Q&A: Anar Alizade - Business & entrepreneurship in Azerbaijan & beyond

Mr. Anar Alizade discusses business activity issues with Azerbaijani journalist Mr Eynulla Fatullayev. Mr Anar Alizade, a young Azerbaijani businessman in his interview with a well-known Azerbaijani journalist Mr Eynulla Fatullayev (http://azeridaily.com/economy/2453) has convincingly discoursed the issues related with his business activities.

Q. There is still ongoing debates and discussions around ‘Azerbaijan anonymous’ Report published a year ago by Global Witness. It raised a number of questions about transparency of the activities of the State Oil Company of the Azerbaijan Republic (SOCAR). How did you set up a partnership with SOCAR, which was unknown to the public prior to the publication of that report?

A. Neither the Azerbaijani society, nor I have any doubts about the bias of Global Witness. Their biased and contradictory report was without grounds. It was published in 2013 - just before the signing of major energy projects, which were quite important in light of the current geopolitical situation in the world. It’s still not clear, though, precisely why I was chosen as the main subject of discussions.

Interestingly, Global Witness never brought any corruption allegations against me - as was later confirmed in their statements and interviews. Their report is based solely on publicly available information. SOCAR’s and my statements have shed light on these issues, and because I’m known to the public - it can be claimed that transparency, and the lack of publicity in my case, have been addressed in full. In this case, their attempts to raise additional questions and exaggerate matters are a clear indication of their bias towards me. Moreover, it can be argued that the position taken by Global Witness clearly shows that this organisation targets not only me, but Azerbaijan as a whole

It is intriguing that Global Witness keeps its sponsors undercover and does not disclose the list in full, as is seen on its website. It’s reasonable to question why an organisation that fights for transparency globally should hide its supporters. In the absence of such information, I wonder what forces may stand behind such campaigns against Azerbaijan, and against me.

For example, let’s take Global Witness’s financial statements, these show it mostly dedicates its activities to “special tasks”, for which it gets most of its funding. Therefore, it can be assumed that the report, which was prepared against Azerbaijan, was sponsored by “mysterious sponsors” hostile to Azerbaijan.

Q. Some controversial information about you can be found in the media. Some claim that you have family relations with someone within SOCAR’s management and all your achievements were possible thanks to such support. Did Global Witness touched upon the issue of family relations?

A. Actually, it has failed to demonstrate my family relations with any powerful officials, and for these reasons, there is still controversy. As to discussing my family members, I believe that it is beyond ethical and is a serious violation of my privacy. I am simply a young and successful businessman and a reliable partner for SOCAR. As to SOCAR, I can only state that our cooperation was based on mutual benefit and trustworthy collaboration.

Q. The Report indicates that until 2012 you were one of the founders and shareholders of SOCAR Trading, one of the top companies trading with crude oil. Was there any necessity for such a company and how did Azerbaijan benefit from such partnership?

A. Impartial reports produced by well-known international experts such as Wood Mackenzie and Boston Consulting Group are the best response addressing this question. They are available at SOCAR Trading’s website.

Both reports, say that SOCAR Trading’s effective marketing strategy in 2008-2013 Azerbaijan produced $1.7-1.8 billion profit which led to an increase of ‘Azeri Light’ premium. Moreover, SOCAR Trading has brought an additional $500m profit to Azerbaijan from third parties trading and transit through the BTC pipeline.

Global Witness’ main argument was that I earned hundreds of millions of dollars only investing $5m into SOCAR Trading. However, they failed to mention that if in 2007 I invested $5m the yet unknown company with unpredictable future, subsequently in 2012 I sold the shares of the internationally renowned oil-trading brand. I also provided financial support to SOCAR Trading during difficult times. Today, I can certainly say that without my financial support this company would not have survived against the backdrop of difficult financial challenges.

A well-known international audit company clearly defined that the market price of my shares in SOCAR Trading as of 30 June 2012 was much higher than the market price. I do believe that it addresses the previous question and shows the benefits brought to SOCAR and Azerbaijan.

Q. As far as we understood there are no direct corruption allegations in the Global Witness report. However, it underlines a serious problem with the lack of transparency in this case. It was revealed that Anar Aliyev as a long-term partner for SOCAR was not known to the public including most of Non-Governmental Organisations who joined the EITI.

