allowed the company to reduce the risks associated with convention prohibitions and bad weather in the Novorossiysk water area. Reduced is the number of mechanical damage during trans-shipment, while maintaining the quality characteristics of the metal.

As noted by MMK, this route allows considering the prospect of increasing export deliveries to the countries of the Middle East, Europe and Africa through their own port in Turkish Iskenderun.

Car assembly

This is also one of the most important spheres of Russian-Turkish cooperation, where, starting this year, Azerbaijan will also take part in an enterprise in the Hajigabul industrial quarter for the assembly of low-tonnage trucks of the GAZ Group.

The platform of the Russian-Turkish car assembly is quite extensive. AvtoVAZ supplies engines for the Oyak-Renault plant in Bursa, which produces Renault Fluence and Renault Clio models. This is one example of trans-regional integration. The shortest route from Tolyatti is just along the railway through Azerbaijan. After the crisis, AvtoVAZ plans to expand the range of supplies to Turkey of the popular Lada 4x4 and Lada Vesta models.

Lada 4x4 and Lada Vesta

GAZ Group is also stepping up its presence in the Turkish market. Today there are 11 official dealerships, more than 40 points of the company's after-sales service. Since August 2017, the assembly of an all-metal van and a combi van GAZelle Next has been organiaed in Turkish Sakarya. Vehicle kits for this enterprise can also be delivered along the route through Azerbaijan.

A new technological level is the production of electric vehicles. In the summer of 2020, the Turkish TOGG patented in the database of the Federal Institute of Industrial Property of the Russian Federation the image of the interior of its C-SUV electric car, the production of which will begin this year. The Russian market may become one of the key ones for this brand, and it is also convenient to carry out deliveries by railway platforms through Azerbaijan.

Turkey has a sufficiently strong engineering and production base, capable of mutually complementing technologies and being interesting for cooperation with Kazakhstan, Belarus and Russia. In turn, for the core of the EAEU, this is an alternative to Chinese industrial dominance in the CIS space. In this context, Azerbaijan is becoming the most important connecting hub for cooperation and transit.

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