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.
Several stages of difficult negotiations preceded the signing of the “Contract of the Century.” In 1993, when the situation in SOCAR was anarchical, the negotiations were joined by the Slovak citizen Marat Manafov, who received a mandate to represent the interests of the republic from the vice prime-minister of Azerbaijan, Rasul Guliyev. Guliyev, a gifted entrepreneur who previously headed the plant for oil products, managed to become a multimillionaire in the early 1990s. Naturally, he wanted to participate in the oil contract, taking into account that he was an informal head of the Azerbaijani oil industry. He was trying to control it, which sometimes conflicted with official decisions. The opinions of Heydar Aliyev and Rasul Guliyev did not always coincide.
The document with open temporal validity given to Manafov according to Guliyev’s decision number 04/2 on July 26th 1993 confirmed that the expert group headed by Manafov had the right to investigate all the questions connected to oil and gas extraction in Azerbaijan. Not a single member of the group was a citizen of Azerbaijan. The negotiations with the foreign committees were conducted in London. Manafov himself soon became a citizen of Azerbaijan and played the patriot. He claims that he paid for the work of all foreign consultants and experts involved in the preparation of the contract. According to Radio Azadlyg and the newspaper Eni Musavat, Manafov paid the experts £700 per hour.
However, he said that the project prepared by these experts did not correspond to the national interests of the country. According to that project, the exploration stage should last for 6 months, and the initial investments should have been 21 million dollars. In 5 years investments were supposed to reach the level of two billion dollars.
Early oil from Chirag deposit should have been extracted by 2007, thirteen years after the signing of the contract (with the “Contract of the Century” it happened in three years). According to Manafov’s project the accompanying gas was supposed to be sold to Azerbaijan at market price, whereas with the “Contract of the Century” by September 1999 the consortium got 1.2 billion cubic meters of accompanying gas that were given to Azerbaijan for free. According to Ilham Aliyev, these differences were caused by the fact that already at the beginning of the negotiations Rasul Guliyev, for his own private interests, was trying to offer extremely favorable conditions to the foreign companies. Manafov was supposed to receive 300 million dollars as an illegal bonus. However, the heads of the foreign companies acted in an honorable way and informed Heydar Aliyev about this crime. The Azerbaijani president removed Manafov from the process of negotiations and expelled him from the country. But even when SOCAR entered the negotiations, Manafov pretended to be an official Azerbaijani representative and approached several bank with the mandate that he received from Guliyev asking for financial “help” to the republic. Later, Ilham Aliyev noted that Manafov “was trying to destroy the consortium and involve other companies; surprisingly, in that transitory period there were many like him.
There was a consensus that the use of the contract project prepared by the group of Manafov would contradict the economic interests of the state. Naturally, the participants in the contract became concerned and came to Baku for a personal meeting with Heydar Aliyev. The council of the oil experts and the state structure, including the president, concluded that the conditions of the contract should be revised. Then the president convinced the foreign companies that the contract would be signed, but because of the re-evaluation of the Azerbaijani oil reserves its conditions would be revised. In 1993, before the authority to create the contract was given to SOCAR, the foreign experts (without any involvement by Azerbaijani specialists) created two versions of the contract – one in July and the other in November.
The accompanying gas in these contracts was considered to be the property of the international companies, and Azerbaijan was supposed to pay for it. According to the president of SOCAR, in the July version of the contract the profit of the republic was expected to be 62.7%, but it was only 53.4% in the November version. The weakest point of these projects was the measurement of efficiency in currency, which was unacceptable for such a long-term and investment-consuming contract. In that case it was necessary to consider world oil prices and the changing costs for equipment and materials. In this situation the profitability of the contract expressed in money (80%) did not mean big profits for Azerbaijan. The key factor in this situation was the moment when each sides received the money. This mistake was connected to the lack of qualified specialists in Azerbaijan. The three-year-long negotiations with foreign companies were a good school for the specialists of SOCAR.