A. All these claims and allegations are groundless. I never hid from the public. You could find my name among the members of SOCAR Trading’s Board of Directors since its establishment back in 2007. This information was always accessible on SOCAR’s corporate website. Could there be any more transparency?

As to why I was not known to the public, there were certain reasons for this, including the privacy and protection of my private and comfortable life and that of my family. It is well known that after the report’s publication there has been a serious concern that various media representatives have meddled in my private life and business activities.

My negative public image has been created with vigorous support of some local and foreign media. It’s part of my character to try to avoid publicity and popularity, which is actively being used against me now.

Q. Global Witness claim that you still have an interest in SOCAR International DMCC. Could you please clarify the situation with your claimed 50% ownership in this company? They currently claim that this offshore structure, where you own half of the shares, is selling crude…

A. I am no longer a shareholder of this company. This can be easily checked and verified through specific companies’ registry, where the company is incorporated. You can also get this information from SOCAR’s corporate website and from public audited financial statements.

For the entire shareholding period in this company, I was paid dividends only once, but the rest of the declared dividends I re-invested into the company to support its further expansion and growth. I had an offer to sell my shares in SOCAR International DMCC, and after certain negotiations and proposals from SOCAR I agreed to sell for the price almost equal to the amount of dividends declared by the company in the amount of AZN 18 mln.

Q. There is no much information about UGE-Lancer, another unknown company owned by you. In 2011 SOCAR submitted the Production Sharing Agreements (PSA) on Balakhani-Sabunchu-Ramani and Kurdakhani oil fields to the Parliament and introduced UGE-Lancer as a foreign company. However, the Report indicates that this company is related to you.

A. This company was a foreign company set up abroad, it belongs to my Group of Companies. It was reasonable to introduce it as a foreign company.

Foreign companies are mainly interested in major offshore oil fields in the Azerbaijani sector of the Caspian Sea, which are new and have rich oil and gas deposits. On the contrary, most onshore oil fields are old exhausted ones and are not commercially attractive to most foreign investors.

Our request to make a PSA was accepted by SOCAR as an interesting offer. Due to successful activities of my company the production in this oil field almost doubled . Today, you can compare the effective infrastructure and working conditions of my employees to other similar onshore oil fields. The infrastructure and working conditions at my sites are much better. I urge you to look at the comparative pictures ‘before’ and ‘after’ downloaded on my company’s corporate website.

~There was no mass-scale redundancy since we took over the discussed oil fields, quite the opposite in fact. You can hardly find any similar effective management at any other onshore oil projects in Azerbaijan.

Q. SOCAR Petroleum is now a well-known chain of petrol stations in Azerbaijan. Did you have any interest in that company?

A. I was one of the founders and shareholders of this company. We got the offer to participate in this project directly from SOCAR. The main reason for this offer was my ability to attract young professional local employees by paying them competitive salaries and providing them with indispensable financial support whenever needed.

Vast investments were made in this company, which allowed it to build new chains of petrol filling stations. No dividends were paid to me throughout the company’s activities and my shareholding period. In spring 2013 I got an offer from SOCAR to buy my shares in SOCAR Petroleum. I sold my shares in SOCAR Petroleum for their real value.

Q. As far as we understood from the Global Witness’s Report it is claimed that you are represented or are shareholder in over 50 various projects with SOCAR. Why did SOCAR choose you for so many projects?

A. This is false and inaccurate. Currently, the number of our joint projects with SOCAR is seven, and all of them are available in SOCAR’s corporate website.

As for tenders, in most fields there is no requirement to hold a public tender. For instance, the process of awarding and signing of the Production Sharing Agreements (PSAs) with SOCAR is based on direct request and negotiations, and is applied to all existing PSAs in Azerbaijan. In the meantime, Azerbaijani legislation doesn’t actually require holding a tender or any other competitive public procedure for partnering in joint ventures. As you can see, they do not give a preference to the letter of law, but to false and invented arguments and facts. Undoubtedly, it must be seen as an indicator of their bias.

Q. Perhaps you are well aware that there is a trend in global business to depict offshore organisations as corrupt. Under such circumstances, how did you manage to build your complex business partnership with SOCAR and what benefits did you get from using such difficult offshore mechanisms?

