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The Open Society Institute has released
a report calling for accountability, transparency, and public
oversight in the oil and natural gas industries of Azerbaijan
and Kazakhstan.
The report, Caspian Oil Windfalls: Who
Will Benefit? urges foreign oil companies, their home governments,
and international financial institutions to promote good governance
and democracy in Azerbaijan and Kazakhstan to ensure that
petroleum revenues generate social prosperity and stable governments.
As the United States and its allies prepare
to help shape the post-war Iraqi oil regime, we are reminded
that security of energy supply has always been a priority
of United States national security policy.
Oil booms in the Caspian Basin are expected
to make Azerbaijan and Kazakhstan important new energy suppliers
for the United States. But the report warns that the lack
of good governance and democracy in the two countries could
make them less reliable partners.
Without systemic reforms in the management
of oil revenues, the report says, the money beginning to flow
into the countries will not result in healthy, long-term economic
growth, higher living standards, and more freedom for the
countries' people. Instead, it likely risks being squandered
on pet projects or domestic enterprises that do not lead to
growth while the majority of citizens remain poor and powerless.
"There is no issue of greater importance
than ensuring the long-run prosperity and stability of resource-rich
countries by developing ways to use these resources and the
wealth they generate well," Joseph E. Stiglitz, Nobel
Prize winner in economics, writes in his foreword to the report.
According to the report, foreign oil and
natural gas companies benefit from disclosing their payments
to governments so that citizens can monitor the use of these
revenues. Without disclosure, companies leave themselves open
to accusations that they have underpaid the state and are
to blame for continued poverty. "It is in the enlightened
self-interest of these companies to ensure that their payments
are not misappropriated," says George Soros, founder
of the Open Society Institute.
The governments of Azerbaijan and Kazakhstan
should consider creating citizens' advisory councils such
as the ones set up in Alaska after the Exxon Valdez oil spill.
The councils would monitor the oil industry and the government
budget, and provide information to the public, giving citizens
a voice in hydrocarbon development.
Caspian Oil Windfalls analyzes the systems
Azerbaijan and Kazakhstan use to manage their oil wealth.
It offers recommendations to the governments of Azerbaijan
and Kazakhstan, multinational oil companies, international
financial institutions, and foreign governments for promoting
accountability, transparency, and public oversight in the
management of oil and natural gas revenues. The report includes
10 case studies on natural resource funds in other countries
as well as models of citizen oversight.
The report was written by Svetlana Tsalik,
director of the Caspian Revenue Watch, a program of the Open
Society Institute's Central Eurasia Project.
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