WikiLeaks: Azerbaijani President accused BP of stealing billions of dollars of oil from his country

PanARMENIAN.Net - The president of Azerbaijan accused BP of stealing billions of dollars of oil from his country and using "mild blackmail" to secure the rights to develop vast gas reserves in the Caspian Sea region, according to leaked US cables.

Ilham Aliyev said the oil firm tried to exploit his country's "temporary troubles" during a gas shortage in December 2006. In return for making more gas supplies available for domestic consumption that winter, BP wanted an extension of its lucrative profit-sharing contract with the government and the go-ahead to develop Caspian gas reserves, one cable from the US embassy in Baku reports. Aliyev also threatened to make BP's alleged "cheating" public, cables show.

The leaks reveal the extent of the company's power over Azerbaijan's government. BP controls the country's crucial energy projects and is its largest foreign investor. One cable reveals BP was so concerned about a terrorist attack on its offshore facilities, and about the lack of protection offered by the government, that it provided Azerbaijan's naval forces with "off-the-shelf" anti-collision radar to cover the company's platforms – "the best one that the navy currently has", according to BP.

Aliyev's hostility towards the company vanished, say the cables, after Russia invaded neighbouring Georgia in August 2008. The invasion – and a major explosion caused by Kurdish rebels on Azerbaijan's Baku–Tbilisi–Ceyhan pipeline, controlled by BP – heightened the Aliyev government's insecurity in an unstable region.

BP is the biggest shareholder in the regionally strategic $4bn (£2.6bn) Baku–Tbilisi–Ceyhan pipeline, which carries more than 1m barrels of oil a day on a 1,000-mile journey from the Caspian to Turkey. BP is also the largest shareholder and operator of the Azeri-Chirag-Guneshi field, Azerbaijan's largest producing oilfield in the Caspian reserve, where vast undeveloped gas reserves also lie.

The row centred on how the consortium operating the Azeri-Chirag-Guneshi field, led by BP, would share profits with the government in what is known as a production sharing agreement (PSA). The contract was signed in 1994 and, as is customary, allowed for the companies initially to take more of the revenues to pay off their upfront costs to develop the field, with a higher proportion of revenues going to the government subsequently.

But in April 2007, according to the cables, BP told the state-controlled oil company Socar that because of higher transport costs and delays in production, the agreed staggered increases in government profits allocated to the government would take longer to materialise. The government was also reportedly unhappy with other aspects of its dealings with BP and its partners and production delays.

In one cable in October 2007 Socar threatened "extra-legal" measures against the consortium and to have BP's Azerbaijan boss, Bill Schrader, put on trial for "stealing ten billion dollars worth of Azerbaijani oil," The Guardian reports.