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AZERBAIJAN


  
  

 

Key Economic Data 
 
  2003 2002 2001 Ranking(2003)
GDP
Millions of US $ 7,124 6,090 5,600 102
         
GNI per capita
 US $ 810 710 650 146
Ranking is given out of 208 nations - (data from the World Bank)

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Update No: 314 - (22/02/07)

The oil curse
It is a regrettable fact that economies which enjoy an oil boom can find it a mixed blessing. It generates huge new revenues, which enrich a privileged minority. But the vast majority can end up being worse off, as staple industries are undermined by a rising currency due to the extraneous upsurge in oil exports.
This well-known paradox is hard to avoid. Many have been afflicted by it, including the UK in the 1980s, Holland even earlier (due to natural gas where it was called the Dutch disease), Russia and Turkmenistan (due to natural gas) now, as also Azerbaijan.
One country which managed to avoid this has been Norway, which long ago set up a national investment fund, the Stabilisation Fund, that serves a double purpose. It stabilizes the currency, preventing overvaluation and keeping non-oil sectors competitive, while it provides a trove of foreign assets, ready to be drawn on when the petroleum runs out. It is worth over US$150bn already. The Russians have imitated them with a stabilization fund of their own worth US$80bn by now. 
In the case of Azerbaijan the regime is determined to milk the oil wealth for all that it is worth immediately. A far-sighted measure such as such a fund would not be in its interests. The excuse is that there are trickle-down effects which is plain wrong in Azerbaijan's sad case.. Actually in its case there are far more trickle-OUT effects, as the corrupt elite stash their ill-gotten gains abroad, where they take up residence in due course. There are a few sops it makes to the populace, but dubious ones, as we shall see.
The Selfish Gene theory may or may not apply to evolution and biology, as Richard Dawkins claims, but it sure does to business in Baku. This leads to another paradox. To keep the lid on popular disaffection with the situation the regime is ruthlessly repressive; the higher goes the price of oil, the greater the scale of repression, a world-wide phenomenon. 

The booming economy
According to a recent report by the European Bank of Reconstruction and Development (EBRD), Azerbaijan is one of the world's fastest-growing economies with over 26 per cent growth in 2005 and a reported 34% in 2006. However, local officials admit the economy could "overheat." Azerbaijan remains an economy in transition whose long-term future can only be secured by means of a viable non-oil sector. And the question many are asking is how, in a country where corruption is so rampant, is that money going to be spent? 
Clare Bebbington, a spokeswoman in Baku for multinational oil company British Petroleum (BP), which is Azerbaijan's main partner in tapping the oil wealth, describes managing this wealth as an "enormous opportunity," but also an enormous challenge. 
"In 2006, the government of Azerbaijan will receive around US$3 billion in oil revenues from our projects. At US$60 a barrel, the full-cost revenues are actually around US$230 billion. That is an unprecedented shock for any economy, it's also many, many times the current levels of GDP," Bebbington says. "Now, it's impossible to predict the oil price, what the oil price will be in the future and BP doesn't make a prediction. But what we have tried to do is to be as open as possible in terms of making some sort of projection about the likely level of receipts so that people can begin to understand what will happen over the next decades." 
Apart from oil, Azerbaijan is also betting on gas. The Shah Deniz gas field in the Caspian Sea southeast of Baku is estimated to contain some 50 to 100 billion cubic meters of gas. 

Diversification 
One of Azerbaijan's potential pitfalls is lack of economic diversification. Mikayel Jabbarov, Azerbaijan's deputy economic development minister, says his government is aware of the dangers. 
"We're planning well enough against any severe shocks. Our non-oil economy is growing very fast, in fact last year, data which analyses non-oil economic development in Azerbaijan for the years 1999-2005 indicates that the non-oil sector in Azerbaijan on the average has grown faster than in CIS [Commonwealth of Independent States] countries, in EBRD countries, and also in Black Sea and Caspian Sea countries," Jabbarov says. 
The government has set up what Jabbarov calls a "hydrocarbon fund" of US$1.5 billion to stabilize the economy. In March, a state-run investment company with an initial budget of US$100 million was created to give loans to small- and medium-sized companies working outside the oil industry. 
However, within Azerbaijan there is much criticism of the government's oil fund. Its critics have said there is little to no oversight of the body. And corruption is still cancerous in Azerbaijan. The country languishes near the bottom of the annual corruption perceptions index drawn up by Transparency International. 

