New oil, same old corruption
I am happy to have helped the OCCRP on its latest investigative report into the siphoning of hundreds of millions of dollars from the Shah Deniz 2 project in 2014 and 2015, by two companies owned by Azerbaijan’s state oil company. The project was aimed at expanding the UK oil giant BP’s operations in Azerbaijan’s Caspian Sea.
It is both an alarming and wearisomely familiar tale. You can read the full story and my take here.
“Anti-money laundering expert Eryn Schornick said single-source or ‘limited tendering’ contracting processes “are a major departure from fundamental principles of transparency and competition.”
“When combined with a pre-existing relationship between the contractors and subcontractors, it raises potential red flags for corruption like bribes or kickbacks and favoritism,” she said.”
In the Shah Deniz 2 project, we saw the same patterns of behavior that are routinely used by the criminal and corrupt to enable graft—using single source or limited tendering processes, ensuring that there is little to no transparency or competition, and cozy relationships between contractors and subcontractors that make it easy for contracts to be padded and costs to be massively inflated.
These are tactics commonly deployed alongside a complex web of opaque corporate structures, associated companies, and networks reaching into offshore tax havens.
In this case, BP stood to lose some money from the project but the size of the overall financial prize on offer to the oil major – the $33 billion Southern Gas Corridor that it feeds – means that BP could swallow losses even in the hundreds of millions. The real victims and those who could not afford to bear the costs of corruption were the workers at the heart of the project who, while their bosses skimmed lucrative rewards from contracts, were underpaid and exploited.
So, too, are those who pay the costs of their governments selling the country’s natural mineral assets for less than their true value.
Such cases are not unique to Azerbaijan. Authoritarian governments like Ilham Aliyev’s, which have systematically clamped down on journalists and civil society, and in countries where information on company ownership is notoriously difficult to access, are not only easy prey but more likely to be complicit.
The lessons from Shah Deniz 2 and similar cases across the world carry common themes. Where legal and disclosure regimes are robust, and public procurement processes transparent, governments and civil society have more tools important to holding companies and individuals to account.
Without information on the people who own or control companies, and the tools to use that information, we are all fumbling around in the dark.