EITI Coalition Information Bulletin #8

Content

Official News
Coalition Life
Oil Revenues and Expenses
Transparency Initiative
International News

Editorial

Editor:
Oqtay Gulaliyev

Production manager:
Dunya Sakit

Translators:
Israfil Khakiyev
Irada Eyvazova

Address:
AZ1065, Baku, 44 C. Cabbarli St., Caspian Plaza 3, 9th floor
Phone: (+994 12) 598 44 31; Fax: (+99412) 598 44 31
Mobile: (+99450) 357 04 62; E-mail: office@eiti-az.org

Announcemen (EITI Coalition Information Bulletin #8)

Kazakhstan hosts a conference on EITI

An EITI conference took place in Almaty, Kazakhstan, on March 26th through 27th, 2007. Participating in the event were NGO representatives from five countries – Azerbaijan, Georgia, Kazakhstan, Kyrgyzstan, and Russia. The Azerbaijani delegation was composed of two members of the Board of the EITI Coalition, Mr Ingilab Ahmadov, Ms Mehriban Vazir, and Mr Galib Afandiyev from the Baku office of the Open Society Institute.
The two-day meeting had the following issues on agenda for discussion:
• Problems and obstacles challenging to regional NGOs;
• Strengthening of the public interest in EITI in the regions in which the Initiative is being implemented;
• Discrediting of the corresponding activities of donor and international organizations by governments;
• Close and deep involvement of broad NGO network in EITI processes;
• Irrelevant relations between the governments and NGOs.
Extensive information and in-depth analysis were provided on the discussed issues, thereby disclosing one by one the existing obstacles in the way of implementation of EITI, examining their nature and structure, and providing would-be solutions to them.
Conferees considered separately both the problems which were characteristic of particular countries those which were common to the region in general.
Meanwhile, it was noted that clearing the existing hurdles was not enough – greater attention should have been devoted to new initiatives as well.
It emerged in the course of the conference that the countries which have joined EITI are at different stages of implementation of the Initiative. There are countries which have relatively advanced on or are behindhand in the realization of the corresponding action plan. Therefore, information was delivered on sharing the new practices of the advanced nations.
It should be noted that the conferees were enthusiastic about the campaign Oil Revenues are Ours All which had been advocated in Azerbaijan. NGOs from Kazakhstan and Kyrgyzstan became interested in the details of the campaign and highlighted the importance of the introduction of such experience in the respective field in their countries.
A special emphasis was made on the study of Azerbaijan’s experience as part of the action plan on the co-operation in the field of the exchange of experience. With that end in view, representatives from the United States supported a visit to Baku by a delegation of NGOs from Kyrgyzstan.
Representatives from regional NGOs and the U.S. office acknowledged the importance of conducting regional conferences on a regular basis and more effective mobilization of the corresponding means of communication. For their part, a delegation from Mongolia offered to take on the work of organization of the next event. The proposal met with approval from the participants of the conference; so the next conference was scheduled in Ulan Bator, in September 2007.
The two-day regional conference in Almaty was practical, full of new initiatives.
Addressing the conference on behalf of Azerbaijan representation were Mr Ingilab Ahmadov and Mr Galib Afandiyev, with Ms Mehriban Vazir answering the questions on the advocacy campaign Oil Revenues are Ours All.
Mr Ingilab Ahmadov served as moderator and one of the key facilitators of the conference.

Baku to host an EITI conference

An EITI conference takes place in Baku on June 7th. On agenda for discussion are the ongoing status of the Extractive Industries Transparency Initiative, the upcoming milestones in the implementation of the Initiative, and the regional outlook for the development of the Initiative, etc.
Participation in the conference is expected at the level of local and foreign delegates, including representatives from diplomatic corps in Azerbaijan.
Mr Sabit Baghirov, a member of the Board of the Increasing Transparency in Extractive Industries, a coalition of local NGOs, will address the gathering.