Energy Hub 
Jabbarov says that Baku also has clear ambitions to become a transit hub for Central Asian oil and gas. 
"What we would like certainly to see, is the continued increase of transit, [the] continued increase in shipping, in transportation of hydrocarbons, and in other products as well," Jabbarov says. 
Oil tankers already cross the Caspian Sea to feed the Baku-Tbilisi-Ceyhan pipeline to Turkey. Hopes for a trans-Caspian gas pipeline to supply Turkey and the EU further down the line are receding, however, despite Baku's lobbying. 
Energy experts in Baku say Western multinationals do not believe there are sufficient gas resources available cheaply enough in either Turkmenistan and Kazakstan to justify such an investment. This would augur well for Russia's drive to dominate the transit market from Central Asia. But the trans Caspian pipeline projects have been 'off-on-off' several times already and in the end will be determined by scarcity and price

Washington Wants Railway Connecting Turkey With Azerbaijan To Run Through Armenia
One way to ease relations between Turkey and Armenia, and indeed Azerbaijan and Armenia too, is to ensure the maximum of business as usual, doubtless the underlying reason for Washington's enthusiasm for the following project.
"We have always backed all projects which are designed to boost transport links between neighbour countries and we have been trying to develop projects aimed at linking the West and East and certainly we would like that a railway that is supposed to connect Turkey with Azerbaijan runs through Armenia," a senior US diplomat was quoted as saying by Azerbaijani Press Agency (APA).
The diplomat, Mathew Bryza, a deputy assistant secretary of state for European and Eurasian affairs and a US co-chairman of the OSCE Minsk Group, said the US administration cannot block the construction of a railway that Turkey, Georgia and Azerbaijan want to build, but added that the US hopes that in near future a transportation scheme that will include all the countries of the region will emerge. 
In another triumph for the redoubtable Armenian international lobby in Washington, last December US President George W. Bush signed into law a resolution imposing a ban on US financing of a proposed railroad that would bypass Armenia. The proposed new Caucasus rail line - at the urging of Turkey and Azerbaijan - would circumvent Armenia. 
Promoters of the project have sought, even at the planning stages, to secure US financing for this undertaking, prompting Congressional friends of Armenia to pre-emptively block such attempts. 
In October of 2005, the European Commission voiced official opposition to the proposed Caucasus railroad bypass of Armenia. A formal statement by the Commission's Directorate General for Transport and Energy noted that its construction was both unnecessary and inefficient in the light of the existing railroad connecting Kars, Gyumri of Armenia and Tbilisi!

Movement on key issue?
Then there is the unresolved issue of Nagorno-Karabakh, a region inside the internationally recognized borders of Azerbaijan, but occupied by Armenian troops together with seven neighbouring districts, since a 1994 cease-fire ended fighting. 
The war with Armenia has bequeathed Azerbaijan more than 800,000 refugees, most living in bleak conditions in and around Baku. 
Azerbaijan's government says it wants the conflict resolved by peaceful means, but has not ruled out war. According to Deputy Minister Jabbarov, the defence budget accounts for 15 per cent of all government spending in 2006, and exceeds US$1 billion. 
Compared to Azerbaijan's neighbours, that's a huge sum that's likely to be sustained. But in the military, as in every other sector of public life, a problem remains: where exactly is that money going? 
Sometimes the answer to that question is visibly evident. On the outskirts of Baku, palatial villas perch on hillsides overlooking the Caspian Sea. Fancy restaurants are packed with foreign and local oil executives. 
But there is another Azerbaijan of rural poverty and refugee camps, of post-apocalyptic vistas of oil-polluted wastelands -- an omen perhaps of what could happen when the oil runs out. 

