History of the Baku Oil Industry. Part 19

Chapters from the book by Ismail Agakishiev

After the discovery of oil fields, Baku became a special place, where various economic and political interests of international coalitions, industrial clans and leaders were concentrated and clashed. VK begins publishing chapters from the book by Ismail Agakishiev "History of the Baku Oil Industry and the Second Oil Boom (second half of the 19th century - beginning of the 20thcentury.)". The book presents a historical analysis of the emergence and current state of the Azerbaijani oil industry.

By this time the WWI turned into the ‘war of engines’ requiring a great amount of fuel. Germany desperately needed oil. And it became the only side that accepted Soviet Russia’s proposal to sign peace. It is wide known that among the first decrees of the Soviet government issued on October 25 was the ‘Decree on peace’. Russia which was being torn from the inside by the revolution and civic war proposed a peace without annexations and contributions. The Entente members didn’t support this idea, and Germany agreed to sign peace only after annexing Russia’s western territories. The Brest-Litovsk  agreement stipulated that Germany gets a certain amount of Baku oil. The Germans agreed that Baku was a part of Russia’s territory, which was very important for the Bolsheviks, as almost all western powers laid claims to Baku oil fields. In exchange for that recognition the Soviet government had to give one fourth of oil produced in Baku to the Germans. It is possible that if the Germans would get their oil on time in summer 1918 the general outcome of the war would be different. The only actual condition of this shipment’s realization was Turkey’s renunciation of supporting the forces of the Azerbaijani Democratic Republic which were about to claim Baku. But that would not be in the best interests of Turkey, even though it was a formal ally of Germany.

On August, 5, 1918 the vanguard of the Islam army approached Baku. And even though they were hurled back soon, Baku’s destiny was decided. The august engagements brought serious casualties to the British army, and the decision of evacuating the troops was taken. On August, 14 the British left Baku. That cased a great panic in the ranks of the ‘Central-Caspian Dictatorship’.

On Septemnet, 15, Turkish-Azerbaijani troops entered Baku despite the resistance of the ‘Central-Caspian Dictatorship’. In late September the government of the Azerbaijani Democratic Republic moved from Gyandja to Baku. There are a few cities in the world whose history is as heroic and tragic as that of Baku, and all this is due to the oil. In 1918 English ‘New East’ magazine wrote: “Baku is the greatest oil center of the world. And if the oil is the Queen, Baku is her throne.” Unfortunately, this oil didn’t bring anything but misery to the local residents in 1920s. When the city was taken there were cases of marauder attacks against the civilians and later on the head of the new Azeri government Fatali Khan-Khoisky, said that ‘there is no use in trying to hide these shameful facts’.  He also said that the anti-Armenian aggression, even though it can’t be excused, was a response to the events of March-May 1918 when dozens of civilian Muslims were killed.

So in September, 1918 the struggle for Baku and its oil fields came to an end. At first the new Azeri government acted under close tutelage of the Turkish army command, which acted in the interests of its own state. The oil was exported to Turkey via railroad, which cased oil prices in Istanbul drop 10 times. But the Turkish presence in Azerbaijan wasn’t prolonged. Very soon the oil policy came to the focus of the Azeri government. On October, 5 the oil industry was de-nationalized and the oil factories were returned to their former owners. However, each entrepreneur was obliged to inform the government of the amount of oil he had in his procession. The owners were free to be in command of two thirds of their oil. Due to the war conditions the government also reversed the decree on 8-hour work-day and worker’s rights for collective control over the production and collective contracts.

By these measures the government intended to increase budget’s income, which was not an easy task. On October, 21 a special decree was issued creating excise taxation for oil and oil products. But the owners often tried to avoid paying taxes. The government revisited this issue in early 1919 and imposed serious penalties for excise taxation law on June, 2. Despite that, the violations continued. And apart from that the Azeri government was pressured by the foreign military contingents, for example, in September-October 1918 the Turkish command forced Baku government to make regular oil shipments to Istanbul.