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TRACECA – the Business of Eurasia

Speech by Lodewijk Briét at the US Chamber of Commerce, Subcommittee on Eurasia, Washington DC, 31 March 1999

I. Introduction

It is a pleasure to speak to you today on a subject other than the one trillion dollar trade and investment relationship between the US and the EU. It is a pleasure too not to have to dwell on bananas, hormones or hushkits. The purpose of my remarks is not to take you into the world of high politics but rather to provide you with factual information on the European Union’s assistance with the development of transport corridors from the West to Central Asia.

For those of you who have spent last night (full moon and blue moon) without sleep wondering about TRACECA, it stands for Transport Corridor Europe-Caucasus-Asia. The TRACECA Program was launched at a conference in Brussels in May 1993 which brought together the trade and transport ministers from eight of the TRACECA countries (five Central Asian republics and three Trans-Caucasian republics). It was agreed to implement a program of European Union funded technical assistance to develop a transport corridor on an West-East axis from Europe, across the Black Sea, through the Caucasus and the Caspian Sea to Central Asia.

The European Union offers this program as an additional route that would complement all traditional routes. The project corresponds to the global European Union strategy towards these countries and is based on the following objectives:

• To support the political and economic independence of the republics by enhancing their capacity to access European and World markets through alternative transport routes;
• To encourage further regional co-operation among the republics;
• To increasingly use TACIS and TRACECA as a catalyst to attract the support of International Financial Institutions and private investors; and
• To link the TRACECA route with the Trans-European Networks (TENs) (thus providing an important and direct link to the EU and EU accession candidate countries).

I should explain that TRACECA is part of the broader Technical Assistance to the Commonwealth of Independent States (TACIS) . Under TACIS finance is provided for the transfer of know-how to twelve countries of the former Soviet Union, and Mongolia. It fosters the development of market economies and democratic societies. It is the largest program of its kind operating in the region, and has launched more than 3,000 projects worth more than 3 billion Euro since its inception in 1991. Note that TRACECA has been dialogue driven from its inception in 1998, whereas Tacis used to be demand-driven.

Today the TRACECA program has financed 22 Technical Assistance projects (30 million Euro) and 7 investment projects for the rehabilitation of infrastructure (25 million Euro).

The leaders of the participating Republics consider that the TRACECA route is of strategic importance to establish an alternative transport outlet to Europe which will complement the traditional and often heavily overloaded route via Moscow.

The program has resulted in closer co-operation and dialogue among government authorities which has led to agreements to keep transit fees at competitive levels; the facilitation of easier border crossings for transport; the simplification of trade procedures and improved customs co-operation between participating states. There have also been agreements to ship large volumes of new cargo along the TRACECA route and the recognition that this route represents the shortest distance and potentially the fastest and cheapest route from Central Asia to deep sea ships serving world markets.

The technical assistance provided through TRACECA has helped to attract larger investments from the International Financial Institutions that include the European Bank for Reconstruction and Development who have made a number of commitments for capital projects on ports, railways and roads along the TRACECA route totaling over $ 250 million and the World Bank who have made commitments for new capital projects on roads in Armenia and Georgia totaling over $ 40 million.

In addition, European Union private investors are engaging in joint ventures with Caucasian and Central Asian transport companies. The European Union is supporting the program with other projects to further enhance regional co-operation and economic sustainability in the region such as the Southern Ring Air Routes project and the Oil and Gas Pipeline project (INOGATE).

II. Working Group Conferences

Working Group Conferences are organized on a regular basis in order to present, discuss and endorse new TRACECA projects. These Conferences are attended by high level Delegates of the TRACECA Beneficiary States, by representatives of International Financial Institutions (EBRD, WB, but also the Asian Development Bank, the Islamic Bank and Kuweiti Fund) and other International Organizations (UN, BSEC, IRU, UIC...) and by officials of the European Union.

So far, five Working Group Conferences have been held, the last one in Tbilisi in May 1998. But I would like to say more about the latest meeting which took place in the framework of the TRACECA program, namely the Baku Conference.

On the initiative of the Presidents of Azerbaijan and Georgia and with the support of the European Union Tacis - TRACECA program an international conference, "Restoration of the Historic Silk Route" was held on 8^th September, 1998 in Baku, Republic of Azerbaijan.

Presidents of Azerbaijan, Bulgaria, Georgia, Kyrgyzstan, Moldova, Romania, Turkey, Uzbekistan and Ukraine, representatives of the European Commission, as well as the heads of governments and transport ministries and experts from 32 countries of the world attended this conference. Representatives of 12 international organizations also participated. Reporters and journalists from many countries attended and the proceedings of the conference were published widely.