Armenia, Azerbaijan 'Very Close' To Peace Deal
Aliyev may be toying with a startling new departure. There is a possibility of an extraordinary development in world politics that would be most welcome if it happened. It could even form a model for the resolution of the gravest contretemps of all, that between Israel and its enemies.
Both Armenia and Azerbaijan are led by youngish men who are still looking to the future to redeem them. What could be a greater achievement, securing them co-awardship of the Nobel Peace Prize than a deal on Nagorno-Kharabakh. 
Presidents Ilham Aliyev and Robert Kocharian were already widely expected to reach a framework agreement on Karabakh early last year. But two rounds of face-to-face negotiations between them collapsed due to last-minute disagreements. 
But a 'stand-off' can mean a 'shake-down.'
Azerbaijan are "very close" to hammering out an agreement on Nagorno-Karabakh before their presidential elections due next year, Washington's chief Karabakh negotiator told RFE/RL on February 7th.
"They don't agree 100 per cent on the basic principles [of a peaceful settlement,] but they are close, very close," said Matthew Bryza, a deputy assistant secretary of state and the US co-chair of the OSCE Minsk Group. "They agree on the philosophy of the basic principles and most of the basic principles themselves."
Those principles are laid down in the Minsk Group's most recent peace plan. It calls for a gradual resolution of the Karabakh conflict that would lead to a referendum of self-determination in the disputed territory after the liberation of Armenian-controlled territories in Azerbaijan proper.
Bryza noted that although the parties have yet to agree on "a lot of technical issues that are really outstanding," they may cut a long-awaited peace deal during the period between the May parliamentary elections in Armenia and the 2008 presidential elections due in both South Caucasus states.
"I think there is going to be a bit of a timeout in terms of the [Armenian and Azerbaijani] presidents' diplomacy now, with the parliamentary elections in Armenia," he said in a phone interview from Baku. "But I think all the other diplomacy can continue, and I think after the elections there is a strong possibility that the presidents will reinvigorate their negotiations."
In a joint statement that followed their late January visit to the conflict zone, Bryza and the two other Minsk Group co-chairs urged the two leaders to "prepare their publics for the necessary compromises."

Hence the need of repression?
Some conjecture that recent measures taken against ANS may be designed to strengthen the government's position for taking a potentially unpopular position soon on Nagorno-Karabakh. The two leaders have agreed to discuss proposals for a resolution to their dispute over the breakaway region of Nagorno-Karabakh. 
"Maybe they [the government] are getting ready to sign an agreement with Armenia on the Nagorno-Karabakh conflict resolution," suggested journalists' union chief Elchin Shikhlinsky. "And we know that ANS, which was the most popular television in the country, always was strongly against any defeatist peace with Armenia." 
Another analyst, Eldar Namazov, a former opposition movement leader and former advisor to the late President Heidar Aliyev, holds a different view, however. "I do not expect the signing of any peace agreement between Azerbaijan and Armenia," he said. "What happened with ANS is just the reinforcement of authoritarianism in Azerbaijan." 
Instead of Karabakh, Namazov points to a recently floated proposal that the constitution be amended to extend the president's term from five to seven years. "And the November 24 events are another attempt by the ruling elite to secure power for a longer period."

