the challenges facing landlocked developing countries: a case study ...

worse (World Bank 2000). In fact, while shipment of a container via this highway only takes
3-5 days, the average cost is US$2,200; shipment to Bandar Abbas (Iran) takes 10-12 days
and costs US$700-800 (World Bank 2002). The highway’s incorporation into the new
Transport Corridor Europe Caucasus Asia (TRACECA ) Silk Route project should bring
about significant improvements. A US$40 million World Bank sponsored Highway Project
has already been initiated to improve this route.
Azerbaijan’s internal road network, while extensive, is also in a severely dilapidated state
due to poor maintenance; Kocks Consult recently estimated that 56% of the main road
network was in a poor state of repair while funding for maintenance is only one quarter of the
required level (World Bank 2002). The poor condition of the roads has not only contributed
to costs associated with delays and accidents but is considered to have increased vehicle
operating costs by between 28 and 44 percent (World Bank 2001). The dilapidated condition
of Azerbaijani roads can largely be attributed to minimal road funding since independence –
only one quarter of the required level.
Rail
Since the fall of the Soviet Union, Azerbaijan’s railways have witnessed a precipitous decline
in freight traffic to 10% of previous levels. Lines are now in a state of disrepair: the EU
estimates that nearly 900 km of rail need to be replaced and only 30 locomotives out of an
“inherited fleet” of 560 are operable (TRACECA 2002). On the positive side, recent efforts
associated with TRACECA have already brought about significant improvements in rail
efficiency. Most of the improvements have been focused on improving the east-west rail
corridor, from Baku to Georgia, which is Azerbaijan’s most important. The European Bank
for Reconstruction and Development has specifically allotted US$20.2m for rehabilitation of
these railways.
Azerbaijan has also benefited from the recent (1999) construction of a rail line to Russia that
bypasses Chechnya, thereby avoiding the Chechen war. The rail corridor to Iran remains of
minimal importance, suffering from limited capacity, disrepair, and vandalism.
Ports/Waterways
As part of the new Silk Route the port of Poti (Georgia) will continue to play the leading role
in Azerbaijan’s freight traffic. For more information on this port, see the section on Armenia.
Azerbaijan’s own port of Baku on the Caspian sea primarily serves as a transshipment point
for trade with the Central Asian states. Since Azerbaijan’s primary trading partners are
Russia and member states of the EU, the port does not handle much Azerbaijani freight
traffic. The port is currently operating at only 30% of capacity and its potential efficiency
suffers from low levels of infrastructure.
POLITICAL RELATIONS
Although Azerbaijan has been adversely affected by internal civil war in its main transit
neighbor, Georgia, the two countries maintain warm relations. Earlier this year the countries
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