State Oil Fund marks 20th anniversary
By Rasana Gasimova
Azerbaijan’s State Oil Fund (SOFAZ) celebrated its 20th anniversary on December 29. The Fund was established in 1999, as part of the national oil strategy developed by former President Heydar Aliyev.
SOFAZ was established for the purpose of collecting, effectively managing and maintaining the revenues from the implementation of the oil and gas contracts.
During the years of its activity, SOFAZ has made significant efforts to achieve its goals, and has successfully invested in strategically important, large-scale local and international socio-economic projects that have been Azerbaijan’s priority. The Fund has been highly institutionalized and has become a transparent institution in the international arena.
When the fund began its operations, it had assets worth $271 million. This year, its assets exceeded $40 billion. Until November 30, 2019, the State Oil Fund has received profits of approximately $158.4 billion, including $151.5 billion from oil and gas contracts and $6.9 billion from the fund’s management.
Part of the State Oil Fund’s revenues is transferred to the state budget, thus ensuring macroeconomic stability and fiscal stability in the country. The first revenues allocated from the Oil Fund were aimed at addressing social and housing problems of refugees and IDPs who were forced to leave their homes as a result of Armenia's aggression against Azerbaijan.
SOFAZ provided the financing of state share in the construction of the Baku-Tbilisi-Ceyhan main export pipeline, Oguz-Gabala-Baku water pipeline, Samur-Absheron irrigation system, STAR oil refining complex, Baku-Tbilisi-Kars railway, and Southern Gas Corridor.
State Program on education of Azerbaijani youth abroad in 2007-2015 is one of the important projects financed by SOFAZ. Under this program, which was a part of President Ilham Aliyev's concept of "turning black gold into human capital", up to 3,500 young people studied in the most prestigious universities in 32 countries,
The fund has invested a total of $9.4 billion to implement all of these projects.
One of the main tasks of the State Oil Fund is to effectively allocate the collected funds and to ensure that they become a sustainable source of income for future generations. To this end, the fund creates a diversified global investment portfolio for a long-term period.
Currently, assets included in SOFAZ's diversified investment portfolio are held in more than 50 countries with financial assets such as US dollars, euros, English pound and other currencies, bonds, stocks, real estate and gold. At present, the State Oil Fund holds shares in more than 1,600 largest companies around the world solely because of stock investments quoted on the stock exchange.
As part of its real estate investment, SOFAZ has made direct real estate investments in Europe, Asia and the Pacific Basin cities, such as London, Moscow, Paris, Tokyo and Seoul.
The fund is currently internationally recognized and highly valued by many reputable organizations around the world. In 2007, SOFAZ was awarded the UN Sustainability Award for "Improving Transparency, Accountability and Responsiveness in Public Service". SOFAZ is the first governmental agency among organizations of the Eastern Europe and CIS countries to receive the UNPSA.
For example, The State Oil Fund ranked fourth with a score of 92 among 60 sovereign funds in the Sovereign Wealth Fund Evaluation Index prepared by Edwin Truman, a senior fellow of the Peterson Institute for International Economics.
SOFAZ ranked first in the Linaburg-Maduell Index compiled by the staff of the Sovereign Wealth Fund and 10th in the ranking of the top 100 most influential public funds investors in 2018 prepared by the Sovereign Wealth Fund.
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