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 autumn 1991 the Amoco production company was completing a contract for the development of an Azeri field. The president of the company, Patrick John Early, admitted that long negotiations were needed to finish all the points of the contract.
The delegation visited not only oilfields but also some industrial plants. Among the plants built in Soviet times they were particularly interested in the factory of deep-water basements. According to the president of Amoco Production, this was "a completely modern plant" that they were ready to use for their work.
The economic strategy of the Soviet government at the turn of the 1990s dictated the following tasks: firstly, to unite the entire chain of oil production into one complex; secondly, the expected investments should be used to modernize oil plants to increase production up to 80-85%; thirdly, to look for the possibility of processing at foreign plants instead of simply selling crude oil. One of the possible ways was to obtain shares in these plants. This was the strategy - not only common extraction of oil but the common creation of an oil infrastructure - that was the basis of the negotiations. However, the investors were only interested in the modern plants such as the Baku factory of deep-water basements. As the leadership of Amoco put it, "if their production meets world demands, they will be used without any doubt".
14 machine-building plants that were producing 70% of the Soviet oil equipment used outdated technologies and could not meet world standards, but the foreign companies did not plan to modernize them.
The negotiations proceeded with difficulty. First the foreign companies were offered the cooperative enterprises. However, when the Supreme Council approved the foreign investments legislation on July 5th 1999, new possibilities appeared. The reaction to these changes took time. In particular, the big economic problem was the geographical location of the oil pipeline. This concerned the interests of several states. As Patrick Early put it, "apart from the economic categories there are also political ones, because the oil pipeline will go through the territory of several states."
US Deputy Trade Secretary Timothy McBride visited Baku in July 1990 and met with the Azerbaijani president, which meant political support for American corporations. Later, similar visits became frequent. Businessmen were coming in groups to study the situation with the local oil industry.
By the end of 1991 the task of keeping the united economic space in the USSR became very difficult. The separatist tendencies in the republic wanted to get rid of the center, to have more power and ignored the economic situation and the demands of the integrated economic system.
On the wave of revolutionary romanticism, this created obstacles for the treaty on the economic community. The crucial event was the collapse of the Soviet Union. The Moscow events of August 1991, the Belovezh Treaty signed in December that year and the practical dissolution of the union state opened the way for a fully independent policy in Azerbaijan.
In the situation of the breakdown of the USSR, the Azerbaijani leadership could hardly count on Moscow's help to develop the oil industry, especially because they clearly understood the unjust and illogical nature of oil prices. In the years of the USSR's collapse, Soviet oil was very cheap on the world markets. The internal oil price was even lower. For instance, one liter of mineral water cost 80 kopecks, while one liter of petroleum cost only 20. In 1990 the fixed price for one ton of land oil was 60 rubles and 34 rubles for oil from the seam oilfields. It is surprising that the fixed price for the latter was so much lower. This fact explains the lack of interest on the part of the local authorities in extracting Caspian oil.
The central government tried to help the situation in 1991 and fixed one price per ton of any oil at 120 rubles, but this was not enough when the necessary investments were lacking. The desire of the republic to use its own resources and to sell them at a reasonable price was fully justified. This also became a reason for speculation by the revolutionary romantics, who knew little about the real economy. They were promising that living standards in Azerbaijan would resemble those in Kuwait in the near future. Without the financial support of the Moscow center, Azneft became an unprofitable enterprise. It needed more than one billion rubles to fulfil the plans, while its own capacities were only about 500 million.
The republic's authorities stepped up negotiations on the oil contracts, trying to stabilize the situation. In November 1991 the republic's government approved a non-fixed price for high-quality Azerbaijani oil. This allowed to increase the priced to 191 rubles for sea oil and 346 for coastal oil. It was also planned to create a republican oil concern by the end of 1991. The factories of oil machine-building were in trouble. Azneftemash, previously exporting its production to 25 countries, was gradually losing the market to US companies. Oil machine-building was also developed in some non-oil countries such as Sweden or Japan, where the profitability of production was very high. However, some countries from the former Soviet bloc were still interested in purchasing the relatively inexpensive production of Azneftemash. The price of Azenftemash pumps was 100 times lower than the price of analogical American pumps (although the latter were of superior quality). [2] However, the lack of commodities and materials prevented Azneftemash from producing the necessary equipment. The breakdown of the USSR forced the creation of the horizontal connections instead of the vertical in order to follow the real situation in the world oil extraction.
