A hub despite conflicts: Azerbaijan brings Eurasia together Khazar Akhundov’s analysis

The recent normalisation of Azerbaijan–Russia relations, alongside renewed momentum in Azerbaijan’s economic ties with Iran, is most visibly taking shape in the transport and logistics sector.

However, progress has been disrupted by the war in the Persian Gulf. As a result, Iran has postponed until next year the construction of the Rasht–Astara railway — a key link in the International North–South Transport Corridor (INSTC).

In contrast, Azerbaijan is pressing ahead. With support from the Asian Development Bank (ADB), Baku is upgrading power supply, signalling, and communications systems along a critical stretch of the corridor — the Bilajari–Yalama railway line. At the same time, construction has accelerated on transport infrastructure along the Iran–Azerbaijan border in the Zangilan district.

Despite persistent geopolitical differences, all countries across the vast Eurasian space remain interested in strengthening regional connectivity, including the completion of infrastructure for the International North–South Transport Corridor (INSTC). Toward the end of last year, prospects emerged for elevating the trilateral format of economic and transport connectivity between Baku, Moscow, and Tehran to a qualitatively new level. This was evidenced by recent meetings on the sidelines of regional summits and reciprocal visits by the heads of railway and other relevant agencies, helping advance capital-intensive transport projects.

Unfortunately, there has also been a “fly in the ointment.” On the eve of these developments, Iran’s Ambassador to Russia, Kazem Jalali, stated that the signing of the executive contract for the construction of the Rasht–Astara railway section has been postponed until the end of 2026 due to the war in the Middle East: “However, the war will not force us to abandon this plan altogether, and this year we hope to begin the implementation phase of the contract.” According to the Iranian diplomat, the current situation only underscores the importance of efforts to develop logistics infrastructure along this route.

Notably, in May 2023, Moscow and Tehran signed an agreement on the joint financing, design, and construction of the 160-kilometre Rasht–Astara railway section, with the total project cost estimated at €1.6 billion.

Over the past period, Iran has completed land acquisition work and begun preparations for the construction of the Rasht–Astara railway line. Initially, the construction was expected to be completed by around the end of 2028; however, given the current force majeure circumstances, these timelines are likely to be postponed by a couple of years.

In this regard, since 2017, Azerbaijan has been working to eliminate “bottlenecks” along the main route of the INSTC. Through the efforts of Azerbaijan Railways CJSC (ADY), tracks have been laid from the border town of Astara directly to the state frontier, a railway bridge has been built, and new terminals and checkpoints have been commissioned at the border.

In particular, the region’s largest grain terminal — the Astara Grain Terminal — has been constructed with a throughput capacity of 500,000 tonnes per year.

ADY also initiated the construction of the Astara border multipurpose terminal. As the Chairman of Azerbaijan Railways, Rovshan Rustamov, noted recently, construction and installation works at the terminal have been completed by 92%, and barring any force majeure, full commissioning of the Astara hub is expected within the next 2–3 months.

Within the framework of the project, one bridge across the Astarachay border river has already been commissioned, while construction of six additional bridges has continued, with the work reaching 90% completion by the end of last year.

The 35-hectare terminal is located in the Iranian city of Astara, 1.4 km from the border, and its territory has been leased to Azerbaijan for a period of 25 years. The facility is operated by ADY’s subsidiary, the South Cargo Terminal company.

According to the head of Azerbaijan Railways, the launch of the terminal will increase both the volume and speed of cargo transportation along the North–South Corridor, significantly strengthening Azerbaijan’s position as a transit country.

Due to the absence of a continuous railway connection, cargo transshipment at the Astara terminal is carried out under a combined scheme: goods are delivered to the Iranian border by ADY trains, then reloaded onto heavy-duty trucks and transported further within Iranian territory to their final destination. The reverse flow operates in the same manner.

Even with the unfinished terminal operating at only partial capacity, 692,000 tonnes of cargo were transshipped through it in 2023, and more than 777,000 tonnes in 2024.