New Membership Composition Approved for the SOFAR Supervisory Board

National Academy of Sciences takes a seat on behalf of NGOs
A new membership composition has been approved for the Supervisory Board of the State Oil Fund of Azerbaijan (SOFAR) following the corresponding presidential decree by President Ilham Aliyev on May 16th. In accordance with the document, the Board has been approved as being composed of Prime Minister, Mr Artur Rasizada; deputy speaker of the Milli Maclis (parliament), Mr Valeh Alasgarov; state counsellor for economic policy, Mr Vahid Akhundov; finance minister, Mr Samir Sharifov; minister for economic development, Mr Heydar Babayev; the chairman of the Board of Milli Bank (the central bank), Mr Elman Rustamov; deputy chairman of the standing parliamentary commission on economic policy, Mr Azar Amiraslanov; the chairman of the State Committee on Securities, Mr Gunduz Mammadov; president of the National Academy of Sciences, Mr Mahmud Karimov.
The coalition of local NGOs Increasing Transparency in Extractive Industries earlier appealed to the President for the appointment of their own candidate to have a seat on the Supervisory Board of the State Oil Fund of Azerbaijan. However, the latest presidential decree named the president of the National Academy of Sciences as a board member on behalf of civil society institutions.
Citizens’ awareness of oil revenues should be created at a proper level

Three years elapse since the establishment of the Coalition Increasing Transparency in Extractive Industries

Three years ago, on May 13th, 2004, representatives from a number of civil society institutions, operating in Azerbaijan, founded the Coalition Increasing Transparency in Extractive Industries in order to establish and exercise civilian oversight of the revenues from the exploitation of mineral wealth of the country, and the management of those revenues. At a press conference, dedicated to the 3rd year since the establishment of the Coalition, Mr Qubad Ibadoglu, a co-ordinator for the Board of the Coalition, provided information on the work which had been done so far and said that citizens’ awareness should have been created at a proper level in order to get a clearer picture of the total revenues from the exploitation of natural wealth and those falling to the share of Azerbaijan, and the effective management of the revenue in general. According to Mr Ibadoglu, so far the Coalition had done different projects in this respect. Several more have been designed for the current year. “At the time of establishment, the Coalition united 29 NGOs and three individuals, while now its ranks involve 93 NGOs and 13 individuals. Our Coalition has announced its conclusions on five statements, which had been made so far by the government commission on the Extractive Industries Transparency Initiative.”

Making the focus on the last, firth report, Mr Ibadoglu said that the commencement of the full production stage since the very outset of the year had contributed heavily to an increase in the volume of profit oil and, consequently, the amount of petrodollars ad compared to the corresponding performance in the previous year. Briefly, the figures doubled since 2005. Mr Ibadoglu believes that the growth could have been even higher. “In accordance with the terms of the Contract of the Century (ACG PSA), in the first place operating expenses for the period of settlement are deducted from the cost of oil extracted during the same timeframe. After that, half of the remaining oil is spent to covering capital expenses. The rest is the profit oil, which is shared between the Government of Azerbaijan, on the one hand, and multinational oil companies, acting in the capacity of project contractors, on the other side. However, in Azerbaijan 30 percent of the profit oil is retained by the Government of Azerbaijan, while the remaining 70 percent fall to the share of contractors.” According to Mr Ibadoglu, The Coalition is concerned over a sharp growth of capital expenses and the extension of the corresponding period of reimbursement. The total investment in the implementation of the Azeri – Chirag – deepwater Gunashli oil fields has exceeded the figure of 14 billion U.S. dollars – this is almost twice the original forecast of 8 billion U.S. dollars. “So the outcomes show that a vigil eye needs to be kept on capital expenses. The State Oil Company of the Azerbaijan Republic (SOCAR) is primarily responsible for that supervision as described in the provisions of the ACG PSA. However, in accordance with the language of the ACG PSA, SOCAR acts both on behalf of the Government of Azerbaijan and in the capacity of a contractor. The logical conclusion is that the company has a dual status.”

Addressing the press conference, Mr Ingilab Ahmadov, a member of the Board of the Coalition, provided an insight into the history of establishment of the Extractive Industries Transparency Initiative, and said that despite its author, UK Prime Minister Tony Blair was stepping out from the government, the Initiative itself retained its topicality and importance, thereby seemingly expanding on an international scale. Mr Ahmadov highlighted Azerbaijan’s role of a pilot country implementing the Initiative and having acquired profound experience in this field of activity.

Another member of the Coalition, Mr Oqtay Gulaliyev spoke about the activities of the Coalition so far, including the projects which had been implemented, the campaign Oil Revenues are Ours All which was carried out last year, relations with the media, and the action plan designed for the current year.

