"PUNISHABLE" INITIATIVE

The government of Azerbaijan is currently actively seeking ways of continuing the development of the country's oil sector so that the growing volume of oil revenues does not lead to the economy becoming dependent on one factor. Various programmes are approved, investments are made, the infrastructure is developed, etc. But at the same time the authorities openly acknowledge that it would be impossible to carry out all the planned work in this area without the oil dollars.

It is well known that the Oil Fund will receive 150bn dollars in the course of the next 15 years. At the same time you can hear quite often that not all of Azerbaijan's profits from oil are being spent for the benefit of the present and future development of the country - something is being appropriated, something is being hidden from the public… It was precisely in order to put an end to such gossip and doubts that in 2003 the government of Azerbaijan was the first to join the Extractive Industry Transparency Initiative (EITI), which was proposed by British Prime Minister Tony Blair in Johannesburg in September 2002. The aim of the initiative is to enhance the transparency of payments by companies to the government and structures linked to the government, and also the transparency of the revenues of governments in countries where such companies pursue their activities.

Prize from UN

In 2004 the government of Azerbaijan signed a memorandum of understanding with local and foreign companies, and also with the Coalition of civil society institutions, regarding the transparency of funds received by gas and oil companies and state revenues from the extractive industry. Five reports have already been published within the framework of this document and a sixth is being prepared.

Without dwelling in detail on the chronology of events and steps taken in our country under EITI, we would just note that the governments of Great Britain, Norway and Azerbaijan recently signed a joint statement regarding the presentation to the Azerbaijani state oil fund of a UN Public Service Award in the category of "improving transparency, accountability and responsiveness in the public service" for 2007.

Also, Azerbaijan is again ready to become a pioneer among countries in which an assessment of the application of EITI is to be carried out. In the words of the executive director of the State Oil Company of the Azerbaijani Republic and chairman of the government commission on EITI, Saxmar Movsumov, even though over 20 countries have joined the initiative, in reality apart from Azerbaijan only a few others adhere to all the principles of EITI.

He said that a resolution supporting EITI which has been proposed by Azerbaijan is expected to be approved by the UN General Assembly this autumn.

This initiative is already beginning to gain ground on a global scale. An EITI Board is currently in operation, which includes representatives of eight countries. Of these, five are already applying EITI - Azerbaijan, Guinea, Gabon, Kyrgyzstan and Nigeria, while three support the initiative - the USA, the UK and Germany. The board also includes representatives of international NGOs, companies from the extractive industry and one investment company.

And the international summit meeting of the G8 countries in Germany in early June approved a document entitled "Development of the world economy and responsibility", which contains a statement regarding EITI. The statement says the G8 countries promise to continue their support for the initiative and to provide financial, technical and political assistance.

The world's leading oil companies are also ready to provide further support for EITI. Thus, vice-president of BP-Azerbaijan Clare Bebbington notes that BP will continue to publish the necessary figures, but at the same time "there are, of course, limits connected with the confidentiality of commercial information or concerning personnel. For example, we will not be disclosing information on the salaries of individuals."

Additions and remarks

Meanwhile, in Azerbaijan itself the "third branch of power" - the non-governmental organizations - have a mass of complaints regarding EITI. In their view, the mandate of the initiative does not offer answers to many questions of concern to the public. Thus, in the words of head of the Coalition of civil society institutes on EITI Sabit Bagirov, certain categories of profit received from the extraction and sale of energy resources remain outside the supervision of EITI. "Under the initiative, there is a requirement to disclose only six varieties of profit (taxes paid by subcontractors, rental payments, social taxes, income tax of workers etc), although many more varieties can be found in profit-sharing agreements," he says. At the same time he acknowledged that in terms of total revenues the proportion of profit which is not included on the EITI list is very small (about 1 per cent), but it should also be disclosed in order to achieve full transparency.

Bagirov also raised the question of the need to disclose the aggregate profit Azerbaijan receives from oil per annum. "We hold many meetings with the public at which we are constantly asked: how much does Azerbaijan earn from oil? We cannot give a precise answer to this question as we do not have the figure. The point is that profits from the sale of oil, depending on the variety, are specified in both dollars and manats, and in barrels of oil and cubic metres of gas. But there is no aggregate figure expressed in money equivalent," he said. He added that in technical terms it would not be difficult to add this figure to the EITI mandate, and that this has to be done. 

He said that apart from BP and Statoil, other companies operating in Azerbaijan do not currently disclose their reports submitted under EITI. "This stems from the principle of voluntary action, but considering that these reports do not contain any confidential information it would be a good thing if they were also published." Also, the Coalition of civil society institutions believes that it would be a good thing to receive answers under EITI to these questions: how effectively are profits from oil spent, are there cases of these revenues being misappropriated, to what extent is the extraction of energy resources damaging the environment, what income does Azerbaijan receive under individual oil contracts.

We should note: while the government and the companies voluntarily disclose the above-mentioned figures, the state commission for EITI is not at all offended by the NGOs' complaints. On the contrary, head of the commission Movsumov promises to look at them and, if need be, to use them.