Identifier
Created
Classification
Origin
06BAKU1295
2006-08-31 12:05:00
UNCLASSIFIED//FOR OFFICIAL USE ONLY
Embassy Baku
Cable title:  

AID COUNTRY COORDINATOR'S INTRODUCTORY CALL AT

Tags:  ECON EFIN ETRD ENRG EPET PREL AJ IR RU 
pdf how-to read a cable
VZCZCXRO0288
RR RUEHDBU RUEHLN RUEHVK RUEHYG
DE RUEHKB #1295 2431205
ZNR UUUUU ZZH
R 311205Z AUG 06
FM AMEMBASSY BAKU
TO RUEHC/SECSTATE WASHDC 1183
INFO RUCNCIS/CIS COLLECTIVE
RUEHAK/AMEMBASSY ANKARA 1718
RUEHIT/AMCONSUL ISTANBUL 0463
RUCPDOC/DEPT OF COMMERCE WASHDC
RHEBAAA/DEPT OF ENERGY WASHDC
RUEATRS/DEPT OF TREASURY WASHDC
UNCLAS BAKU 001295 

SIPDIS

SENSITIVE

SIPDIS

E.O.12958: N/A
TAGS: ECON EFIN ETRD ENRG EPET PREL AJ IR RU
SUBJECT: AID COUNTRY COORDINATOR'S INTRODUCTORY CALL AT
THE STATE OIL FUND OF AZERBAIJAN REPUBLIC

REF: BAKU 1274

SENSITIVE BUT UNLCASSIFIED - PLEASE HANDLE ACCORDINGLY.

UNCLAS BAKU 001295

SIPDIS

SENSITIVE

SIPDIS

E.O.12958: N/A
TAGS: ECON EFIN ETRD ENRG EPET PREL AJ IR RU
SUBJECT: AID COUNTRY COORDINATOR'S INTRODUCTORY CALL AT
THE STATE OIL FUND OF AZERBAIJAN REPUBLIC

REF: BAKU 1274

SENSITIVE BUT UNLCASSIFIED - PLEASE HANDLE ACCORDINGLY.


1. (SBU) USAID COUNTRY COORDINATOR PAID AN INTRODUCTORY
CALL ON THE EXECUTIVE DIRECTOR OF THE STATE OIL FUND
(SOFAZ),SHAHMAR MOVSUMOV, AUGUST 7. MOVSUMOV OUTLINED
THE PLANNED INTERNAL REORGANIZATION OF SOFAZ BASED ON A
STRATEGIC PLAN THAT WOULD BE COMPLETED BY MID-FALL. HE
ALSO DISCUSSED THE REVENUES THAT WOULD FLOW INTO SOFAZ
AND HOW THESE FUNDS WOULD BE USED THIS YEAR.


2. (SBU) MOVSUMOV STATED THAT SOFAZ WAS DEVELOPING A
STRATEGIC PLAN FOR THE NEXT TWO YEARS. THE STRATEGIC
PLAN WOULD BE FINISHED BY MID-FALL AND WOULD REVEAL THOSE
AREAS IN WHICH SOFAZ NEEDED TECHNICAL ASSISTANCE. USAID
PLANS TO PROVIDE TECHNICAL ASSISTANCE TO HELP SOFAZ
DEVELOP A STAFFING AND COMPENSATION PLAN THAT SOFAZ WOULD
HAVE THE GOAJ APPROVE1(IT WOULD BRING TO THE GOAJ FOR
FUNDING - THIS IS UNCLEAR TO ME; SOFAZ WOULD SEEK GOAJ
FUNDING FOR A NEW STAFFING AND COMPENSATION PLAN?).
MOVSUMOV COMPLAINED THAT ALTHOUGH SOFAZ WAS TIED TO THE
CIVIL SERVICE WAGE SCALE, THE SKILLS OF HIS STAFF WERE IN
DEMAND NATIONALLY AND INTERNATIONALLY AND HE WAS HAVING
GREAT DIFFICULTY ATTRACTING AND RETAINING QUALIFIED
STAFF. THROUGH AN ONGOING USTDA ASSISTANCE PROJECT, SOFAZ
WILL RECEIVE TECHNICAL ASSISTANCE TO IDENTIFY ITS IT
REQUIREMENTS.


