"Azerbaijan's government is squeezing activist groups to the breaking point while claiming to international audiences that it's a leader on open civic participation and good governance," Lisa Misol, a business researcher at Human Rights Watch, said in a statement from New York.
The rights group said it's frustrated by Azerbaijan's decision to enact measures that restrict the work of non-governmental organizations.
Azerbaijan is a founding member of the Extractive Industries Transparency Initiative, a global collaboration meant to promote transparency in the management of state natural resources like oil and gas.
Azerbaijan's president and state oil company, known as SOCAR, control the nation's energy sector.
The country received a "weak" score on an index from the Natural Resources Governance Institute.
"Azerbaijan is blatantly violating EITI rules, and EITI cannot afford to be complicit in this hypocrisy," Misol said Thursday.
Azerbaijan is one of the premier oil and gas producers in the Caspian region, with European communities taking a particular interest in the country in an effort to break Russia's grip on the energy sector.