Mr Telman Zeynalov, a member of the Board of the Coalition and the head of the Independent Environmental Forecasting Centre, noted that transparency in the petroleum development sector was not confined to the accurate accounting of revenues and expenses, as a serious attention should have been paid to the extent of and solutions to reduce the environmental impact following the implementation of oil & gas projects.

At the end, representatives of the Coalition answered the questions asked by journalists.

SOFAR executive congratulates EITI Coalition on its three-year anniversary

The executive director of the State Oil Fund of Azerbaijan, Mr Shahmar Husseinov has sent his greetings to members of the Coalition Increasing Transparency in Extractive Industries on the occasion of the three years since the establishment of the alliance.
The message of congratulation says: “Three years are passing since the establishment of the Coalition Increasing Transparency in Extractive Industries which currently unites more than 100 members. I congratulate members of the Coalition on this occasion. For about four years which had passed since Azerbaijan’s joining the Extractive Industries Transparency Initiative (EITI) and throughout the three-year activity of the Coalition, the government has attained successful achievements in the implementation of the Initiative following our co-operation with the Coalition, one of the major partners of us in this respect. Azerbaijan today is considered to be in the vanguard of the implementing countries worldwide; so far five reports on EITI have been issued by the country. In Coalition we have the involvement of the civil society in this process, thereby confirming once more the implementation of the Initiative in Azerbaijan.
Again, I congratulate you and wish success in your activity.”

Work starts on implementation of a united projects of the Coalition

In accordance with the program paper which the Coalition Increasing Transparency in Extractive Industries has approved for 2007, work has started on the implementation of the united project of the alliance. The Selection Group within the Coalition has assessed the scheme, which is being funded by the World Bank and the Open Society Institute – Assistance Foundation. The Group has appointed responsible persons in charge of corresponding areas of activity in the framework of the project. For their part, the Board of the Coalition gave final go-ahead to the project at a meeting on May 11th. The project itself consists of two major components: the tracking and analysis of the use – including investment – of the assets under the management of the Oil Fund, and the preparation of the consequent report at the end, and the tracking, analysis and the assessment of the finances of the State Oil Company of the Azerbaijan Republic (SOCAR) against transparency criteria, and the crafting of proposals and recommendations on the refinement of the draft law “On the management of oil revenues” and relevant legislative acts, in order to increase the status of transparency in the extractive industry and ensure the effective management of petrodollars.

At the same time, two more objectives of the project are to analyse the companies, operating in the extractive industry, against their compliance with advanced transparency requirements, and to draft the corresponding Policy Paper in order to strengthen transparency in the sector. Also, for the current year it has been planned to carry out public awareness campaign and another series intended to evoke greater interest for the effective use of oil revenues. To the same point, the following activities have been planned:
Holding discussions in 12 district towns;
• Roundtables on the topic of oil revenues and the effective use of them, to be conducted at 10 universities in Baku and regions;
• Broadcasting of two documentaries on oil revenues through regional TV channels; these productions are the winners of the open competitions which was announced by the Open Society Institute in 2005;
• Broadcasting of two trailers about oil revenues on the Public Television; the films are a joint production between the Coalition and Internews, a U.S. media NGO, in 2006;
• Broadcasting of radio dialogues;
• Organization of media forums and talk shows on TV channels.
Among other upcoming activities, which have been set out in the united project, are the publication of the bulletin and magazine of the Coalition, presentations of the results of the analysis of and statement on biannual EITI reports, involvement of the youth in EITI processes, etc.

Coalition’s regional branches get approved regulations

Ganca branch starts official activity
At the General Assembly of the Coalition Increasing Transparency in Extractive Industries in March this year, a working group was set up to determine the objectives coming from the decision on granting the regional status to the Ganca branch, and to draft the required legal documents. The group is composed of the three members of the Board of the Coalition – Mr Sabit Baghirov, Mr Aslan Valiyev, and Mr Nariman Aghayev.

In accordance with the Statute of the Coalition and the decision which was approved at the General Assembly, the working group prepared the Regulations on the activity of regional branches of the Coalition, and submitted the document for consideration to the Board. At the board meeting on Mat 4th, the paper was approved following discussions and with the introduction of certain amendments and alterations. The Regulations will govern the activity of other regional branches to be established by the Coalition in the near future.

