Azerbaijan tries to fulfil letter but not spirit of EITI rules

Azerbaijan tries to fulfil letter but not spirit of EITI rules
President Ilham Aliyev signed the initial set of EITI principles laid out iin London in 2003.
By Carmen Valache in Lund November 11, 2016

In late October, the Extractive Industries Transparency Initiative (EITI), an Oslo-based voluntary organisation that oversees transparency in resource-rich countries, decided to give Azerbaijan yet another chance at having its membership restored, but urged the government in Baku to improve in five areas related to oil revenue reporting. Most notable and urgent among them was allowing for more freedom for civil society to engage in monitoring revenues and free dialogue.

But a defiant Baku has continued with its crackdown on human rights ever since. On the same day as EITI released its review, a court in Baku sentenced a youth activist who had sprayed graffiti over a monument dedicated to late President Heydar Aliyev - President Ilham Aliyev’s father - to 10 years behind bars for alleged drug trafficking. 

In the weeks since, freedom of press watchdog Reporters without Borders published its updated World Press Freedom Index, reporting a deterioration in freedom of speech in the country compared to 2015, placing Azerbaijan in the undesirable group of "enemies of the press" among the likes of Saudi Arabia and Iran.

Another scathing report from the UN Committee on Human Right (UNCHR) followed on November 4, in which the organisation expressed concern about a wide range of human rights abuses.

Most recently, on November 9, Amnesty International issued a call to action to end the harassment of human rights lawyer Elchin Sadigov.

In light of recent developments, one would be forgiven for thinking that Baku simply does not value its EITI membership very much. But the reality is more nuanced than might appear at first, and the chances that the organisation completely drops Azerbaijan from among its members are slight, observers believe.

Why EITI?

Founded in 2003 as a voluntary soft law for resource revenue reporting, EITI has grown in size and influence since. Almost 50 developing countries desperate to fight the image of "Dutch diseased" basket cases have rushed to achieve the status of EITI-compliant states, not least because the standard has been heavily promoted by some multilateral lenders like the World Bank, which has set up a trust fund to assist countries in adhering to the standard.

In essence, EITI ensures that mining and energy companies report the money they pay to governments in the form of taxes, royalties and fees, and that the governments report the revenues they receive separately. The data must be published in an intelligible manner so that civil society can hold governments accountable for how they spend the money. Intimidating civil society therefore can prompt EITI to downgrade compliant states.

That is exactly what happened to Azerbaijan in 2014, when the organisation changed the country's status to "candidate" from "compliant", five years after it had become a full member, amidst an increasing crackdown against civil society.

EITI membership is important to Baku for several reasons, Razi Nurullayev, chairperson of the Popular Front opposition party, explains to bne IntelliNews in an email. Firstly, EITI's sway on multilateral lenders means that the latter might be disinclined to extend financing to countries that lose their membership. And Azerbaijan is short of some $8bn to build its portion of a large gas exploration and transport scheme dubbed the Southern Gas Corridor (SGC), which will link its Caspian Sea gas wells to the Turkish and European markets.

Parts of the project are already being financed by the World Bank, the European Bank for Reconstruction and Development (EBRD) and the European Investment Bank (EIB). But Baku is still short of cash and keen on international loans, which it made apparent in early October, when it launched a charm offensive at the World Bank annual meeting in Washington to secure further funding.

But money is not the sole reason why Baku is so keen on maintaining its membership status, Nurullayev explains. For EITI is a pet project of Aliyev, who, in his previous position as vice-president of the state-owned oil company Socar, was among the signatories of the initial set of EITI principles laid out in London in 2003. "He loves reiterating this fact and how proud he feels about it," Nurullayev writes.

That might perhaps explain why Aliyev has sought to address some of the concerns that EITI has raised. On October 21, he signed a decree amending a law that banned non-governmental organisations (NGOs) from receiving foreign funding. Passed only two years ago in its current form, the law has decimated the number of foreign-funded NGOs in the country, and led to the ousting of foreign organisations like the National Democratic Institute (NDI) from the country. Nurullayev expects that the new law will make life easier for NGOs when it comes into force in January.

But Arastun Orujlu, director of the Baku-based think tank East West Centre, is less optimistic about EITI's influence on democratic freedoms in Azerbaijan. Subject to a travel ban due to his outspoken criticism of the government, Orujlu contends that "international organisations are weak and undecided when it comes to Azerbaijan's violations of human rights, therefore they do not have much influence over the country's domestic affairs".

Even if EITI decided to drop the country from among its members, which is highly unlikely, Orujlu belives that Baku would still find financing for its gas project, because Azerbaijan is perceived as an important energy partner by both Washington and Brussels.

"The conduit is important to the US and the EU because it will help Europe diversify its gas supplies away from Russia. That is why I do not expect [international lenders] to shut their doors to Azerbaijan. There are very import international energy interests at play here, and foreign energy experts know that the [Azerbaijani] government will always agree to sell its oil and gas at cheap prices just to maintain international support and their grip on power," Orujlu concludes.

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