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.
“The contract of the century”: jumping above the abyss The agreement about the development of the oilfields Azeri-Chirag-Gyuneshli in the Azerbaijani sector of the Caspian sea got the name “The contract of the century”. It was signed in 1994 by the world’s biggest oil giants and Azerbaijan. The preparations for it were difficult and even dramatic. “I am an optimist and I believe in in the future of Azrbaijan, but the current economic situation is close to the catastrophe – our people paid a lot for the misktakes”, the famous economist Z. Samedov said in 1994. By the mid-1990s the production was only 33% of the national income in the republic, most plants stopped working. The war in Karabakh required enormous expenditures that paralyzed the financial system of Azerbaijan. In July 1996 the consumption basket cost approximately 14 thousands manats while the minimal swage was only 2 thousand manats. The minimal wage was just a little above dollar, and even these wages were often delayed for several months. In October 1994 minimal wage could buy just 33 kg of bread (while the year before 150 kg), 1.1 kg of meant (3.7 a year before), 20 liters of petrol (100 a year before). The exchange rate changed from 285 to 1800-1900 manats for one dollar.
The production was so devastated that there were basically no locally produced goods and food on the market. And this was happening in Azerbaijan where climate and natural condition are good enough to produce enough food for the entire region. In the Soviet times the value of the final product was higher than the value of the used materials. After the dissolution of the USSR the situation changed completely as no economic mechanisms were created to protect the internal market. In these conditions it was necessary to support the few working producers, solve the problem of the shortage of personnel that had adjusted to market economy and was capable of organizing the profitable production.
The cause of the many mistakes was the fact that there was no systematic program of the social and economic reconstruction. The methodology of the social and economic reforms was created by those very people whose artificial economic doctrine proved its complete failure. It was very important to attract the investments in the economy and help the country out of the economic collapse. The authorities asked the banks for loans to organize the extraction of oil from the sea bottom but the bank refused. And all this despite the fact that Azerbaijan was approaching its second oil boom! Investors were frightened by the serious economic and political obstacles. In 1993, in the situation of the complete economic crisis, Heydar Aliyevbecame the president of the republic. On July 23 1993 the president cancelled the planned signing of the contract. Aliyev understood that its conditions were unfavorable for a young republic and could harm its national interests. Explaining the delay, Aliyev said in his interview to Chicago Tribune: " I understand that oil companies coming to Azerbaijan have their own economic interest. It is normal. But we need to place the interest of our country above the interests of these companies".
It meant that the government will pay maximum attention to this contract, in particular when negotiating its conditions. One of the reasons for delay was the hope of Aliyev that Russian will help with the resolution of the Karabakh conflict. Therefore he was slow to sign the agreement with the Western countries and wanted to make Russia interested in the cooperation.