The participants emphasized the importance of the revival of the Great Silk Route, and we have reason to believe that the contribution to that end of the TRACECA project, implemented within the European Union’s Tacis Program since May 1993, was much appreciated.

It was stated at the conference that the TRACECA corridor is in full operation, will stimulate the development of the economies of all concerned countries, will be of great significance for international integration, and is a regional priority.

Interest of such countries as Japan, China and the United States, as well as Europe, in this program shows that the initial idea of a West - East transport corridor has attracted attention well beyond the limits of the Caucasus and Central Asia.

To be noted also the participation of a delegation from Armenia, led by that country’s Prime Minister.

The most important achievement of the conference was the signing by the heads of delegations of Armenia, Azerbaijan, Bulgaria, Georgia, Kazakhstan, Kyrgyzstan, Moldova, Romania, Tadjikistan, Turkey, Ukraine and Uzbekistan of a so-called Basic Agreement, i.e. the "Basic Multilateral Agreement on International Transport for the Development of the Transport Corridor Europe - Caucasus - Asia". Included also are Technical Annexes to this Basic Agreement on:

• international rail transport
• international road transport
• international commercial maritime navigation
• customs procedures and documentation handling

The goals of the Basic Agreement and its technical annexes are as follows:

• development of economic relations, trade and transport communication in Europe, Black Sea region, Caucasus, Caspian Sea region and Asia
• ensuring access to the world market of road, rail transport and commercial navigation
• ensuring traffic security, cargo safety and environment protection
• harmonization of transport policy and legal structure in the field of transport
• creation of equal conditions of competition for transport operations

These goals will be pursued by the establishment in the near future of a permanent Inter-Governmental Commission at Baku, with the continuing active support of TRACECA.

At the end of the conference the delegations signed a so-called "Baku Declaration", foreseeing further international co-operation for the development of TRACECA.

III. Co-operation with International Financial Institutions

TRACECA has always worked in close co-operation with the International Financial Institutions and many agreements have been made with World Bank and the EBRD. These include:

• The construction of highways in Turkmenistan, with the technical assistance (TA) for 0.75 million Euro being financed by the European Union for the feasibility and design of two highways prior to a $80 million Euro EBRD loan.
• The rehabilitation of Baku Port with TA financed by the European Union for 1.5 million Euro for the feasibility and design of a ferry terminal to be reconstructed with a $50 million Euro EBRD loan.
• The rehabilitation of Turkmenbashi Port with TA financed by the European Union for 1.5 million Euro for the design, study and preparation of the tender for the ferry terminal prior to a $50 million Euro EBRD loan.
• The upgrading of roads in Armenia with TA financed by the European Union for 0.75 million Euro in order to provide the TA package for the second half of the $40 million Euro WB/EBRD loan.

As TRACECA now includes direct investment projects as well as Technical Assistance, complementarity of actions with the International Financial Institutions has to be maintained. TRACECA needs to act as a co-financier rather than a substitute donor. The objectives of investment projects therefore still focus on the stimulation of participation by others. This is achieved when potential revenue streams from TRACECA investments add to and enhance the overall investment attraction of a larger package including an International Financial Institution.

TRACECA does not work directly with private investors. TRACECA aims to be a facilitator to bigger investment by providing the beneficiary states with the required basic technical background documentation, feasibility studies, enabling them to make decisions on investments for transport infrastructure. At the same time, TRACECA finances the basic technical documentation such as design studies and tender documents to enable the IFI’s to implement loans agreed with the beneficiary states. These tenders, organised by the IFI’s are open international tenders, open not just to companies located in the EU but to companies worldwide.

IV  US and EU

Before concluding, let me say a brief word about coordination and cooperation between the EU and US. Much of our work is done on the basis of the New Transatlantic Agenda, signed in December 1995 by President Clinton, Felipe Gonzales and Jacques Santer, President of the European Commission. A series of activities are foreseen in four broad areas, diplomatic cooperation, global issues, trade and people-to-people. The NTA is an important instrument of partnership between the EU and the US which covers a very broad range of activity both regionally and globally. It focuses on actions vital to transatlantic and global peace, prosperity, security and stability. Time constraints force me to refer you to the detail given on our web site which you will find among the materials on the table at the entrance. The EU and US are both partners and competitors. We both strongly support the growing independence, sovereignty and prosperity of the New Independent States of the Eurasian region. We also agree on the principle of multiple routes and on furthering regional cooperation. And while we do not always agree with our respective policies to Iran (cf. US opposition to the transit of Caspian energy through Iran), here too there is growing convergence between our positions, not least as a result of the encouraging developments in the region itself.

Thank you for your attention.

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