The Center for National and International Studies (CNIS).

The Baku Oil and Local Communities: A History. (edited by Leila Alieva)

Bakı, Qanun, 2009, -276 səh.

Tərcüməçi və Azərbaycan dili redaktoru: Əli Novruzov

Rəssam (hissə 2): Fazil Məmmədov

Fotolar (Giriş, hissə 1,3,4): Təhminə Əhmədova

Dizaynerlər: Fəxriyyə Məmmədova, Sahib Qəniyev

Əlavədə olan xəritə: Turaxanım Ağabəyova

ISBN: 978-9952-26-036-6

Introduction

The aim of this book is to shed light on parts of the history of the oil industry which are usually neglected, namely, the lives and faith of the communities living in oil-bearing areas. Scholarly literature on the subject suggests that the “paradox of plenty” makes areas rich in hydrocarbon resources prone to poverty and conflict, with the Niger Delta in Nigeria, Africa, offering an outstanding example of this. Although the case study of Baku villages focuses on the historical impact of oil development, given that half a century ago oil production had moved away from this area to the sea, the region nevertheless matters from the point of view of the consequences which many centuries of oil production has had on local communities.

The Absheron peninsula is the oldest oil-producing area in the world. Historical sources refer to the extraction of oil here centuries before its industrial production. The Baku villages of Sabunchi, Balakhani, Ramani and Surakhani witnessed conflicts, oil-field fires, strikes as well as poverty and inequality at the end of the 19th-early 20th century, when the area was the centre of international commercial oil production. The population of this area benefited from developments in this sphere in terms of access to jobs and the land, but at the same time they suffered discrimination, resource pressure, poverty and environmental degradation. The main focus of this research is the transformation of the life of the communities of the Absheron peninsula in the context of the history of oil.

The study tries to focus attention on the historical importance of these villages – both in the area of artifacts and the ethnography of these communities. It also highlights an asset or tool to develop this former world centre of oil production – its industrial heritage - which can be utilized for tourism purposes or as a way of attracting investors. The other no less important objective of the study is to highlight certain ways in which oil extraction influenced the communities living in the areas where these oil resources were located. Thus, the documents in this book reflect the diversity of these objectives – some are more descriptive and factual, while others analyze the mechanisms of the effects and consequences of industrial oil production on the population.

After onshore oil supplies were exhausted under Soviet rule, largely because of outdated technologies and over-exploitation of the Absheron fields, the industry moved offshore into the waters of the Caspian in the 1940s. This move left the villages and communities on these lands, which had been environmentally polluted by years of oil extraction, facing the problem of underinvestment. In this way, the conflict over the oil-bearing lands which marked the end of the 19th and early 20th centuries transformed in the post-Soviet era into another conflict between these communities and the powerful new rich for the lands on the area adjacent to the capital of power and oil.

The social conditions of the local communities on these former oil-producing areas then became highly dependent on the state. Unfortunately, however, the state did not come up with special programmes for the development or environmental improvement of the region, particularly when Moscow switched investment from Baku to the Siberian oil industry.

The Soviet system provided for infrastructure and utilities such as gas and electricity, but this system almost totally collapsed after the disintegration of the Soviet Union. The post-Soviet conditions of the Baku villages in terms of infrastructure were reminiscent of pre-Soviet times, when these communities lacked fuel for lighting and heating, rather than the period prior to the industrial production of oil.

This book is based on research which was initiated by the CNIS in 2004 and it was realized with the support of the Embassy of Norway.

Our focus is on the stark contrast between the wealth which these lands produced over the last two centuries and the modern conditions faced by the heirs of those who owned these lands, the local villagers. This study concludes with a proposal to create an Open Air Oil History Museum on the territory of three Absheron villages

The suggestion to create such a museum was put forward to attract investment and as a means of promoting the prosperity and development of an area which, for centuries, has made an enormous contribution to the world energy market and yet nowadays suffers from underinvestment, social contrasts and centuries of oil waste.

The book covers all aspects of the unique importance of these regions and reveals previously unknown facts about the life of these communities. Some of the most outstanding features of the Absheron peninsula are the well-preserved hand-built oil wells and famous oil reservoirs, described by Kaempfer in the 17th century and re-discovered by the co-author of the first chapter, the archeologist Idris Aliyev. In the first chapter, the authors Orkhan Mamed-zade and Idris Aliyev paint a picture of the transformation of the life of communities during the history of oil extraction in Azerbaijan. Describing the artifacts of Baku’s industrial heritage, they trace the development of oil technology and the role which oil and its production have played in the life and times of Baku villages throughout different historical periods. This chapter contains unique archive references, materials and photographs which reflect the complex effect of oil development on local communities.

