On September 20, 1994, an agreement on joint development and production sharing in the “Azeri”, “Chirag” and “Guneshli” fields of Azerbaijan’s sector of the Caspian Sea was signed with world-known oil companies. This agreement, known later as the “Contract of the century”, paved the way for signing new agreements in Azerbaijan. Owing to the realization of the oil strategy, Azerbaijan ensured its energy security and became a reliable country and partner in the international arena.
The national leader Heydar Aliyev prepared a long-term oil strategy program that envisaged the incorporation of increasing oil revenues to the state economy in a proper way. The main goal of the oil strategy, realized as the long-term development program, is the mobilization of the domestic potential of the country and efficient use of abundant oil reserves for the prosperity of the people of Azerbaijan. Core ideas of the National Oil Strategy are based on the attraction of foreign investments and expertise; establishment of multi-optional export systems; and efficient and transparent management of generated revenues.
At the next stage of the oil strategy, it was highly crucial to efficiently manage accumulated oil revenues generated from the development of the country’s oil fields jointly with foreign companies and to direct these assets to the development of advanced areas and implementation of projects of socio-economic importance.
For this purpose, Heydar Aliyev approved a Decree № 240 on December 29, 1999 establishing the State Oil Fund of the Republic of Azerbaijan (SOFAZ). The Statute of SOFAZ was approved by the Presidential Decree № 434, dated December 29, 2000.
Oil funds, sovereign wealth funds, and other similar institutions serve to efficiently manage revenues generated from the sale of natural resources and its equal distribution among generations. Currently, SOFAZ has achieved high institutional development and became nationally and internationally recognized organization, capable of sharing its experience in asset management and ensuring transparency.
There are several funds in the world similar to SOFAZ. Experience of these funds was used as the reference point alongside with local peculiarities and present needs when the Fund was established. A model based on the accumulation of oil revenues for future generations and utilization of revenues for solving the problems of the present generation was selected while laying the foundations of SOFAZ.
Since its establishment, transparency has been one of the main principles of the activities of SOFAZ. The Fund has developed both institutionally and in terms of transparency assurance perspective and has become a financial organization at international level, meeting modern standards. SOFAZ's achievements have served to the growth of influence of Azerbaijan in the international arena.