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The following is self-explanatory:-

POLITICAL CHANGES IN TURKMENISTAN OPEN NEW OPPORTUNITIES FOR AZERBAIJAN 
By Fariz Ismailzade 
The sudden and unexpected death of Turkmenistan's President Saparmurat Niyazov (Turkmenbashi) on December 21st, 2006, has opened a window of opportunity for both domestic reforms and changes in Turkmenistan's relations with its neighbours. Azerbaijan, being one of the closest neighbours, could greatly benefit from this situation. President Ilham Aliyev, speaking to Russian radio station Ekho Moskvy on December 22nd, declared, "Azerbaijan is ready for cooperation with Turkmenistan, but it is not going to interfere in the domestic affairs of this country."
Under Niyazov, bilateral relations between these two countries slipped into a type of localized Cold War, despite warm past relations and common Turkic roots. Not only did Turkmenbashi's unpredictable personality contribute to the worsening of relations, but there were also several key political issues on which the two countries disagreed. Much will depend on the next moves of the new leaders in Ashgabat. In the opinion of Azerbaijani political scientist Zardush Alizadeh, "Even after the death of Turkmenbashi, his system will continue in this country" (Day.Az News, December 23rd). His colleague Sabit Bagirov, from the Baku-based NGO "FAR Center," seems to agree: "The heir of Turkmenbashi will continue his policy" (Day.az News, December 22nd).
Yet, other opinion makers in Azerbaijan hold different views. A December 23rd editorial in Zerkalo stated that no matter how much the new political leadership of Turkmenistan pledges to continue the foreign policy course of Turkmenbashi, it is clear that some changes will follow; indeed, they are inevitable. The election platform of presidential front-runner Gurbanguly Berdimukhamedov contains some pledges of reforms in the education and economic sectors.
A more open government on the other side of the Caspian could create great opportunities for improving bilateral relations and developing regional projects. But in order to do so, several key issues need to be tackled.
Foremost is the issue of the legal status of the Caspian Sea. After more than a decade of negotiations, the littoral states of the Caspian Sea have not produced any breakthroughs, and the deadlock remains one of the main obstacles to the development of regional projects. Azerbaijan, Kazakstan, and Russia have agreed among themselves to divide the Caspian seabed according to the "median line" rule, while still disagreeing on apportioning the surface of the sea. Yet Turkmenistan and Iran have blocked all resolutions on the division of the sea by the median line and have lobbied for common usage of the sea.
The arrival of new personalities in power in Turkmenistan should be taken as an opportunity to revive the deadlocked talks on the Caspian Sea, and Baku should try to convince the new Turkmen leadership to side with Russia, Azerbaijan, and Kazakstan. If that happens, Iran will become a minority of one, and it will become much easier to nudge Tehran toward a compromise, given Iran's current dependence on other Caspian states for support against a possible military attack by the United States.
The resolution of the Caspian Sea's legal status will, in turn, help to resolve the issue of the Kyapaz oil field, which both countries claim. In 1997 the Azerbaijani government even proposed the joint development of the field, yet Niyazov's hostile attitude toward Heydar Aliyev, then president of Azerbaijan, effectively ruined that scenario.
Improved relations between Turkmenistan and Azerbaijan could provide a much-needed boost to the TransCaspian oil pipeline. First proposed in the mid-1990s, this project was one of the main elements of the East-West energy corridor plan by the U.S. administration and EU member states to diversify the regional pipeline network, increase the supply of the Turkmen gas in Western markets, and reduce the dependence of Turkmenistan and Azerbaijan on Russia for pipelines. Yet, disagreements between the political leadership of Turkmenistan and Azerbaijan also blocked these plans.
With the EU's misgivings about the reliability of Russia's Gazprom energy giant and the growing interest of European consumers in diversifying their energy supplies, the TransCaspian gas pipeline could be revived and turned into a serious regional integration plan. But this issue will require considerable lobbying not only from the US side, but also from EU politicians, as both Gazprom and the Iranian government will fight as hard against it as they did against the Baku-Tbilisi-Ceyhan oil pipeline in mid-1990s. While it will create some new tensions in Baku's relations with Tehran and Moscow, the pipeline could be worth the price of competition.
Normalization of bilateral relations between Turkmenistan and Azerbaijan could also open opportunities for joint patrol of the Caspian Sea's waters, as part of the fight against terrorism, drug smuggling, human trafficking and other transnational crimes that have emerged in recent years. Both countries need to speed up the process of reopening their embassies and fostering diplomatic ties.
Up until now, President Ilham Aliyev seemed less than eager to engage in a serious dialogue with Niyazov, considering the latter's cold attitude toward his father. Yet, the election of a younger person into the presidency in Turkmenistan could raise the opportunities for these two young leaders to find a common language. By sending Prime Minister Artur Rasizadeh to Niyazov's funeral, President Aliyev showed his intentions to restore the cooperation between the two countries. The time is ripe and Azerbaijan's government should not waste this opportunity. 