Entrepreneurship in colonial Azerbaijan faced fierce discrimination during tsarist times – the law and its protection was on the side of the Christian brethren, Armenians. This fact had a major effect on their relative power in the oil business.

The role of land as the main source of “black gold” becomes obvious in the conflicts which provided a context for the history of the oil boom of the late 19th-early 20th centuries. The relative weakness of rule of law left the communities vulnerable to the practices of re-settlement, extortion and injustice. Yet the local population saw and made use of the opportunities created by reforms in the legal sphere, as demonstrated by the development of a relatively large class of entrepreneurs. Compared to other publications on oil history, this chapter stresses the previously-neglected area of the formation of a national bourgeoisie rather than focusing on the role of foreign capital and industrialists. This research shows that local entrepreneurship flourished after tsarist reforms to the oil industry opened up opportunities for private ownership and business in the Muslim periphery of the empire. It also shows how market pressures were a driving force behind the development of technology in the oil industry. The authors cite evidence to show that a system of leasing existed in Azerbaijan, along with local refining of oil, all be it in a primitive way, even before these things were introduced by Russian colonizers. In spite of the dominance of oil and salt as the main resources of the area, the economy and lifestyle of the villages was characterized by relative diversity, with the cultivation and production of grain, vegetables, fruits and spices. The local population, who were largely denied the right of ownership of imperial oil-bearing areas, was involved in transportation, manual labour and the production of lime.

The three villages are unique in other ways apart from their industrial heritage. In addition to well-preserved ancient oil reservoirs and wells, other artifacts – medieval fortresses, bronze-age barrows, mysterious cart routes, water reservoirs and mausoleums – bear witness to the diverse and complex cultural heritage of the area. In fact, the communities themselves and not just their ruins and artifacts are of a unique value given their specific language, traditions and history. The traditions and norms of these communities reflect the complex mix of their Zoroastrian, Christian and Muslim heritage. This history and current conditions, including those of the Tats – the people living in the villages of Balakhani and Surakhani – are explored by Aydin Balayev, who traces the demographic, ethnographic and social changes experienced by these communities. His work is based on the results of a survey conducted by CNIS in 2004.

The oil-rich area adjacent to Baku city has undergone some major demographic changes. The first significant change took place at the end of the 20th century. Since the first oil boom, Baku and its villages have attracted a large number of entrepreneurs, migrants and guest workers from other parts of Russia, Iran and Europe. The disintegration of the Soviet Union led to more changes, but in this case they were not prompted by the oil industry, which had become much less labour-intensive. These changes were a result of the conflict with neighbouring Armenia and refugees arriving from the occupied territories, along with the concentration of the main labour market in the capital city.

Although major waves of re-settlement inevitably had an impact on the life of these local communities, on the whole they managed to preserve their traditions and lifestyle. The author shows contrasting and diverse patterns of settlement, where refugees and local inhabitants co-exist, and urban and rural lifestyles mix. The survey demonstrates the language preferences of the local population, with the status of the Russian language downgraded and replaced by Western European languages, primarily English. Aydin Balayev analyzes the whole range of difficulties surrounding the integration of refugees and IDPs into the local community due to increased resource and cultural pressures. These difficulties are reflected in the lack of contacts between these groups. While family in general maintains its formally patriarchal structure, there are clear signs of a move away from authoritarian to egalitarian relations in the family. Similarly, in the area of the status of women, the majority of those questioned were in favour of improved education and greater involvement for women in society.

The value of this study also lies in the discovery of a controversial aspect of the religious beliefs of the population. Despite living in what is regarded as a very conservative area, villagers around Baku demonstrate a distinctive belief system which combines Islam with some pagan and mystical elements, coupled with a rather liberal approach to the rituals of Islamic faith. Given that the area is mainly under the influence of Shi’a Islam, the local population’s negative attitude towards Wahhabism comes as no great surprise.

Azerbaijan’s economy reflects the problems of any transition economy along with all the controversy surrounding the economy of an oil-rich state where the large-scale commercial development of oil began before mature state and democratic institutions were built. Although benefiting from the oil dividends which helped to soften the shocks of transition, Azerbaijan’s economy could not avoid some of the traps and asymmetries of oil dependency. As the study by Amiraslanov and Ibadoglu confirms, post-Soviet economic transition shows how futile measures to counteract structural factors caused by an oil economy developing in the aforementioned conditions can be, particularly when they are delayed. This leads to asymmetries with a heavy dependence on raw hydrocarbon resources and underdevelopment of the non-oil and agricultural sectors. Furthermore, investment goes chiefly to the capital at the expense of the periphery.

