Azerbaijan suspended from the EITI – a Bankwatch and Counter Balance statement

March 9, 2017

A decision to suspend Azerbaijan’s membership in the Extractive Industries Transparency Initiative (EITI) adopted yesterday (Mar 9) is the latest reminder for international financial institutes to avoid supporting the Southern Gas Corridor (SGC) project.

In 2015, the EITI board downgraded Azerbaijan’s membership status due to its relentless crackdown on civil society, political opponents and journalists in the country, and in its October 2016 meeting board members decided to give Baku another chance to comply with international standards.

Yet, the Azerbaijani authoritarian regime that’s running a country completely dependent on the extraction and export of oil and gas, has so far proven that the concepts of democracy and human rights are simply foreign to it.

In the latest case, on Friday (March 3), Mehman Huseynov, a prominent blogger and chairperson of the Institute for Reporters’ Freedom and Safety, has been sentenced for two years in jail on defamation charges. Civil society figures believe this sentencing might be linked, among others, to the organisation’s work on the EITI.

Last month, an international group of 22 civil society organisations including Human Rights Watch, Reporters Without Borders and Bankwatch, has written to EITI board members, urging them to suspend Azerbaijan’s membership in the EITI.

Azerbaijan’s membership status in the international body is considered key to the Southern Gas Corridor project that is intended to bring 16 billion cubic meters of gas from Azerbaijan to Turkey and the EU every year.

The European Investment Bank (EIB), the EU’s house bank, is currently mulling a record EUR 2 billion loan to the western section of the SGC, the Trans Adriatic Pipeline (TAP), as well as a EUR 1 billion loan to the central section of the project, the Trans Anatolian Pipeline (TANAP).

The European Bank for Reconstruction and Development (EBRD) – which has already helped finance the Shah Deniz II project, the SGC’s source gas field – has also stated it is considering a loan of up to EUR 1.5 billion for TAP, and possibly another for the TANAP project.
Both institutions have committed to EITI compliance in their energy policies and are official partner organisations of the EITI.

“If there is no progress [on the implementation of EITI standards in Azerbaijan] it will be quite difficult to justify a large amount of financing,” the EBRD’s now former Managing Director for Energy and Natural Resources, Riccardo Puliti, told Anadolou Agency in a September 2016 interview. “It is important for both TAP and TANAP, but it is particularly important for TANAP, because [Azerbaijani state owned energy company] SOCAR is so prominent in TANAP,” he added.

In an open letter published in January, jailed Azerbaijani opposition politician Ilgar Mammadov warned European governments, as well as potential financiers of the SGC, about engagement with Azerbaijan’s rulers.

Specifically, Mammadov, who had worked closely with the EITI as a member of the Natural Resource Governance Institute until his arrest in March 2013, clearly warned that at this week’s board meeting, “those driven by pressing commodity and geopolitical interests … may ask the international financial institutions to disconnect the SGC loans from Azerbaijan’s compliance with the EITI.”

Anna Roggenbuck, EIB Policy Officer at CEE Bankwatch Network, says:

“The EITI board’s decision is but the latest confirmation that Azerbaijani fossil fuels export projects like the SGC only fuel the autocratic regime in Baku as it intensifies its repression of civil society and media in the country. The EIB and the EBRD should recall their commitments to human rights and take the EITI board’s decision as their cue to disengage from the project.”

Xavier Sol, Director of Counter Balance, says:

“EU leaders, who have long cited democracy and human rights as the cornerstones of modern day Europe, should recognize the EITI board’s decision for the stark warning sign it is. Knowing that any revenues from the Southern Gas Corridor project will only serve to entrench Azerbaijani President Ilham Aliyev’s regime, now is the time for Europe to think whether it is willing to put its highest energy bets on such partner.”