Asian Development Bank Agrees Azerbaijan Loan To Finance Railway To Russia

The Asian Development Bank (ADB) and CJSC Azerbaijan Railways have signed a loan agreement for US$131.5 million to complete the reconstruction of a 166-kilometer section of a double-track railway, including civil structures and railway crossings on the Sumgait-Yalama route, to the Azeri border with Russia.

This loan is additional financing for the Railway Sector Development Program approved in 2017, aimed at modernizing railway infrastructure in Azerbaijan, ADB have stated. Under this program, the bank had already allocated US$150 million to Azerbaijan Railways for the project.

The loan is granted for a term of 22 years, including a 2-year grace period. The Azerbaijani government will contribute US$29 million to the project. The additional funding will expand the initial project to cover the modernization of approximately 333 kilometers of the main railway from Sumgait to Yalama, including civil structures and railway crossings, with the railway’s additional construction now expected to be completed by December 31, 2025.

“Upgrading and modernizing rail service will enable Azerbaijan to provide safer, cheaper, and more energy-efficient transport,” said Yevgeniy Zhukov, the ADB Director General for Central and West Asia. “At the same time, it will help Azerbaijan optimize its strategic location at the crossroads of Europe and Asia.”

The project is aligned with the transport strategy of the Central Asia Regional Economic Cooperation (CAREC) Program, which aims to contribute to regional economic development by improving rail and multimodal infrastructure and commercializing and reforming railway activities.

Under ADB’s Railway Sector Development Program, Azerbaijan Railways (ADY) implemented comprehensive reforms in 2018–2019 that strengthened its financial capacity and railway management. Since then, ADY continued efforts to improve its operational and financial performance. Between 2018 and 2022, ADY’s freight transport grew by 34%, from 14 million tons to 18.7 million tons. More than 80% of this is international or transit traffic involving Russia.

Azerbaijan has been a member of ADB since 1999. Over the past 25 years, the bank has provided the country with over US$5 billion in loans.

The Sumgayit-Yalama line is part of the North-South international transportation corridor, which crosses the territory of the country from the border with Iran in the south to the Russian border in the north. The corridor has great potential as an alternative to the sea route from India to Europe via the Suez Canal, and will further accelerate freight capacity development to the Caspian Sea region, including Iran.