Azerbaijan

EITI Status Other
EITI Member Since 2005
Latest Data From 2015
Website EITI Azerbaijan

Status of Azerbaijan

Azerbaijan no longer member of the EITI. 

On March 10 2017, the Government of Azerbaijan decided to withdraw from the EITI following its suspension from the EITI Board the previous day.

The EITI has issued a statement regretting the withdrawal of Azerbaijan.

This page is kept as a historical record of Azerbaijan's implementation.

Overview

Azerbaijan is one of the world’s oldest oil producing nations with proven crude oil reserves of 7 billion barrels and natural gas reserves of 1300 billion cubic meters (source: Azerbaijan EITI 2014 Report). Its real gross domestic product (GDP) has greatly increased in recent years, driven by growth in oil and gas production though the recent global price decline of oil affected the overall economy.

Major projects such as the Baku-Tbilisi-Ceyhan oil pipeline (BTC) to Turkey, the country’s largest oil field Azeri-Chirag-Guneshli (ACG) and the largest natural gas field Shah Deniz (SD) contribute significantly to government revenues (Source: Azernews).

The Southern Gas Corridor pipeline route recently began construction which will take gas from the Shah Deniz 2 field to markets in Turkey.

Extractive industries contribution

  • 34.6 %
    to GDP
  • 41,500
    jobs
Azerbaijan stands ready to take challenges and decisively defend transparency and accountability in the extractive sectors.
Farid Farzaliyev, Head of EITI Secretariat in Azerbaijan

Beneficial ownership

Azerbaijan's MSG, together with the national secretariat developed a beneficial ownership (BO) roadmap outlining actions towards publishing beneficial ownership information of companies operating in Azerbaijan by 1 January 2020. This BO roadmap explains the scope of work around beneficial ownership disclosures, its purpose, structure, activities, budget and the definition. This is a live document that is subject to change by Azerbaijan's MSG.

Prior to the publication of the beneficial ownership roadmap, Azerbaijan's 2016 EITI work plan included activities aimed at addressing potential legal and regulatory obstacles to implementation, i.e. the activity to “engage experts into the analysis of the legal and practical experience over the state licenses, contracts and beneficial ownership” (2016 work plan; activity 2.3).

Production

According to the 2014 EITI Report, the size of the extractive industries in 2014 is 34.6% of GDP, a decline from 47.3% of GDP in 2012. The total government revenues generated from extractive industries is 61.7%, or USD 2 225 million in absolute terms (Source: 2014 EITI Report). The State Oil Fund of the Republic of Azerbaijan (SOFAZ) is one of the central components of the strategy for managing these revenues.  The State Oil Company of Azerbaijan Republic (SOCAR) plays a major role in oil and gas production, and in managing oil and gas imports and exports.

Natural resources

CommodityReservesUnitSignificance
Oil7Billion barrelsAzerbaijan is ranked in the top 20 countrie with oil reserves.
Gas1300Billion cubic meters
Gold 30.2tons
Silver1300tons

Initializing chart.

Initializing chart.

Revenue collection

The latest EITI disclosures show that “consolidated total income of the state budget amounted to USD 2 225 million in 2014.” The receipts from the extractive industries made up 61.7% of the total budget revenues in the same year (Source: 2014 EITI Report). Revenues were mainly collected through the sale of oil and gas (53.3%) and profit tax (5.6%).

Initializing chart.

Revenue allocation

The 2014 EITI Report states that AZN 252.8 million in income tax from extractive activities was transferred to the State budget alongside a AZN 9 billion transfer from the State Oil Fund of the Republic of Azerbaijan (SOFAZ). SOFAZ is the main body managing resources of country’s oil and gas industry.

Implementation

Azerbaijan is not a member of the EITI. 

On 10 March 2017 the Government of Azerbaijan decided to withdraw from the EITI following its suspension from the EITI Board at the 36th Board meeting the previous day.

The EITI has issued a statement regretting the withdrawal of Azerbaijan.

At the 35th Board meeting in Astana, Kazakhstan on 26-27 October Azerbaijan found to have made meaningful progress but more needing to be done, especially on civil society engagement. The Board's decision in full can be found here. The Board agreed that Azerbaijan is to be assessed in a third Validation commencing on 26 July 2017.

Following the Board’s decision at its 34th meeting in Oslo in June 2016, Azerbaijan was among fourteen other countries whose Validation commenced on 1 July 2016. It is the first country to be validated against the 2016 EITI Standard.

Background: In 2015, Azerbaijan had been downgraded to ‘candidate’ country at the 29th EITI Board meeting in Brazzaville following an early Validation report. The early Validation was called due to concerns about civil society representatives’ ability to operate freely. The Validation does not assess the 2013 EITI report which was finalised at the time of the Validation and was published in July 2015. 

The EITI process in Azerbaijan is overseen by the EITI Committee (the MSG) that cosists of members of the government, civil society and companies [see this link for details]. The Committee is chaired by Shahmar Movsumov, CEO of the State Oil Fund of the Republic of Azerbaijan (SOFAZ).

Timeline

Validation

On 9 March 2017, the EITI Board decided that Azerbaijan did not meet the corrective actions as layed out in October at the previous Board meeting. It was therefore suspended. 

On 26 October 2016, the EITI Board came to the following decision on Azerbaijan's status following its Validation:

The Board agrees that Azerbaijan has made meaningful progress in implementing the 2016 EITI Standard, and with considerable improvements across several individual requirements compared to the first Validation in 2015. Azerbaijan retains its candidate status, taking into consideration recent developments.

The EITI Board agreed that Azerbaijan had not made satisfactory progress on requirement 1.3 on civil society engagement. Accordingly, Azerbaijan will need to take corrective actions. Failure to take corrective actions to the satisfaction of the Board will result in suspension in accordance with the EITI Standard. The Board tasked the International Secretariat with preparing an assessment in advance of the next Board meeting. On the basis of this assessment and in accordance with the EITI Standard, the Board will take a decision at its next meeting.

Following the decision of the EITI Board, Azerbaijan must address corrective actions by March 2017 and will be validated again in July 2017.

Below is an overview of the progress Azerbaijan made per requirement.