International Alert’s latest research looks at the potential economic benefits of restoring the railways in the South Caucasus, in order to assess whether this could be a useful economic component of the peace process.
It is the result of a 10-month study involving researchers from different parts of the South Caucasus and looks at two stretches of the railway network: Sochi-Sukhum/i-Tbilisi-Yerevan and Kars-Gyumri-Nakhichevan-Meghri-Baku.
Protracted conflicts have been a source of instability in the South Caucasus since the 1990s, jeopardising socio-economic development and disrupting transport links – both physically and politically. Yet the peace processes in the South Caucasus have traditionally been dominated by political and security concerns and overlook the importance of economic interaction as a way of supporting peace.
The question of restoring transport links is also often influenced by political and security interests – either as a means of strengthening one’s own position or weakening that of another. In the absence of any real economic justifications, parties fall back on myths, which tend to reinforce either one or the other political line.
Our economic research, however, shows that the restoration of the Sochi-Sukhum/i-Tbilisi-Yerevan railway route does not have economic benefits.
The high cost of repair works on the Psou-Ingiri (Zugdidi) segment and the relatively small volume of potential cargo mean that freight traffic will not ensure a return on investment.
For Georgia, while the cost of repairing the Ingur/i-Ingiri segment of the railway would not be considerable and could be paid back even with minimal cargo traffic, it would not have an overall positive effect on Georgia’s economy. Its socio-economic effects, such as stimulating the production of export goods, creation of jobs and development of regional infrastructure, would also be insignificant.
For Armenia, however, direct rail connection could be of sufficient economic benefit in the medium and long term.
This study was conducted between December 2012 and September 2013 and the methodology for analysing the potential economic effects of restoring the railways was jointly developed by the research team.