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ENERGY

SOCAR, Wintershall sign Ashrafi memorandum


Azeri state oil company SOCAR has signed a memorandum of mutual understanding with Germany's Wintershall for the development of the Ashrafi field, SOCAR President Rovnag Abdullaev said, Interfax News Agency reported.
"At the moment SOCAR is preparing a working strategy for the Umid, Babek and Nakhechevan structures, and the Karabakh, Ashrafi and Apsheron fields. The company plans to independently develop some fields, and to develop others jointly with foreign companies. The corresponding memorandum has already been signed with Wintershall for the Ashrafi field. A number of foreign companies are interested in the Umid and Babek structures and the Apsheron field," Abdullaev said.
He said the development of these fields and structures aims to support the level of SOCAR oil and gas production.
The contract for the development of the Ashrafi - Dan-Ulduzu structure was signed in 1997 by SOCAR (20 per cent), Unocal (25.5 per cent), Itochu (20 per cent) and Delta HESS (4.5 per cent). Small reserves of hydrocarbons, amounting to about 20 million - 40 million tonnes, were discovered at Ashrafi.
The contract expired on March 7th, 2000. Ashrafi was the first field in Azerbaijan discovered by foreign companies. The Ashrafi field is located north of the Apsheron Peninsula, 105 kilometres northeast of Baku.

Oil refinery in Turkey to cost US$5 billion

Investment will total US$ five billion to build a complex to refine Azerbaijani oil in Ceyhan, Turkey, Azeri state oil company SOCAR President, Rovnag Abdullaev, said, Interfax News Agency reported on January 22nd. 
"Our plans are to set up a refinery complex in Ceyhan to refine Azerbaijani oil that has been transported along the Baku-Tbilisi-Ceyhan oil pipeline," he said. "Initial work on the project is currently underway. Investment is estimated at US$ five billion according to preliminary calculations," he said. Azerbaijan, with the help of Turkey, will be able to enter European markets with the construction of such a complex, Abdullaev said. "We have opened a representation in Turkey and are actively implementing the project," he said. 

SOCAR to pump 750,000 tonnes of oil to Novorossiisk

Azeri state oil company SOCAR plans to pump 750,000 tonnes of oil through the Baku-Novorossiisk pipeline in the second and third quarters, a source in the company said, Interfax News Agency reported.
"We have obligations to export oil for joint ventures and operating companies producing onshore. As part of these obligations we will export 750,000 tonnes of oil," the source said. He also said pumping of oil has already been carried out by joint ventures and operating companies. In January 60,000 tonnes of oil were transported, and it is planned to transport the same amount in February. However, SOCAR's decision not to transport its own oil remains unchanged. "While there is still high demand for fuel oil, SOCAR is not likely to export its oil," the source said. Azerbaijan has six operating companies producing oil and gas at inland fields - Salyan Oil Ltd (Kyursengi and Garabagly fields) Karasu Operating Company (Kyalameddin and Mishovdag), Shirvanoil (North, Central, and South Gyurovdag), Gobustan Operating Company (Southwest Gobustan), Binagadi Oil (Binagadi), and AzShengli (Pirsagat), and two joint ventures - Azerbaijani-Malaysian-Turkish ANSHAD Petrol (Neftchala) and Azerbaijani-German AzGerneft (Ramany).

