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Report: Rich Azerbaijan oil deal points to insiders

The State Oil Company of Azerbaijan (SOCAR) signed an unusually rich production sharing agreement with a company based in the United Arab Emirates that has close ties to Azeri officials.

The deal Bahar Energy Limited (UAE) signed with SOCAR gives Bahar 80 percent of profits of the Gum-Deniz and Bahar oil fields, with the other 20 percent going to SOCAR.

In SOCAR’s five other PSCs, no private company holds more than 50 percent of shares, according to a report by the Organized Crime and Corruption Reporting Project.

Adem Aliyev, the father-in-law of SOCAR president Rovnag Abdullayev, and Fakhraddin Ismayilov, the head of SOCAR’s Oil & Gas Research and Design Institute, were early directors in the company that became Bahar Energy, the OCCRP said.

A document trail shows that Aliyev and Ismailov sold their interests in the operation in 2008 to Anar Aliyev, who’s linked “to more than 50 other questionable public-private partnerships in Azerbaijan,” the report said.

The Azeri Parliament in 2010 ratified the production-sharing agreement that gave Bahar 80 percent of the profits.

A few opposition legislators tried and failed to find out who was profiting from the Bahar deal.

The fields covered by the production sharing contract are expected to produce 4,629 barrels of oil per day, worth about $500,000 a day at current prices.

Bahar Energy shares an address in Baku with companies linked to Hafiz Mammadov’s Baghlan Group.

Mammadov bought sponsorship rights for the football club Atletico Madrid, which has “Azerbaijan: Land of Fire” on its jerseys. And he owns the French football club Lens.

“When the agreement with SOCAR was signed in 2010, [Mammadov’s] Baghlan Group owned one-third of Bahar Energy. The other two-thirds were split equally between Greenfields Petroleum Corporation and Rafi Oil FZE,” the OCCRP said.

Greenfields Petroleum is a Cayman Islands company based in Houston, Texas.

Rafi Oil FZE is owned by Rafi Oil (BVI) and has connections to SOCAR officials, the report said.

“Two men were listed as Rafi Oil (BVI) company directors — SOCAR’s [research director] Ismayilov and the SOCAR president’s father-in-law, Adem Aliyev.”

The two SOCAR insiders sold all their shares in Rafi Oil FZE in 2008, two years before the Bahar Energy deal.

The Buyer of their shares was a Singapore-registered company named Union Grand Energy Pte Ltd.

Two years ago, Union Grand Energy sold Rafi Oil’s one-third share of Bahar Energy to the Baghlan Group for $150 million.
Union Grand’s listed owner is Anar Aliyev. A 2013 Global Witness report called “Azerbaijan Anonymous” described Aliyev as a mysterious partner with almost no known business background who is somehow involved in dozens of SOCAR joint ventures.

Global Witness said companies owned by Anar Aliyev reported profits of $375 million in deals involving the handling of Azerbaijani oil, usually through deals that didn’t involve public tenders or proper bidding.

“In just one example,” Global Witness said, “Anar Aliyev made $118 million in profit in exchange for an investment of just $5 million in Socar’s Swiss-based oil trading arm Socar Trading. The reasons for his company’s involvement have not been adequately explained.”


Richard L. Cassin is the publisher and editor of the FCPA Blog. He can be contacted here.

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1 Comment

  1. Great post – isn't it interesting that the more things change, the more they stay the same? SOCAR, after all, was at the center of the case for which Frederic Bourke went to prison and involved the infamous Victor Kozeny, the 'Pirate of Prague.' You can't make this stuff up.



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