Trans-Asian Railway Is On track, Driven By Azerbaijan

Another cornerstone of the new global economic order was laid last Thursday.

It didn’t get any coverage in the mainstream press. And, all by itself, you may even wonder why I’m bothering to mention it…

The answer is easy enough: I’ve spotted an enormous profit opportunity here. Let me tell you what I mean.

Last Thursday, the presidents of Turkey, Georgia and Azerbaijan inaugurated the construction of the Turkish section of a regional railway network.

That may sound like a non-event. But it’s a vital part of a much bigger inter-continental railway programme to link Asia and Europe. That’s helped trigger-off an economic boom in the Caucasus.

A new Silk Road: Laid down in iron

The Kars-Tbilisi-Baku (KTB) railroad will link the eastern Turkish city of Kars with the capitals of Georgia and Azerbaijan.

The railroad is scheduled for completion in 2011. And it’s expected to carry 1.5 million passengers and 6.5 million tonnes of cargo per year in the first three years. That should more than double to 3 million passengers and 15 million tonnes of cargo per year until 2015.

Azerbaijan, Georgia, and Turkey are beginning to form a common economic region, increasingly connected with Europe and potentially with Central Asia, on either side of this region’s territory.

The three countries are already economically linked. The Baku-Tbilisi-Ceyhan (BTC) oil pipeline carries crude oil from Azerbaijan's Shah Deniz oil fields to world markets through Turkey's Mediterranean port of Ceyhan. And there’s also a Baku-Tbilisi-Erzurum (BTE) gas line. But trade links between Turkey and the Caucasus region are limited. So there is still enormous scope for growth once the railway starts running.

What’s really fascinating about this is who is driving it. Not the regional giant, Turkey, but tiny oil-rich Azerbaijan.

This little country already pumps more than a million barrels of oil daily. The Azerbaijanis used this petrodollar bonanza to single-handedly finance the railroad’s construction on Georgian territory.

Azerbaijan’s economy grew by 23% last year and could grow by 19% this year. In fact, it is growing so quickly that the economy is going to be more than twice as big next year as it was last year!

This is a big project. It involves constructing 105 kilometres of new rail tracks In Turkey and Georgia. And another 183 kilometres of existing rail track on Georgian territory will have to be upgraded. The project will cost an estimated $600 million.

The economic benefits are obvious. But it has been held up by regional politics. The European Union, international financial institutions, and Turkey declined to finance it because of ongoing territorial disputes in the region.

So, the International Bank of Azerbaijan has provided a US$200 million loan for the project on extremely generous terms. Georgia will repay the loan using revenue generated by the railroad on its territory.

At the same time, Turkey is building a railroad tunnel under the Bosporus that will link Asia and Europe. The Marmaray tunnel is expected to be completed by 2010. And it is going to be shot in the arm for the KTB railroad. Because trains from any point in Europe will now be able to travel to the Caspian Sea without interruption. The railways already carry a huge amount of trade between Asia and Europe. About $75 billion worth of goods each year. The new Eurasian rail connections could give that a huge boost. Turkey alone could generate $7 billion annually from it.

This could lead to a massive expansion in the capacity of Turkish State Railways, which currently handles 19.5 million tons of cargo annually. That could rise to 30 million tonnes in the medium term.

That’s just the beginning

But more importantly, it’s where the KTB railway links up to an even bigger story: the economic revival of Central Asia.

The KTB railroad will open direct access for the Central Asian giant, Kazakhstan, to European Union territory for the first time. And the Kazakhs plan a massive increase in commodity exports to Europe, including grains.

In fact, Kazakhstan is now completing an 800,000-tonne grain-handling terminal near Baku, for trans-shipment from barges to the KTB railroad.

But even that’s just the beginning. By 2011, the new Caucasian railway will allow direct rail travel between London and Shanghai. That’s a journey I would love to make.

And that’s when we’re really going to see a revival of the ancient Silk Road….laid down in iron this time.

And the Caucasian countries look set to be big winners.

How to profit from it

We aren’t invested in the Caucasus right now. But amazing things are going on in the region. And they’re hardly getting a mention in the mainstream financial media.

Profit Hunter readers have already made a good profit in the Caucasus when we bought into a Georgian company listed here in London in January last year. We cashed out with a 40.4% profit in November. Not bad at all when you remember how markets were tanking back then.

That company’s shares have fallen a lot further since then. In fact, it’s even cheaper today than it was when we first recommended it.

And there is nothing wrong with this company either. In the first three months of this year it more than doubled profits from the same period last year. And it almost doubled its asset base as well.

What’s been grating on it is the threat of political instability in the Georgia. The little Caucasian country is locked in a political standoff with Russia. There are territorial disputes. And the Russian’s have backed a separatist movement in the north of the country.

But its economy has still been growing massively. It grew by 12.4% last year. And the IMF predicts 9% growth this year. With growth figures like that, this company is in a very attractive market. This company definitely looks very interesting right now.

But the whole region is a fantastic opportunity. And we’re also looking for other ways to buy into Caucasia's boom. Here at PH, you can bet that we are going to leave no stone unturned as we keep looking for new ways to profit from this.

To get in on this opportunity, before others do, click here

Regards,

Manraaj Singh
Editor
Profit Hunter

p.s. If you’re a bit of railroad or Caucasian junkie, you can actually watch the inauguration of the TBK railroad last Thursday on Youtube. Just click here:

http://youtube.com/watch?v=Vb7DYNMURDE

Please note: Past performance is not a reliable indicator of future results

Since the service began on 22/12/03 and 30/06/2008, the average overall performance of the open and closed shares recommended is up 36.5%. In the 12 month periods ending 30/06/2004, 30/06/2005, 30/06/2006, 30/06/2007 and 30/06/2008 the overall performance of shares closed during these periods was -19.4%, 47.5%, 40.5%, 34.9%, 53.8% respectively. P.S. If you enjoyed this article then we encourage you to sign up for Profit Hunter. Track down exciting opportunities in the worlds’ emerging markets and always stay ahead of the curve.

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Trans-Asian Railway Is On track, Driven By Azerbaijan

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