USACC, Washington DC - October 21, 2005Yesterday, the US – Azerbaijan Chamber of Commerce hosted Mr. Samir Sharifov, Executive Director of the State Oil Fund of Azerbaijan (SOFAZ) for a luncheon with its members. Mr. Sharifov discussed many issues related to SOFAZ, including expected revenues, strategic planning, asset management, and expenditure plans.
Mr. Sharifov said that between 2006 and 2024, Azerbaijan is expected to get between $73 billion and $143 billion, based on $30 or $45 a barrel oil price from oil sales accordingly. To that end, the Government of Azerbaijan has made a strategic decision to establish SOFAZ that will collect and manage these revenues.
Established in 2000, SOFAZ is an extra-budgetary legal entity that collects revenues generated from sales and transportation of oil and related operational and tax income.
“Azerbaijan’s oil fund is intergenerational, that is, the revenues will be used for both current and future generations”, Mr. Sharifov noted.
Given the country’s great need for development of its physical and social infrastructure, the government, in accordance with a Presidential decree on long term oil revenue management strategy, will use some of the oil revenues for its public investment programs. “Over the next few years, SOFAZ will invest in construction and rehabilitation of highways, power generation and distribution facilities, schools, and hospitals”, Mr. Sharifov said.
In addition to budgetary expenditures SOFAZ will also fund specially earmarked projects considered important for country’s development. “We are considering establishment of an educational fund that will provide scholarship for young Azerbaijanis to study in the United States and in Europe. The country now faces a demand for highly qualified cadres in various areas. By investing in the human capital of the country we hope to get the expertise related to the market economy”, Mr. Sharifov said.
SOFAZ’s expenditure portfolio also includes support to refugees and the Internally Displaced People (IDP). Azerbaijan still has about 800,000 refugees and IDP-s forced to flee their homes by the aggression of neighboring Armenia. As part of the resettlement program, SOFAZ has allocated $109 million for construction of homes and residential infrastructure for this purpose.
Mr. Sharifov also spoke of the Fund’s “Stabilization and Emergency Portfolio”, used in cases of catastrophic events or unexpected shocks in the country’s fiscal position and the “Investment Portfolio” that will hold revenues for the future generations and serve as a source of income for SOFAZ. Last year, the US Trade and Development Agency provided a $1 million grant to help SOFAZ to develop its human resources and institutional capacity to better manage these revenues.
Mr. Sharifov is on a working visit in Washington, DC to attend the second meeting of the International Advisory Group of the Extractive Industries Transparency Initiative (EITI). Mr. Sharifov is also the Chairman of the National Committee on EITI.
The Transparency Initiative was announced by the British Prime Minister Tony Blair in September 2002 at the world summit on sustainable development. Its goal is to increase the transparency of payments of oil, gas and mining companies made to the government and state revenues from extractive industries. Azerbaijan joined the Initiative at a conference on EITI in London in June 2003.
During his visit, Mr. Sharifov addressed a forum organized by the Brookings Institute, and a working luncheon at the Center for Strategic and International Studies. Mr. Sharifov also held various meetings with relevant offices of the U.S. Government and Congress.