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 Agakishiyev "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.
LUKOIL developed as a big international oil company, capable of organizing the activity in the entire Caspian. From 1993 onwards it participated in discussing almost all the projects of oil development in the offshore Caspian fields. The Russian government and the prime minister realized the profitability of LUKOIL's activity in the foreign Caspian sectors for Russia, and not only supported the company’s initiatives but even lobbied its interests. LUKOIL's participation in the “Contract of the Century” was, on the one hand, good will on the part of the Azerbaijani government, but on the other, the result of the lobbying of the Russian state, which was one of LUKOIL’s shareholders.
The research conducted proves wrong a thesis that exists in scholarly literature and the press about the exhaustion of the Caspian reserves of hydrocarbons and the inefficiency of the cooperation between LUKOIL and SOCAR. Each project that LUKOIL carried out in the Azerbaijani sector was mutually profitable. When LUKOIL left the Contract of the Century, it sold its 10% share at an enormous profit – Japan's Inpex paid 1.375 billion dollars. The Karabakh project became the turning point in the development of LUKOIL: getting this priceless experience, it started participating only in projects where it held the function of operator.
Its participation in the development of the Shah Deniz deposit has also been profitable to today. In all these contracts LUKOIL was one of the main investors in the economy of Azerbaijan. The investments in machine-building industry and in the development of the connections between Russia and Azerbaijan are particularly valuable. They resulted in the renovation and equipping of schools, book publications and medical purchases. As the president of SOCAR Natik Aliyev admitted, it is particularly pleasant to work with LUKOIL among the foreign companies because of the similar mentality of the people.
Conclusion
Azerbaijan experienced two oil booms. The first started in the 1870s and continued through to the early 20th century. The second oil boom started in the 1990s and continues today. If during the first boom the oil was extracted only onshore, now the offshore Caspian deposits are also being developed. The Baku engineers were the first to drill in the Caspian Sea in 1949. The conducted research allows the following conclusions to be made: Together with Pennsylvania, Baku was a region where for the first time the extraction of oil reached an industrial scale. From the mid-19th century until 1905 half of all world oil was extracted in Baku.
Baku oil replaced American kerosene and fulfilled the oil demands of the Russian market. It was processed oil products from the oil-processing plants built by Russian engineers and not crude oil that was brought to the world markets. In 1918-1920 the Azerbaijani Democratic Republic existed for 23 months, and in this unstable period global powers were struggling for the black gold of Baku. After the Bolsheviks seized power in Russia, Azerbaijan lost its independence and entered the USSR. In 1920-1945 Baku remained the main oil supplier in the USSR. Baku oil made its contribution to the industrialization of the country and to the victory over Nazi Germany in WWII.
The period when the independent Azerbaijani state was built after the break-up of the USSR meant a new stage in the development of the oil industry, which became known as the second oil boom. The difficulty of this period was connected to the economic crisis, corresponding to the break-up of the USSR. The Soviet republics received their independence in a situation in which there was no system of economic cooperation, resulting in economic collapse. In this situation the Azerbaijani government held to the policy that started in the last Soviet years. The republic started negotiations with the biggest global oil corporations to extract oil from the deep offshore fields. Technologically, this problem was as difficult as the creation of spaceships or supersonic aircraft, and required billions of dollars of investments and highly-qualified personnel to work with this equipment. All this could be provided solely by the biggest oil corporations. Soviet equipment allowed for work to be carried out only at depths below 200m. On the other hand, the exploration and extraction of oil was connected to significant financial risks, and the prospect of large financial losses if the commercial oil reserves were not found was quite real. All this pushed the Caspian countries and Azerbaijan in particular to work together with the giants of the world oil business. This is how the "Contract of the Century" came into being. In the difficult historical moment of building their statehood, the ex-Soviet republics faced not only economic, but political internal and foreign policy problems. Solutions to them could have stabilized the economy and become the basis of the cooperation with foreign companies. First of all it was necessary to create consensus within the country and come to an agreement with foreign states whose oil companies were interested in the oil reserves of Azerbaijan. The resolution of these issues was complicated by the war in Nagorno-Karabakh.
The third Azerbaijani president, Heydar Aliyev, managed to reach a truce on the front and to conclude an international oil contract. The "Contract of the Century" answered the hopes of the Azerbaijani leadership and triggered theeconomic and political development of the country to overcome the crisis and construction of the state. Out of 15 former Soviet republics only three - Azerbaijan, Russia and Kazakhstan - managed not only to overcome the consequences of the economic collapse, but because of the commodity sector got a real possibility to create a processing and technological industry, to develop services and create a prosperous state. The overcoming of business monopolies and a significant reduction of corruption will not only allow for the establishment of a national elite but for the growth of wealth of the entire population. The international status of the Azerbaijani Republic has grown since 1991. The oil industry in Baku has again become world-famous, the city entered the association of the oil cities of the world that includes the capitals of some big states.