3. (SBU) MOVSUMOV TOLD TAYLOR THAT THE ECONOMETRIC FIRM,
OXFORD ECONOMIC FORECASTING, FUNDED BY BP WAS DEVELOPING
A MACROECONOMIC FORECASTING MODEL THAT WOULD MODEL THE
EFFECT OF OIL REVENUES ON THE ECONOMY. THE MODEL SHOULD
BE READY IN SEPTEMBER. (FULL REPORT ON SOFAZ'S NEW
ECONOMOIC MODELING UNIT IN REFTEL.)


4. (SBU) MOVSUMOV EXPLAINED THAT SOFAZ RECEIVES MONEY
FROM THE STATE OIL COMPANY OF AZERBAIJAN BASED ON A
PERCENTAGE OF THE REVENUES ON OIL IT EXTRACTS OVER AN
AMOUNT SET YEARLY BY PRESIDENTIAL DECREE. THIS YEAR THE
AMOUNT IS USD 40 A BARREL. IT ALSO RECEIVES ALL THE
GOAJ'S SHARE OF EARNINGS UNDER ITS PRODUCTION SHARING
AGREEMENTS. IN TOTAL, HE EXPECTED REVENUES OF USD 150 TO
200 BILLION WITH USD 1 BILLION THIS YEAR, USD 2 BILLION
NEXT YEAR, USD 8.5 BILLION IN 2008, AND USD 17.5 BILLION
IN 2009. MOVSUMOV EXPECTED REVENUE TO LEVEL OUT IN 2012-
2013 AND TO BE FLAT FOR A COUPLE OF YEARS BEFORE
BEGINNING TO DECLINE. HE ADDED THAT THE AMOUNT THAT
SOFAZ WOULD RECEIVE THIS YEAR WAS USD 1 BILLION AND THAT
ITS DISBURSEMENT WOULD ALSO BE USD 1 BILLION, LEAVING
SOFAZ WITH USD 1.6 BILLION IN ASSETS.


5. (SBU) MOVSUMOV STATED THAT THE AMOUNT THAT SOFAZ WAS
TO TRANSFER TO THE BUDGET ON AN ANNUAL BASIS WAS SET
ANNUALLY BY PRESIDENTIAL DECREE. IN 2006, THE AMOUNT WAS
800 MILLION MANATS (APPROXIMATELY USD 880 MILLION) AND
SOFAZ HAD ANTICIPATED DRAWING DOWN ON THE STABILIZATION
FUND FOR THE DIFFERENCE, BUT THAT HIGHER THAN ANTICIPATED
EARNINGS (THE RESULT OF A USD 70 A BARREL PRICE) MEANT
THAT THERE WAS NO NEED.


6. (SBU) MOVSUMOV SAID THAT THE ANNUAL PRESIDENTIAL
DECREE ALSO ORDERED SPECIFIC CAPITAL EXPENDITURES. IN
2006, THESE PROJECTS TOTALED 400 MILLION MANATS, WITH THE
BALANCE OF 600 MILLION MANATS BEING TRANSFERRED FOR
BUDGET SUPPORT. THE EXPENDITURES AUTHORIZED THROUGH
SOFAZ WERE FOR TWO PROJECTS TO BRING WATER TO BAKU FROM
THE CAUCASUS MOUNTAINS, IDP HOUSING, BTC FEES, AND
FUNDING FOR THE STATE'S EQUITY INVESTMENT FUND. THE
MONEY IS TRANSFERRED TO COMMITTEES WITHIN VARIOUS
MINISTRIES THAT ARE CHARGED WITH ADMINISTERING THE
PROJECTS.

DERSE


_______________________________
1The funds would come from SOFAZ which pays the
operational expenses of SOFAZ but permission to be
released from the constraints of the Civil Service wage
scale would have to come form the GOAJ