SOCAR calls 4th 2007 Azeri Light tender

Azeri state oil company SOCAR has called a tender for the fourth consignment of Azeri Light crude oil produced at Azerbaijan's Azeri- Chirag-Gunashli (ACG) fields in 2007, a source at SOCAR said on January 23rd, New Europe reported.
The consignment of 600,000 barrels will be shipped from the port of Ceyhan. Addax bought the first Azeri Light consignment this year, Glencore bought the second and Vilma Oil - the third. SOCAR has a 10 per cent interest in the ACG project. Profitable oil is distributed among shareholders in proportion to their participation in the project. Participants in the Azeri-Chirag-Gunashli contract currently includes British Petroleum - 34.1367 per cent, the US companies Unocal - 10.2814 per cent, ExxonMobil - 8.0006 per cent, Devon Energy - 5.6262 per cent, and Amerada Hess -2.7 per cent, Japan's INPEX Corp - 10 per cent and ITOCHU Oil - 3.9205 per cent, Norway's Statoil - 8.5633 per cent, and Turkey's TPAO - 6.75 per cent.

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FOREIGN COOPERATION

Aliyev, De Villepin vow to boost bilateral cooperation

Azerbaijan President, Ilham Aliyev, and Prime Minister of France, Dominique De Villepin, during their meeting at Matignion Palace in Paris on January 30th, emphasised that the visit by Azerbaijan President to France will give impetus to development of bilateral relations and expansion of cooperation between the two countries, New Europe reported. 
Azerbaijan-France economic ties have good prospects in all fields, and in this context, the documents to be signed between the sides will play an important role in setting concrete priorities of bilateral cooperation. 
In a joint statement on the results of state visit of the Azerbaijan president to France adopted in Paris, the two leaders said Azerbaijan and France adhere to the principles and goals mentioned in the "Agreement on friendship, mutual understanding and cooperation between the Republic of Azerbaijan and the Republic of France."
In this framework, France stated once again its support for the independence and territorial integrity of Azerbaijan. Both countries stressed the importance of the development of bilateral relations and necessity of continuation of the active and deeper political dialogue at all levels. 
The parties stated their keenness for development of their relations within the frame of respect for universal values as human rights and democracy, legal state and market economy. 
The parties have specified the questions of mutual cooperation, noting "Azerbaijan and France mark their satisfaction with the level of cooperation in the energy field and participation of the French companies in Azerbaijan's economy."
The two sides welcomed the positive tendency in the trade between two countries and approved their readiness for deepening the economic ties and expressed their wish to make further efforts to boost the French investments in Azerbaijan.
Both countries noted their adherence to deepening of existent cooperation in the field of culture, health and social security, as well as organizing of mutual days of culture. 
The statement also refers the issues related to global threats and the Armenia-Azerbaijan, Nagorno Karabakh conflict: "Azerbaijan and France confirmed their readiness for bilateral and multilateral cooperation in further combat against global threats as international terrorism, illegal drug circulation and narco-trafficking and their realization, proliferation of mass destruction weapons, transnational organized crimes, illegal arm and human trade," the statement read.
Both countries have noted rapprochement of their positions in coordination of the basic principles for settlement of the Nagorno Karabakh problem with the mediation of the OSCE Minsk Group co-chairs from Russia, the US and France. They emphasised the necessity of making more active efforts for peaceful resolution to the conflict. 
The parties also hailed the signing of the plan of action between EU and Azerbaijan in the fame of New Neighbourhood Policy, noting this policy would contribute to the realization of political and economic reforms in the South Caucasus and region. 
The parties have agreed for continuation of mutual visits at all levels. The President of France Jacques Chirac is going to visit Azerbaijan in the first half of 2007.