A. Actually, I never used any classic offshore structures in my business relations with SOCAR. The top parent company of my Holding Group was set up in Singapore = one of the most transparent and respectable jurisdictions in the world. In addition, I registered its representative office in Azerbaijan declaring it to the Azerbaijani authorities. The profits generated by this group of companies were properly declared and I paid any relevant income taxes in Azerbaijan.

In other words, we never used offshore structures for the purposes of tax evasion, hiding something or committing any crimes. Why then did I establish foreign companies for specific business purposes? Well, to establish effective business relationships with our foreign partners. An Azerbaijani company could face many restrictions (foreign currency regime, import and export issues, special permits/ licences etc.)

The use of such foreign companies allowed us to get access to effectively operating banks, since most of those banks are reluctant to open accounts for Azerbaijani entities.

But despite using foreign companies most of my income is used for the purposes of re-investing into non-oil sector projects in Azerbaijan.

Q. It is also claimed that you confidentially participate in the ‘White City’ project in Azerbaijan?

A. The ‘White City’ project launched in 2009, by a special Presidential decree, seemed attractive and as my main goal was to re-invest my income in Azerbaijan. I expressed our interest to the project’s management. We chose the project on construction of an office premise. For these reasons, and without hiding anything under the sole ownership of my group’s top parent company, we set up a local company. The process of investors’ invitation and joining the ‘White City’ project is transparent and the information provided on its website.

Q. In your interview with ‘Business Time’ magazine you mentioned that Azerbaijan was under pressure when SOCAR was selling crude through foreign companies. I am sorry, but if you were talking about trading companies, then what political pressure could they exert on Azerbaijan? And don’t such companies approach oil countries with a request of cooperation?

A. Well, Azerbaijan did face such a situation. At one time, all those companies united their efforts and managed to put pressure on Azerbaijan by agreeing not to buy Azerbaijani crude. As a result, Azerbaijan had huge volumes of crude unsold and it negatively affected its economy. Through such a scenario, they achieved good conditions for the sale of Azerbaijani crude. They also used it to prevent Azerbaijan becoming one of the independent energy providers.

Another interesting fact related to this matter is that Azerbaijan did approach major oil companies with a request to set up a joint trading company. However, none of them expressed an interest in this offer, because they didn’t want to control such trading company on equal basis with SOCAR and share the generated income..

Q. As we can see now you have managed to get rid of the ‘mysterious man’ reputation through your statement and follow-up interviews. Are you planning to cooperate with Global Witness, the civil society organisations or EITI in the future?

A. No, I don’t have any need to cooperate with them.. Their bias is so obvious, there’s no chance of them treating fairly and objectively. Global Witness never published or provided links to my statements or interviews on its website. Nor did it ever refer to any information on my personal website. It claims to be a strong, objective, fair and transparent organisation, providing profound and thorough research, but it shows a clear prejudice towards me circumstance and Azerbaijan.

Regardless of this, I shall continue providing information about my activities to the public. I will use my personal website and social networks to do this. And, as always, I am open for discussions with neutral and unbiased media..

Q. It is claimed in some media that Global Witness, Radio Free Europe and other affiliated organisations are about to prepare new reports against you and SOCAR. Do you know anything abut this?

A. I am aware of this. It’s been expected, given their previous report, based on false and ill-grounded arguments and evidence, did not have the desired effect.

Despite working for a long time, they were not able to find anything against us to damage the country’s reputation. In other words, due to the lack of serious and well-grounded negative arguments against me, they will be falsifying the facts and exaggerating certain matters out of proportion.

You can already observe, for example, Radio Free Europe has already published a new piece against me based on false and groundless documents took from anonymous hacker resources. It is an undeniable fact that the reference to any documents can be only valid if they are obtained legally and officially from the relevant official authorities. It has never been an issue in this case and the above-mentioned organisations are exploiting fake and false documents to perplex the society and create social tensions in Azerbaijan. In this case, it’s reasonable to question their so-called ‘responsible journalism’ principle!

I would like to call upon all readers and warn them in advance not to believe and accept new reports produced by that organisation or media resources. They would use ill-grounded and occasionally false facts and arguments against Azerbaijan and me in person. They believe that by doing so they can blackmail and keep Azerbaijan under permanent pressure both economically and politically.

However, I am confident that the Azerbaijani society throughout these years has obtained unrivalled experience and would not accept seriously any provocative or false reports prepared by those who took a hostile stance against Azerbaijan…

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