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SOCAR Oil Deal Benefits Hidden Investors Linked To ... SOCAR?

By Nushabe Fatullayeva and Khalid Kazimov

Etibar Kovsarov was one of 200 Azerbaijani oil workers who lost their jobs in early 2014.  After 30 years of working in oil fields developed by the State Oil Company of Azerbaijan (SOCAR), he was let go without warning when his contract expired.

One more surprise awaited Kovsarov.

When he applied to SOCAR for any possible compensation, company officials told him that the Gum-Deniz oil field where he’d worked for so many years was now being managed by a private company based in the United Arab Emirates, and that it did not have to pay pensions.

The private company, Bahar Energy Limited (UAE), has signed an unusually lucrative deal with SOCAR. A production-sharing agreement gives it 80 percent of profits of the Gum-Deniz and Bahar oil fields, with the other 20 percent going to SOCAR.

The percentage of profit flowing to Bahar is substantially higher than average for such deals in the industry, and for at least five similar arrangements in Azerbaijan.

The unusual deal may be explained by previously hidden connections between SOCAR and Bahar officials uncovered by reporters for the Organized Crime and Corruption Reporting Project (OCCRP) and Radio Free Europe/Radio Liberty, with the cooperation of the International Consortium of Investigative Journalists.

The document trail indicates that two men connected to the government agency that is supposed to be selling oil on behalf of the public were in fact using their connections to strike a deal that may have been bad for the government, while it’s not clear who ultimately benefitted.

Adem Aliyev, the father-in-law of SOCAR president Rovnag Abdullayev, and Fakhraddin Ismayilov, the head of SOCAR’s Oil & Gas Research and Design Institute, were early directors in the company that became Bahar Energy.

The story of what happened in the Bahar Energy deal sheds light on a series of murky transactions that have occurred in two Caspian oil fields over the past decade. According to the document trail uncovered by OCCRP/RFE, Aliyev and Ismailov sold out their interests in the operation in 2008 to Anar Aliyev, a mysterious figure linked to more than 50 other questionable public-private partnerships in Azerbaijan.

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