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FOREIGN GRANTS

Norway provides Azerbaijan with grant to develop hydropower

Norway is providing Azerbaijan with a US$1.5 million grant to develop small hydroelectric systems under a project of the United Nations Development Programme (UNDP); Azerbaijan and the UNDP signed a contract on January 17th in Baku, Interfax News Agency reported.
Azerbaijan's Industry and Energy Minister, Natiq Aliyev, and UNDP resident director, Marco Borsotti, signed documents on technical assistance for a project to develop small hydroelectric systems and to remove barriers in developing long-term and commercial wind energy in Azerbaijan.
The project to develop small hydroelectric systems envisions providing assistance in setting up a favourable investment climate in hydroelectricity in Azerbaijan, including improving the legislative base, raising investment and implementing one or several pilot projects.
The second project envisions that the Global Environment Fund and UNDP will provide Azerbaijan with US$45,000 in aid. A plan of measures will also be drafted to get rid of legal and institutional problems in the sector for US$ one million.

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FOREIGN RELATIONS

Yerevan, Baku discuss Karabakh settlement

Russian Foreign Minister, Sergei Lavrov, has discussed prospects in talks on the settlement in Nagorno Karabakh with his Armenian and Azerbaijani counterparts, Vardan Oskanian, and, Elmar Mamedyarov, Interfax News Agency reported. 
Oskanian and Mamedyarov held consultations on the settlement, with the attendance of international mediators - co-chairmen of the OSCE Minsk Group. Deputy Foreign Minister, Grigory Karasin, represented the Russian side at the meeting.
An earlier report said that Moscow would host the talks between the foreign ministers of Azerbaijan and Armenia on the Karabakh conflict and that it would be the first meeting at such a level in 2007. The next meeting between the presidents of the two countries on a peaceful settlement of the problem hinges on the results of the talks between the foreign ministers. 
Diplomatic sources told Interfax that the talks ended, but that the results were not disclosed. 
"The present state and prospects in the negotiating process on Nagorno Karabakh were discussed during the meeting," the report said. On January 23rd, Azerbaijan and Armenia came to an agreement to resume negotiations in seeking to settle their conflict over Nagorno-Karabakh, a Moscow diplomatic source said, citing "intensive and difficult" talks in Moscow between the two countries' foreign ministers. 

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TRANSPORT

Baku, Tbilisi finalise deal on railway project 

Azerbaijan and Georgia are close to finalise deal on terms of financing construction of the Baku-Akhalkalaki-Kars railway link which will connect Azerbaijan with Turkey via Georgia, officials said. Azerbaijani Transport Minister, Zia Mamedov, and the head of Azerbaijani Railways, Arif Askerov, led the Azerbaijani delegation, which met with Georgian Prime Minister, Zurab Nogaideli, on January 12th, the Messenger reported. 
Georgian Economy Minister, Giorgi Arveladze, who was also engaged in talks said that this was a strategic project for Georgia. Former Economy Minister, Irakli Chogovadze, attended the negotiations as a consultant to the Georgian government as he was engaged in previous talks while serving as the economy minister. "I think we will have no problems and the results of talks will be known straight away. I do not think there will be problems with financing the project - the Azerbaijani side is ready to finance it," Mamedov said.
The project assessment report was expected to be ready in February, which will estimate the total amount of finances needed for implementation of the project. Reports about the total cost of the project vary from US$400 million to US$600 million. The project involves the construction of a railway link between the Turkish town of Kars and Akhalkalaki in southern Georgia. In addition, the rehabilitation of a portion of the railway on Georgian territory will also need to be completed. "We want to launch construction by the end of second quarter of 2007," the chief of the Georgian state-run Railway Company Irakli Ezugbaia said, but added that rehabilitation works on a 192-kilometres portion of railway can be launched even earlier.
He said project implementation would take about two and half years. The railway will have a capacity to transport 15 million tones of cargo annually, Ezugbaia added. The presidents of Azerbaijan, Georgia and Turkey signed a joint declaration on May 25, 2005 in Baku over the construction of railway. Armenia is against the Baku-Akhalkalaki-Kars railway, claiming that the project will further isolate the landlocked country. As an alternative, Yerevan is pushing for reopening the already existing Kars-Gyumri-Tbilisi railway.

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