Since the beginning of the early oil production and its sale at the world market in 1996 the oil revenues for the first time has gained a definite character in Azerbaijan's history and become an object of intent attention. Following the formation of the State Oil Fund in 1999 and the accumulation of oil funds there a theme of oil revenues and their right use have become more actual. If earlier interests towards this topic were high at the international organizations, at present Azerbaijani Government and the civil society have also joined the active parents of transparency and efficient use of oil revenues in the country. Joining the Extractive Industry Transparency Initiative (EITI), Azerbaijan has made a step towards assimilation of a reputation of transparent country. Particularly, in a recent summit of Great 8 (G8) they stressed Azerbaijan's leading role in the EITI and achievement of world standards in fighting against corruption.
Indeed, the fact that Azerbaijani Government agreed upon producing transparency in oil revenues and reported on revenues in incomes obtained from companies involved in Azerbaijan's mining industry worth praising. In accordance with the decree issued by the Azerbaijani government on 13 November 2003, the State Commission on EITI was established with the composition of Azerbaijani Ambassador to the UK, representatives from ministries, the State Statistics Committee, the State Oil Company of Azerbaijan (SOCAR) and the State Oil Fund of Azerbaijan (SOFAR). In 2004 the Azerbaijani Government signed with the local and foreign companies, as well as with the coalition of civil society organizations a memorandum on mutual understanding in transparency of revenues obtained by the oil and gas projects and incomes of the mining industry. On 17 October 2006 Azerbaijan entered the EITI Managing Board. Foreign oil companies' aspiration towards this initiative is pleasing amid their recent thereat of unveiling the commercial secret.
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Firstly, though Azerbaijan has submitted 5 reports and is developing the 6th, the NGO Coalition on EITI notes that many Azerbaijani companies do not present financial reports on their activities. A trilateral memorandum, signed in 2004 between the state commission, extractive companies and the NGO Coalition on transparency, did not commit the companies to reveal their data privately. It is regarded their commercial secret and their revealing contradicts terms of the contract. The State Commission states that the refusal is not related to their activities in Azerbaijan, but global activities and the report will make them publicize their data about their activities in other world countries. The Azerbaijan Government has no intention to put obstacles, because the companies were proposed to publish reports, but they were not forced. Only Statoil and BP companies achieved full transparency in presetting a report in their payments. Still it will be OK if they publicized their reports.
Lately, the fourth side has been actively involved in this issue - the world financial institutes, such as the World Bank, the International Monetary Fund, the European Bank for Reconstruction and Development and different financial foundations. The presence of the fourth player makes the situations easy, because the favorable conditions, both in the stock exchange and crediting envisage transparency of companies. The world tendency is that the companies thinking of their image and finally of entrance to the international capital markets, becomes more open. Transparency is not so moral, rather financial economic category. As the company more open, as it is more competitive at the stock market. Only those evading from tax payments are in loss.
Secondly, EIII does not answer many questions concerning the Azerbaijani public. Thus, the NGO coalition on EITI considers that the types of incomes obtained from production and sale of energy resources remains out of EITI's control. EITI requires declaring on only 6 types of incomes (taxes, paid by subcontractors, rents, social taxes, income tax collected from employees, etc), though more types of incomes can be indicated in the Production Sharing Agreements. The special weight of incomes, not include in the list of EITI is low in the general list of incomes (approximately 1%), it is necessary to indicate them to ensure full transparency. It is also necessary to indicate the combined amount of Azerbaijan's profits from oil per year.
The public has no idea of this indicator, because the incomes are obtained from sale of oil depending on its type are indicated in US dollars and in manats, as well as in barrels of oil and in cubic meters of gas. However, there is no aggregate figure indicated in money and no necessity to do so. According to NGO coalition, it will be more expedient to have answers to some questions under the ETITI: the expediency of use of oil revenues, existence of facts of illegal use of incomes, ecological damage as a production of energy resources, Azerbaijan's incomes under different oil contracts.
Thirdly, representatives of public organizations do not participate in the SOFAR's Observation Board. In February 2007 NGO Coalition on EITI appealed the Azerbaijani President in assistance in joining of its representatives to the Observation Board with a right of public organization, while no reply has followed so far.
The new composition of the SOFAR Observation Board, like the previous composition, does not include members of independent public organizations, though it is established by the presidential decree dated 29 December 2000. At present MP and representatives of the National Academy of Sciences participate as representatives from the public organizations. It obviously evolved sad thoughts in public. The process gains a speed and perhaps, soon we will witness active participation of citizens in the issue.
It is important to understand that the EITI can only observe over the way of collection of incomes, but not its implementation. In this respect it is necessary to hold a rigorous control over the collection and use oil revenues. It stipulates the conduct of broad public discussions on this topic, whereas legal and administrative culture is necessary to enable everyone to see that corruption is unacceptable in every level. Meanwhile, out of 20 countries which joined the EITI, only few countries along with Azerbaijan apply in accordance with their principles. To define the countries, who does not observe these principles, a process to confirm the application of the initiative will be applied. Azerbaijan has undertaken to carry out this process the first.