As the Ganca branch was given the regional status at the last, third General Assembly of the EITI Coalition, Mr Aslan Valiyev, a branch representative was approved – as described in the Statute of the Coalition – in the capacity of a member of the Board of the Coalition. Meanwhile, in the framework of the united project of the Coalition, certain amount of money has been planned for institutional development of the Ganca regional branch to ensure its normal activity.

Information policy of the Oil Fund laid open to the public

The State Oil Fund of the Azerbaijan Republic (SOFAR) has announced its information policy. According to the press office of the Fund, the corresponding document, which had been approved by SOFAR executive director Shahmar Movsumov, has been worked out in compliance with the law on “Access to Information” in order to foster the accurate co-ordination and effective management of relations between the Fund and the public, to make the Fund meet the information needs of the public, to the preserve and promote the image of the Fund as a transparent state agency.

The paper contains major principles of the information policy, as well as key objectives of the Fund consequent with those values, and the classification of the data to be accessible to the public. It has been set out in the document that the aim of the information policy is to compile necessary information, thereby ensuring the delivery of information on solutions to the tasks commissioned to the Fund. The following have been described as major principles of the approved framework:
• Adherence to the legislative requirements, standards and rules governing the freedom of information in Azerbaijan Republic;
• Security of the interests in ensuring the transparency of the Fund;
• Delivery of the information to the public on a regular basis and to the media in accordance with the principle of equity;
• Guarantee of the accuracy of the disclosed information;
• Maintenance of confidentiality of the information which is not in the domain of the Fund.
In accordance with the paper, the State oil fund has to provide the public with the following information:
• quarterly data on revenues and expenses;
• annual reports;
• reports on the implementation of the Extractive Industries Transparency Initiative (EITI);
• auditor’s reports;
• statements on the meetings of the Supervisory Board;
• organizational chart;
• status of the budget of the Fund;
• receipt , terms and use of grants;
• legal and normative texts governing the activity of the Fund;
• background on the projects which are being financed;
• non-confidential data about the investment portfolio of the Fund;
• data about foreign business trips of Fund executives; and
• vacancies.
In accordance with the current legislation and its statute, the Fund has to ensure that:

• every single interested party gets access to the information, which the agency considers as being laid open to the public and delivers to the public in order to secure the transparency of its activity;
• the corresponding reports are delivered to international organizations and diplomatic corps in Azerbaijan;
• data about its financial activity are stated on a quarter basis, and at the beginning of every year.
Another point of interest in the document is the provision for the announcement of legally non-binding information by the State oil fund on the basis of its own judgement.
Note: The document is available in the Azeri and English languages at the website of the State oil fund (www.oilfund.az).

Audit of statement on Transparency Initiative put to tender

The Selection Group, involving representatives from the Governmental Commission on EITI, local and foreign companies involved in extractive industry in Azerbaijan, and NGOs - signatories to the memorandum on the introduction of the Extractive Industries Transparency Initiative (EITI) in the country – held its meeting on April 19th, to give the final go-ahead to the process of choosing an audit company to be in charge of auditing the six statement covering the implementation of the Initiative throughout 2006.

With that end in view, members of the Selection Group voted in favour of the decision on sending the corresponding invitations to tender to international recognized audit companies with operations in Azerbaijan. Representatives from the NGO Coalition, who were attending the meeting, raised the question on higher expediency of hiring a different company as compared to those who were approved to audit the previous, 5th statement. That auditor’s report was done by Deloitte & Touche.

Oil Fund allocations for refugees miss purposes

An investigation by a Coalition member elicits serious facts
Investigating journalist Hicran Hamidova, a member of the Coalition, has investigated, through the financial support from the Open Society Institute – Assistance Foundation, an issue on the purpose use of the allocations from the State Oil Fund of the Azerbaijan Republic (SOFAR) for the bettering of accommodation conditions of refugees and internally displaced persons. The investigation has covered the work worth 86 million manats (93.5 million U.S. dollars).

Ms Hamidova has revealed the facts of embezzlement and violations of law in the building of 1,011 houses at Alibayli-1 settlement, 340 houses at Tazakand settlement, 390 houses at Banovshalar settlement, and 192 houses at Dordyol-1 settlement, through the funding which had been provided by the oil fund. Ms Hamidova has personally visited the above-mentioned settlements and recorded the corresponding facts in the place.
Soon the results of the investigation will be posted on the website of the Coalition.