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.
In prospect oil industry was considered to be the crucial branch of the economy of Azerbaijan from the point of view of its development. Everybody, including Mutallibov, realized it at that time. Baku, formerly one of the most important world centers of oil industry which gave an average of 85% of oil industry production of Russia and the Soviet Union till the middle of the XXth century, lost its leading position. After the Great Patriotic War oil fields of Western Siberia became the fields of crucial importance for the USSR. Nevertheless, at the beginning of 1990s, according to experts, there were roughly 30% of oil in the Baku fields. The decline in oil extraction in Baku was connected to some extent with the decline of capital investments in this branch, which, in its turn, was the consequence of the decreasing interest to it in Azerbaijan. Huge investments were necessary in order to revive oil extraction process in Baku.
There was a similar situation in "Kaspmorneft". Vast oil fields were situated in the sea, but there weren't neither resources nor technologies in order to develop them. At the beginning of 1990s nearly 10 million tons of oil were produced in Baku region, both onshore and offshore; this covered only domestic needs of the republic. However, the Soyuzneftemash union was situated in Baku; it produced 70% of the facilities applied in oil industry in the USSR and in the Comecon countries. This union had 14 large factories producing oil industry facilities and two research institutes. Azerbaijan was indeed the centre of oil engineering of the USSR. Baku also remained the large centre of crude oil processing. Two huge refineries - the XXII Party Congress Baku refinery and the Novo-Baku refinery named after Lenin - processed more than 10 million tons of oil per year. A petrochemical complex was constructed in Sumgait in the Soviet period. There were world-known Azerbaijan Oil and Chemistry Institute in Baku from which high-skilled professionals graduated. The measures for involving oil industry in the system of market relations were also undertaken. The government of the AzSSR enacted a regulation on the creation of the Baku Stock Exchange. The Baku City Executive Committee, the Gossnab of the AzSSR, Azneft, Kaspmorneftegaz, Bakelektrosbytpribor, the XXII Party Congress Baku refinery and the Novo-Baku refinery named after Lenin became the founders of the exchange. The main aim of its creation was attracting goods flows to the republic and market saturation with facilities and consumer production
Raising Western capital to the USSR economy and, in particular, to the oil industry of Azerbaijan in the late 1980s and in the early 1990s was necessary. Without foreign investments and advanced technologies oil extraction in the Caspian Sea remained illusive. It seemed to be impossible to surmount economic recession without investing in oil and gas industry of the republic and without massive currency earnings.
The authorities of the republic saw the way of carrying out the decision of the government in creating joint companies. Both central and local authorities negotiated with international oil industry companies about it.
The difficulty of negotiating was in the fact that the Soviet international system wasn't integrated in the financial sector of Western Europe and the USA. That's why international oil industry companies couldn't rely on partnership with leading international banks. Mutallibov explained the difficulties of the transition period by the fact that the partners actually risked, because "our government can't provide international oil industry companies with bank loans: we have to rely on gentlemen agreement and the guarantees of the presidential power".
