Azerbaijan needs to amend its laws on non-government organisations (NGOs) in order to restore its membership in the Extractive Industries Transparency Initiative (EITI), the board of EITI decided on October 26. If it fails to satisfy the EITI that it is allowing civil society to monitor transparency in the extractive industries, this could prevent it receiving finance from international financial institutions (IFIs). 

An Oslo-based voluntary initiative that oversees transparency in mineral and energy-rich countries, EITI's importance has increased in recent years, with financing from IFIs made dependent on compliance with EITI regulations on many occasions.

Azerbaijan needs to allow more freedom for civil society before the next EITI board meeting, tentatively scheduled for early 2017, and to work on five other areas - reporting on state participation, public debate, quasi-fiscal expenditure, documentation of impact and independence of civil society members of the multi-stakeholder group - if it wants its membership restored at its next membership assessment in July 2017.

Azerbaijan was a full member of the initiative between 2009 and 2014. Last year, however, it lost its membership amidst an unprecedented crackdown on the civil society that saw scores of journalists, opposition politicians and government critics imprisoned and international NGOs and organisations like the Organisation for Security and Cooperation in Europe (OSCE) ousted from the country.

In recent months, the government in Baku has been seeking to mend its ways as far as civil society is concerned by releasing thousands of prisoners, including a dozen political prisoners. However, critics accuse Baku of window dressing. While it had released some of the more prominent political prisoners, it arrested tens of others who protested a move by President Ilham Aliyev to expand his powers through a referendum that many allege was rigged.

Fredrik Reinfeld, EITI chairman and former prime minister of Sweden, said that “Azerbaijan has made important progress in opening up the oil sector and I am encouraged to hear about the recent plans for government reforms towards more transparency. I hope that the government will continue its recent efforts to ensure that civil society can play its proper role in this process, otherwise this progress risks being overshadowed.”

The next evaluation of Azerbaijan's status will take place next July. The country's suspension from EITI has come at a bad time for Baku, which has been courting IFIs for a large-scale regional gas project, the Southern Gas Corridor (SGC), for the completion of which it needs to borrow externally some of $8bn in the next two years.

According to two sources cited by the Financial Times, the US opposed Azerbaijan's suspension, because it strongly endorses the SGC as a way for Europe to diversify its gas supplies away from Russia.