5 August 2005
The Azerbaijan Country Update provides information about recent developments, decisions, and civil society activities related to International Financial Institution (IFI) involvement in Azerbaijan.
By Jelena Kmezic
Also Available [
Pусский] (Acrobat PDF 275 KB)
The Azerbaijan Country Updates provide information about recent developments, decisions, and civil society activities related to International Financial Institution (IFI) involvement in Kazakhstan including that of the World Bank (WB), International Finance Corporation (IFC), International Monetary Fund (IMF), European Bank for Reconstruction and Development (EBRD) and Asian Development Bank (ADB). If you would like to be included or removed from the distribution list, please email the moderator, Heike Mainhardt-Gibbs at . Correspondence with BIC may be conducted in Russian.
I. IFI Project Activities
New WB Projects
On June 9, 2005 the World Bank approved Rural Environment Project in the amount of US$17.72 million ($8 million IDA credit, $5 million Global Environment Facility (GEF) grant, and $2.72 million Japan Policy and Human Resources Development Fund (PRHD) grant.) The project consists of three main components. The first component is supposed to support the legal establishment of the Shah Dag National Park (SDNP) and expanded Ordubad National Park (ONP), and adjacent Protected Areas (Pas). The second component is planned for helping residents of 55 communities within and next to the two national parks to adopt more modern agricultural methods and more sustainable use of natural resources. The third component is supposed to stimulate economic diversification in the areas through providing financial and technical support to local entrepreneurs. Further information and available documents about the project can be found at the following website:
On May 24, 2005 the World Bank and the Government of Azerbaijan Republic signed the Development Credit Agreement for the Financial Services Development Project (FSDP) which was approved by the WB Board of Directors on January 6, 2005. Project will provide US$12.25 million which is, according to the World Bank, supposed to facilitate the implementation of the country’s Poverty Reduction Strategy and economic reform programs related to regional development and development of the non-oil sector through improvements of the access of the rural population to financial services and improvements in the financial architecture. The project’s first component Azeri Post Platform is supposed to build the financial service capacity in rural areas that are presently underserved or not served by the banking system and to improve access to basic business infrastructure and for delivery of Government services. The second component, National Payment System Architecture Component, is meant to finalize the development of the National Payment System Architecture, including introduction of electronic payment risks, interface with the large billing systems and integration of rural areas. More information and documents related to this project can be found at the following website:
EBRD released three new Project Summary Documents
On May 27, 2005 the EBRD released Project Summary Document for Lukoil Overseas: South Caucasus Gas Pipeline project. Lukoil Overseas Holding Limited holds a 10% interest in South Caucasus Gas (SCP) Pipeline via its subsidiary Lukoil Overseas Shah Deniz Midstream Ltd. (LOSDM). Lukoil sought financing in the amount of US$119.9 million for the completion of the SCP pipeline. In March 2004 EBRD has provided US$118.5 million for building a portion of the State Oil Company of Azerbaijan Republic’s (SOCAR) portion of the SCP. SOCAR also holds a 10% interest in the SCP via its subsidiary AzSCP. Board date for the Lukoil Overseas: South Caucasus Gas Pipeline project is scheduled for June 27, 2005. Project summary document can be viewed here:
On May 27, 2005 EBRD disclosed Project Summary Document (PSD) for the Lukoil Overseas: Shah Deniz Gas Condensate Filed Development project. This project will finance a portion of the Lukoil Overseas Holding Limited share of cash calls relating to the development of the off-shore Shah Deniz gas and gas condensate field. This project is supposed to fund stage 1 out of 4 stages for SD field development. According to the EBRD initially 9 wells will be drilled at the SD filed from a fixed offshore platform. After processing onshore, gas will be sold to Azerbaijan at the Sangachal terminal and via the South Caucasus Pipeline exported to Georgia and Turkey. Condensate will be exported to the world market via the BTC pipeline. EBRD will provide US$110 million for the project out of an estimated SD Stage 1 project cost of US$2,777 million. Project summary document can be viewed here:
On June 24, 2005 EBRD published PSD for the Bank of Baku Equity Investment project. EBRD will provide equity investment of up to $US5 million which is supposed to provide support for newly incorporated Bank of Baku, created by merger of two local private banks (Bank of Baku and Ilkbank) in February 2005. Through this project EBRD is supposed to provide both management guidance and institutional building through Supervisory Board participation and technical assistance. Proposed Board date for the project is July 26, 2005. Project summary document can be viewed here:
II. IFI Consultations and Policy Updates
IFC Policy and Performance Standards
A second draft of the International Finance Corporation’s new Policy and Performance Standards will be published by end of July and considered by the Board Committee on Development Effectiveness (CODE) in the last week of August. The Guidance Notes regarding implementation of performance standards and the revised Information Disclosure Policy will be submitted to CODE at the same time. After the CODE meeting, the second draft will be disclosed for a 30-day public comment period. There is some possibility that this comment period may be extended, due to the number and complexity of the proposed changes. The final Board date for approval of IFC’s new policies is expected to be in mid-November. For more information on the IFC policy review processes, please see the following websites:
EIB announces disclosure policy review
