IN TOP FIVE

The State Oil Fund of Azerbaijan (SOFAZ) is chosen one of the top transparent sovereign funds in the world, hence once again proving the success of the policy of oil revenues management. On the other hand, this is yet another response to organizations, which present the fund's achievements in ensuring transparency in negative hues, while noting the "successes" of the extractive industry in Armenia, who violated all principles of international law and human rights with their occupation policy.

But justice certainly triumphs, even if not immediately. While our neighbours hysterically wait for decisions on the compensation for damage from the exploitation of our fields, Azerbaijan will further strengthen its position in the list of countries with a free and transparent economy.

External balance

“A new era has come in the Azerbaijani economy – the era of transparency and end of monopolies,” President of Azerbaijan Ilham Aliyev said recently, declaring the basic principles of the model of development for national economy. Full transparency in all areas has been the main idea behind all the reforms and structural transformations of authorities in recent years. As a result, Azerbaijan improved its position in the Economic Freedom Index 2021 of the Heritage Foundation by six points, taking the 38th place.

Perhaps, the activities of the State Oil Fund of Azerbaijan (SOFAZ) are the most successful achievement of Azerbaijan in terms of transparency. The main mission of the fund, which for 22 years has played an instrumental role in maintaining economic stability and implementing the most important social programs in Azerbaijan, is the fair distribution of oil and gas revenues between current and future generations. Despite the strong influence of external factors, the situation in the global economy and the economies of neighbouring countries, SOFAZ continues to increase its assets every year thanks to conservative and competent management of revenues.

That is why Azerbaijan remains one of the most secured by international reserves among the CIS countries. "As of the end of 2020, the assets of SOFAZ grew by 0.6%, despite the increase in transfers to the state budget due to the pandemic," reads the review of the Russian Gazprombank. Strong external balance supported by significant amount of foreign assets of the fund ensures high rating to Azerbaijan from international agencies.

“Today we are not dependent on anyone in any criterion, any parameter. We have advanced our positions in economy in terms of both external debt and economic growth, as well as foreign exchange reserves per capita. In other words, we have advanced in all areas and ensured transparency,” President Ilham Aliyev said recently.

International recognition

For all these years, fairness and transparency have been the main principles of SOFAZ, which is one of the pioneers of the "transparency movement" of sovereign funds. Its activities are annually evaluated by independent international auditors, with all the detailed reports available in public domain, including for international audiences.

Back in 2007, SOFAZ was awarded the UN Public Service Award in the category “Strengthening transparency, accountability and commitment in public service”. At the same time, SOFAZ became the first among the state-run structures of the countries of Eastern Europe and the CIS to receive the UN Civil Service Award.

Reports and activities of SOFAZ fully comply with the well-known Santiago Principles. These are 24 principles adopted by the International Working Group of Sovereign Funds and define their framework for effective management, reporting, investment activities, and most importantly, transparency. SOFAZ is an active member of the International Forum of Sovereign Wealth Funds created in 2009 to exchange experience in the area of compliance with the Santiago Principles. Fhe first annual meeting of the forum was held in Baku.

In 2018, SOFAZ entered the top ten most influential investors in the world according to the rating of the Sovereign Wealth Funds Institute (SWFI). The rating table includes 100 organizations, including large sovereign funds, pension and charitable funds, central banks. SOFAZ was ranked the 10th in this rating.

In addition, SOFAZ occupies top positions in the well-known Linaburg-Maduel index, which determines the degree of transparency of sovereign funds, gaining the highest possible score among its “colleagues”.

At the same time, despite the recognition of the success in the management of oil revenues in Azerbaijan, SOFAZ also suffered from injustice of some international organizations. Nevertheless, all their attempts to tarnish the fund’s accomplishments crashed into yet another international success of SOFAZ.

Stable transparent

In early March, SOFAZ was ranked fifth among 64 other funds by the prestigious Peterson Institute for International Economy (PIIE, USA). With 92 points of 100 and almost the maximum points in each category (management of funds of global sovereign wealth funds, governance, sustainability, transparency and accountability, as well as the application of the Santiago Principles), SOFAZ once again was chosen one of the best sovereign wealth funds in the world by prestigious international organisation.

PIIE is a private non-profit organization specializing in the study of international economics. It was named after the famous American economist, politician, businessman, billionaire Peter George Peterson. In 2020, the institute, as #1 think tank in the US, was named the best university of the US, and it also ranks 9th in the world ranking of think tanks for 2020. Its research areas include global macroeconomic problems, international finance, energy topics, etc.

In a word, the authority and international recognition of the PIIE assessments are undeniable, as well as the fact that SOFAZ has earned this position quite objectively. “SOFAZ’s activities are very transparent. Information about its income and expenses is periodically published. Expenditures of the fund are approved by the parliament. During the approval of the budget, Milli Majlis also determines the amount of transfers. In other words, maximum transparency allows us to effectively use the available opportunities. Today Azerbaijan is one of the countries that have been highly praised by international organisations for transparency,” President Ilham Aliyev said.

Contrary to double standards

Maintaining a leading position in world rankings is not easy. No matter how you observe the principles of transparency, there are still double standards. Azerbaijan once had such an experience with the Extractive Industries Transparency Initiative (EITI). By the way, the government of Azerbaijan was the first to join the initiative back in 2003. In 2004, a Memorandum of Understanding was signed with local and foreign companies, as well as with the Coalition of Civil Society Organizations regarding the transparency of funds received by gas and oil companies and state revenues from the extractive industry. Within the framework of this Initiative, Azerbaijan has published more than 20 reports, has repeatedly shared its experience in this area with other countries.

But... EITI suddenly began making claims against a number of countries, including Azerbaijan, that were completely unrelated to transparency in the extractive industry. “We have worked with EITI for many years. But when we saw that it was losing its significance, was overly politicised and biased against Azerbaijan, we said that if they didn’t stop doing this, Azerbaijan would leave the organisation... Time shows that we made a correct step. Some time later, the US withdrew from the initiative as well. Thus, the Extractive Industries Transparency Initiative has completely lost its credibility and is not mentioned anywhere today,” President I. Aliyev noted.

The most interesting thing is that EITI, which began to make unreasonable and politically motivated claims against Azerbaijan, including in the area of human rights, subsequently awarded Armenia the highest rating "satisfactory progress". On the website of the organisation Armenia is described as a country "rapidly moving towards greater transparency". This is an assessment of the country, which for 30 years has most grossly violated the rights of more than a million Azerbaijanis, forcing them to leave their places of permanent residence in Garabagh. It is the same Armenia, which has attracted investors to carry out mining activities in gold and other deposits in the territories it occupied.

Is it transparency, is it progress? If the standards of EITI allow for accepting and even encouraging this kind of injustice and wrongdoing, then, indeed, Azerbaijan has no place in it.

Over the years of independence, over the years of struggle for Garabagh, Azerbaijan has become accustomed to double standards and unfair treatment by a number of international organizations. It is difficult to come to terms with injustice; it is best to deal with it in the language of truth. The victorious war of Azerbaijan in Garabagh restored the historical and political justice of Azerbaijan. Our wins in international courts for compensation for economic damage from the illegal exploitation of our territories and mineral resources by Armenia and the "investors" attracted by it will restore economic justice.

As for EITI and transparency... As we can see, Azerbaijan has not lost anything after withdrawing from the organization. On the contrary, our achievements are recognized at a much more authoritative level. This process will surely continue.