Economists speak about “BP issue”

Economists speak about “BP issue”

After the President of the Republic of Azerbaijan criticized BP, some stakeholders have called for suing the company. For example, the Member of Parliament Vahid Ahmadov said that as a result of BP’s failure to perform adequately Azerbaijan lost $8.1 billon of dollars. Thus, the government had to react on time.” The MP also noted that this violation had to be prevented: “$ 8.1 billion should be turned to Azerbaijan, and BP should think carefully about this. Of course, it is all economical issues, but there is also a political side of the case. Taking all of this into consideration, Azerbaijan should get back aforementioned sum. I don’t think that the contract with BP will be broken or that another company will replace it. However, we should work on the solution of this issue, even if it needs to be at the level of international court. ”

Is it possible for suing the company? Economists shares views with “Movqe” newspaper.

VuqarBayramov, the chairman of Economic and Social Development Center (CESD), says that suing of BP not going to happen. He says: “obligations of both BP and Government of Azerbaijan are managed by terms of the “Contract of the Century” signed in 1994. However, neither the implementation of the commitments nor sharing production is obliged severely, thus it is hard to stop cooperation with BP on the grounds that it has failed to meet its commitments. Generally, countries try not to spoil their relations with such big companies. They try to solve problems through mutual understanding and debate. Therefore, I do not think that the breach of contract is in the interests of either the Azerbaijani government or BP. I ​​think the solution of challenges related to the obligations is more likely rather than terminating of cooperation and getting the issue to the court. In any case, BP’s position shows that both sides are trying to solve the problem.”

IlhamShaban, an expert from the “Turan” news agency, said that the mechanism, how to treat the company if it failed to comply its obligations, existed: “This mechanism has been reflected in the “Contract of the Century.” Besides, the way to solve these problems was also reflected in the document. The contract reflects how to force the company to admit its mistake through the court, evenif the company doesn’t want to do it. If one of the sides doesn’t agree on some issue, then the International Court of Arbitration can examine the case. However, I don’t think that the issue around BP will be considered in the court. Second, I do not believe thatAzerbaijan will change the contractor because replacing a contractor has never had a positive effect. This can be observed from the experience of neighboring countries, such as Russia and Kazakhstan. In any case, the problems related to BP should be resolved within the framework of the law. ”

Ali Alirzayev, an economist, said that if BP fails to comply with its commitments, it is possible to recover damages through the court:  “Commitments in oil contract are regulated by law.  In case of failing commitments, the mechanisms that are indicated in contract should come into effect.  In the worst-case scenario, BP can be disqualified through the court in accordance to the provision of the contract. At the same time, the 8.1 billion dollar loss resulting from BP’s operation can be recovered from the company. However, I don’t think that the situation could rise to this level. The problem is that BP’s interest in the oil production in Azerbaijan is declining. It gets only 25 % of produced oil.  In this case, none of the partners would invest capital in the production process. Logically, if the process needs more capital, both partners should invest.”

“Movqe” newspaper

One Response to “Economists speak about “BP issue””
  1. Elchin Hasan says:

    The only comment I would make is that it seems Ali Alirzayev seems to have misunderstood the PSA contract. Firstly, BP’s share is not 25%, rather it is 7% (35% of 20%) of produced oil. Second, he says “Logically, if the process needs more capital, both partners should invest” where there must not be such a principal in PSA. Investor should be the foreign company till the end of the contract.

    Thanks and Regards

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