Azerbaijan has been sending reassuring signals to the Western investor community following its decision to withdraw from the Extractive Industries Transparency Initiative (EITI) in March (see Caspian Focus – March 2017).

Since its 2003 launch at a London conference, the EITI has become an industry-wide standard whereby oil-producing countries provide guarantees to foreign investors that no money will be used for purposes other than domestic development. Azerbaijan joined the initiative in 2003 — amid growing interest in its oil and natural gas resources — almost a decade after the ‘contract of the century’ was signed with the BP-led consortium of IOCs. Earlier this year the lingering dispute with human rights watchdogs over the treatment of the local opposition, including prominent civil society activists, led to the suspension of Azerbaijan’s membership and finally to the country’s withdrawal from EITI.

The government is keen to maintain the goodwill of foreign investors. President Ilham Aliev’s administration established a special committee to oversee transparency and prevent the mismanagement of funds in the energy industry (see Caspian Focus - April 2017). The State Oil Fund of Azerbaijan (SOFAZ) said on 7 June that it was giving a mandate to London-based accountancy and advisory firm Moore Stephens to conduct a transparency assessment for 2016. It will audit both domestic and foreign companies as well as government accounts, and will prepare a public report about the use of hydrocarbon revenues. Moore Stephens employs over 27,000 people in more than 100 countries and has an annual turnover exceeding US$2.2 billion.

The government says that Moore Stephens was chosen through a call for proposals from ten companies. Three other companies provided quotes — RSM Azerbaijan, BDO Azerbaijan and Baker Tilly Azerbaijan — provided quotes. The selection process reportedly involved representatives of NGOs, embassies, international financial organisations, and the oil industry. This will be the first time that Azerbaijan has published a transparency report drafted outside of EITI’s guidelines. The government published 20 reports between 2003 and 2015, but none was prepared in 2016 because of the escalating tensions between the authorities and the EITI secretariat.   … [article continues] …

This is an excerpt from an article in our monthly Caspian Focus publication.