Azerbaijan’s Shadowy Finances: $1.7 Billion Diverted from Shah Deniz 2 Gas Project
In a damning exposé, leaked documents reveal a large-scale embezzlement scheme involving two state-owned Azerbaijani companies, Bos Shelf and Star Gulf, who siphoned off over $1.7 billion from BP’s Shah Deniz 2 gas project.
Key Findings
- Bos Shelf and Star Gulf used fake charges and padded contracts to misappropriate billions from Shah Deniz 2.
- Much of the money was paid out before profits went to the Azerbaijani state budget, placing a significant financial burden on the public purse.
- Workers at Bos Shelf’s factory in Azerbaijan went on strike due to low wages and poor working conditions, while the companies were embezzling their pay and providing inflated salaries to the general director’s family.
- The scheme came to light during a period when the Southern Gas Corridor was expanding, contributing to the EU’s efforts to diversify away from Russian gas.
Labor Unrest and Embezzlement
Around 2013, laborers at Bos Shelf’s factory in Azerbaijan went on strike due to low wages and poor working conditions (Amnesty International). Despite promises to investigate, Bos Shelf continued to misappropriate the workers’ pay and employed the general director’s family on inflated salaries.
Bos Shelf’s Role in Shah Deniz 2
Bos Shelf, a lead contractor on Shah Deniz 2, was poised to pocket over $1.7 billion from the project. The company and another SOCAR subsidiary, Star Gulf, together used artificially inflated charges for corporate overhead and unjustified markups to extract these funds.
Exorbitant Costs and Missing Funds
As workers at Bos Shelf complained about their inability to make ends meet, these companies were cashing in. Around the same time, the director of Bos Shelf and his wife began buying expensive properties in Miami worth over $10 million.
Despite allegations of corruption, BP took no action, and a whistleblower’s report to the U.K.’s Serious Fraud Office lacked sufficient evidence for an investigation.
Ongoing Concerns and Allegations
Despite the substantial embezzlement, both SOCAR and BP maintain that they have adhered to anti-corruption laws and internal procedures. However, some experts argue that the deep involvement of big oil companies with authoritarian regimes can facilitate the diversion of resources away from the public.
During a period when Azerbaijan’s government was clamping down on civil society and independent journalism, hundreds of millions of dollars vanished from the project (European Parliament resolution). Following the European Parliament’s 2015 resolution on Azerbaijan’s worsening democratic governance, questions remain about the accountability and transparency of funds within the region’s energy sector.
Evidence of Corporate Embezzlement
Emails, presentations, and contracts suggest that unjustifiable costs and charges were a systemic issue within the consortium building the Southern Gas Corridor.
- Bos Shelf and Star Gulf charged exorbitant costs and fees under the terms of their contracts.
- These costs flowed out of Azerbaijan in dollars to the companies’ accounts in Dubai and Luxembourg, making it difficult to trace the destination of the funds.
Saipem’s Alleged Involvement
Saipem, a consortium partner with a history of corruption, faced allegations of inflating costs and artificially increasing the price of goods and services provided. However, Saipem did not respond to repeated requests for comment.
As the financial misdealings at Shah Deniz 2 continued, the larger concerns over accountability and transparency within the region’s energy sector persist.