With all facilities fully commissioned, the throughput capacity of the Astara terminal is expected to increase to 3.5 million tonnes per year in the near term, and according to a protocol signed by the railway authorities of Azerbaijan, Russia, and Iran, this figure could potentially rise to 5 million tonnes per year in the longer term.

Azerbaijan has been strengthening the transport infrastructure of the North–South Corridor not only in the southern direction but also in the northern one. In this regard, the country is focused on modernising key railway segments of the route. In particular, there is a need to align the capacity of the Baku–Yalama section (currently 10 million tonnes per year) with the Alat–Astara section (7.5 million tonnes per year). In the second phase, both sections are expected to be synchronised to handle up to 15 million tonnes of cargo annually.

The next step will be the reconstruction of the Alat–Osmanli–Astara railway line, which is included in the Action Plan for increasing Azerbaijan’s transit potential for 2024–2026.

To this end, Azerbaijan Railways CJSC has been actively cooperating with the Asian Development Bank (ADB) in recent years. In 2024, an agreement worth $131.5 million was signed with the ADB, with the funds planned to be used for the completion of the rehabilitation of 166 kilometres of double-track railway infrastructure, including civil structures and level crossings on the Sumgayit–Yalama section.

According to a statement released by Azerbaijan Railways CJSC (ADY) on April 18, the company will soon begin design and construction works on the modernisation of power supply, signalling, and communication systems along the Bilajari–Yalama railway line, which is approximately 192 km long (a double-track line with 15 stations).

This project is part of a broader programme covering the modernisation of energy supply, signalling, and communication systems along both the Bilajari–Yalama and Baku–Boyuk Kasik railway sections. The modernisation process is strategically important for expanding the capacity of the North–South Transport Corridor.

In this context, the Azerbaijani government has applied for financial support from the Asian Development Bank (ADB). The bank is currently considering the allocation of $325 million; however, a final decision is expected to be made by its Board of Directors in June next year.

Azerbaijan is actively developing other transport routes whose substantial transit potential could further enhance the logistical connectivity of the North–South project. This issue was recently discussed during the 24th meeting of the Intergovernmental Commission (IGC) on Economic Cooperation between Russia and Azerbaijan, held in the Zangilan district.

Russian Deputy Prime Minister and co-chair of the IGC, Alexey Overchuk, highly praised the level of development of transport and logistics infrastructure in the territories of Azerbaijan liberated from occupation. According to him, a network of highways has already been established, and the railway line heading towards Armenia is also largely ready.

“We are currently at an international checkpoint and see a new bridge here, which is an integral part of both the East–West and North–South transport corridors. The Russian Federation is interested in the earliest commissioning of this infrastructure,” the deputy prime minister emphasised.

Indeed, Azerbaijan is shaping a powerful transport hub of the Middle Corridor in East Zangezur, which in the future is expected to handle up to 15 million tonnes of cargo annually. This will become possible following the implementation of the Trump Route for International Peace and Prosperity (TRIPP) project in Armenia, as well as the connection of the railway infrastructure of the Nakhchivan Autonomous Republic (NAR) with Türkiye via the under-construction Kars–Iğdır–Aralık–Dilucu railway line, which is 224 km long.

Moreover, through this infrastructure, Nakhchivan will gain a short access route via the Julfa railway node to Iranian ports in the Persian Gulf, including for transit cargo within the framework of the transport corridors. In this regard, construction continues on the Iranian side of the 107-km Julfa–Kalaleh highway (part of the Araz Corridor project), which will provide high-capacity connectivity between Nakhchivan and Iran’s main transport arteries.

To this end, Azerbaijan has also accelerated the construction of the Aghband–Kalaleh road bridge over the Araz River and has been developing border and customs infrastructure in this area.

"The Aghband bridge over the river is fully completed, and it is expected that the construction of the border checkpoint will be finalised in the near future. The Iranian side is also preparing temporary transit infrastructure on its territory," said Azerbaijan’s Deputy Prime Minister and co-chair of the Intergovernmental Commission, Shahin Mustafayev, during talks in Zangilan.

According to him, once the project is fully completed, the border infrastructure created here will be capable of handling up to 1,000 freight trucks per day. It will also make transport links between the Persian Gulf and the Black Sea significantly more efficient.