The European Investment Bank (EIB) is reviewing its disclosure policy and on May 19, 2005 released the first draft of the policy which leaves much room for improvement. The EIB does not significantly expand the amount of information available during project preparation, implementation and evaluation, which limits the ability of communities in the project area to participate in project development and monitoring. Furthermore, while the EIB’s policy allows for some recourse if a request for information is denied, this recourse is only available to European Union citizens, while the EIB operates in almost 40 countries outside of the EU. On June 1, a statement with recommendations for increased transparency was delivered to the EIB by civil society. The statement was endorsed by 118 organizations from over 40 countries all around the world. The statement recommends the disclosure of information on projects before their approval and of reports on their progress during their life to the communities affected by the projects and any other interested party. Moreover, the suggested policy changes would ensure that EIB consults with the public before approving any project. Full statement is available via the following link:
IMF Guide on Resource Revenue Transparency
In June 2005, the IMF released the final version of its “Guide on Resource Revenue Transparency.” The final version does not appear to differ significantly from the Draft Guide. Responses to public comments on the December 2004 draft are provided in an appendix to the final Guide. The Guide, which outlines some principles of best practice regarding fiscal management of natural resource revenues, is currently available only in English at the IMF web site and via the following link:
The draft guide, published in December 2004, is still available in multiple languages on the Fund’s website:
III. Civil Society Activities
EIR Stock-taking Conference announcement
In early December 2005, CEE Bankwatch and BIC will host a conference to highlight the status of World Bank Group (WBG) performance on the EIR recommendations. Over the next several months, case studies assessing the WBG’s implementation of the EIR will be conducted in Europe and Central Asia (ECA). The case studies will largely reflect a list of EIR progress indicators prepared by Bankwatch and BIC. An EIR Status Report based on the case study findings and additional policy analysis will be presented at the conference and distributed to relevant decision makers, primarily those who were involved in commenting on the EIR final report. While the primary purpose of the conference is to present EIR project case studies and an overall EIR Status Report, there will also be opportunities for CSOs to meet with World Bank Executive Directors to advocate enhanced implementation of the EIR and to participate in a CSO planning session. Although the case studies currently underway are only in the ECA region, Bankwatch and BIC would like to invite individuals to contribute case studies from other regions and, more generally, to participate in the conference and meetings with the Board of Directors. If you are interested in conducting a case study, providing comments or suggestions on the progress indicators, or attending the conference please contact Heike Mainhardt-Gibbs at: or Petr Hlobil at: .
Civil Society Organizations send a letter to WBG about EIR implementation
On May 26, 2005, over 60 NGOs sent a letter to Mr. Kaldany, Director of the Bank Group’s Oil, Mining, Gas and Chemicals department, and to the Bank’s Board of Directors, raising concerns about the inadequate implementation of EIR recommendations and commitments made by the World Bank Group in its response to the EIR final report. A copy of the letter can be found on BIC’s website and via the following link:
CSOs voiced their concerns during G8 Summit in Britain
The summit of the Group of Eight (G8) industrialized countries was held in Gleneagles in Scotland on July 6-8, 2005. The G8 nations are Britain, Canada, France, Germany, Italy, Japan, Russia, and the United States. Civil society organizations and representatives from around the world followed the summit. Twp dominating themes were debt relief and climate change. The G8 multilateral (IFI) debt cancellation proposal which foresees cancellation of World Bank, IMF, and African Development Bank debt represents a positive step forward but several civil society groups raised concerns about the harmful impact of continued conditionality for indebted countries. The proposal does not ensure that the people of the Global South will regain control over economic decisions that affect their lives. Groups also critique the selection of countries slated for debt cancellation and the range of debts covered. Civil society groups also called for G8 countries to make significant cuts in their current greenhouse gas emissions as 65 per cent of historical global emissions come from G8 countries and the dangers of human-induced climate change impacts are increasingly alarming. To access more information and analysis of the G8 summit and related issues go to the following web page:
IV. General News and Developments
Drilling plans for Shah-Deniz Gas field
KCA Deutag drilling company, a wholly owned subsidiary of Abbot Group plc. signed a three-year contract to begin drilling works in Shah-Deniz gas field in the second quarter of 2006. According to the State Telegraphic Agency of the Republic of Azerbaijan KCA Deutag has designed and engineered a new build snubbing and pressure control package in accordance with the contract for the provision of high pressure snubbing services on Bp-operated Shah-Deniz Gas Export Project. (Source: State Telegraphic Agency of the Republic of Azerbaijan, Azertag; 28 June, 2005)
ExxonMobil begins exporting Azeri oil via Georgia
Starting from July 2, 2005 ExxonMobil started exporting Azeri oil to the western markets via Georgia’s Black Sea port of Batumi. Last December ExxonMobil announced that it will not participate in the Baku-Tbilisi-Ceyhan (BTC) pipeline project and instead signed a five-year contract with the Azpetrol Company to export 10 million tons of Azeri oil by rail from Baku to the Georgian port of Batumi. (Source: CIVIL.Ge, http://www.civil.ge/eng/article.php?id=10292; 5 July, 2005)
Energy experts see Caspian Region as major oil supplier
Energy experts attending a United Nations meeting in Geneva say that oil and natural gas from the Caspian Sea Region could ease the world’s dependence on oil from the volatile Middle East. According to a UN Report, the Middle East presently supplies about 30% of all the oil consumed in the world. The experts at the UN meeting in Geneva agreed that the Caspian Sea region could soon be an important alternative to the Middle East. Currently, Russia and the other Caspian Sea countries, primarily Kazakhstan and Azerbaijan, account for approximately 11% of total world production of crude oil and this figure is expected to rise dramatically as stated in the UN Report. (Source: EIN News: http://www.einnews.com/ ; 29 June, 2005)
V. Additional Resources
Previous Updates and related reports can be found on BIC’s website on the Azerbaijan Page. These reports are available in English and in Russian.