One consequence of this is that the unprecedented economic growth of Azerbaijan has not been translated into corresponding social improvements. In examining the region’s economy, the expert A. Amiraslanov traces growth of the national economy since 1996, as well as the course of reforms which led to most state enterprises in the settlements being privatized. Amiraslanov also demonstrates a substantial rise in retail turnover and average wages. Despite the achievements of privatization and economic growth, however, the living standards of the population are low. For this reason it is essential not only to develop, but also to rehabilitate these settlements. According to the survey, in 2004 the per capita income of 43.9 per cent of respondents was less than 10 dollars. Moreover, their financial status is dependent on the state budget sector. This situation has arisen as a result of poor development of the business sector, an undeveloped infrastructure, the low level of bank credits and the lack of legal protection offered to businessmen. In the author’s view, poor liquidity and the low profitability of business structures has hampered the development of credit. Therefore, banks are not interested in offering credit to small and medium-sized businesses in the settlements. Despite measures to create new jobs, the employment situation remains critical, with one in three of those surveyed finding themselves without a job.

The author stresses that a significant number of refugees and displaced persons were traditionally engaged in agriculture and livestock-breeding, but the conditions of the region are not conducive to this, leading to increased competition for land resources.

The development of tourism is likely to play an important role in creating a good infrastructure and solving employment problems by giving an impetus to the development of service industries as an alternative source of income for the local population and municipalities. The study indicates that small and medium-sized businesses offer the best means of realizing the development potential of the region and improving the business climate.

Since 2003, the government has undertaken a few measures to address the issue of poverty and inequality in the region. The effectiveness of these measures is analyzed in the paper by Qubad Ibadoglu, who sets them in the broader context of the oil economy and macroeconomic conditions. Along with unprecedented growth, particularly since 2004, the economy of Azerbaijan shows a number of underlying tendencies which lie behind the problems in the social sphere. The positive trend of state investment in the infrastructure is hampered by a lack of transparency when it comes to the implementation of such projects. Employment problems can be attributed to inadequate growth in the agricultural sector and the slow pace of economic diversification, affected by the phenomenon of Dutch disease when most resources go to the oil and non-trade sectors. To stimulate development of the agricultural sector, the government subsidized this sector in 2007. Ibadoglu explains the social issues in the Baku villages through an analysis of budgetary spending and those policies which have ultimately led to underinvestment in the region. Among these policies are insufficient reforms in the area of fiscal de-centralization and control over spending being concentrated in the hands of a small group in the government, or “monopolization” of the budget. At the same time, much of this spending is directed not towards social programmes but the construction sector, which opens the way to corruption. There is a direct correlation between socio-economic conditions in the villages and the fair distribution of oil revenues.

The author devotes the second part of his paper to an evaluation of state programmes to improve social conditions and reduce poverty, in particular to the programme which was adopted on the basis of the president’s decree of 26 November 2006 “On Measures to Accelerate the Socio-Economic Development of the Baku Villages for 2006/2007”. The data shows a broad range of investments and budgetary spending on infrastructure, communal services, education and the health system in the villages. In addition to budget funds, the National Oil Company, the Heydar Aliyev Fund and credits from international financial organizations have all contributed to implementation of this programme, with the bulk of these resources coming in the form of direct transfers from the State Oil Fund to the budget. The opinions of experts and the public regarding implementation of these state programmes are also cited. These paint a rather contradictory picture regarding implementation of these programmes, necessitating a further study into the effectiveness of state measures to address social issues in the region.

These three villages are the sites of the oldest oil industry in the world but also suffer from the accumulated environmental damage to the area. The lease system which was utilized in Baku’s oil fields in the middle of the 19th century by the tsarist empire resulted in the rapid exhaustion of resources because of the short term of these leases. Industrial development in the late 19th century, before suitable reservoirs and pipelines were created, saw unprecedented contamination of the soil and waters of the villages by oil gushers, which could last for weeks.

Only in the post-Soviet era did the issue of cleaning up the old Absheron oil fields appear on the agenda. In the early 90s, the Green Movement of Azerbaijan, of which the author of this chapter and the editor of the book were members, measured radioactivity levels at waste water pools in the oil fields of the villages. Their results showed a critical level of environmental pollution. According to Fikret Jafarov, the pollution levels of Suraxani and Sabunchu settlements are higher than in other regions of Azerbaijan in terms of air, water and soil pollution indicators. This has a major health impact. There are far more instances of allergic and malignant diseases in these settlements than there are in other regions of Azerbaijan. One of the leading causes of pollution is Beyuk Shor Lake. The level of this lake is rising all the time due to the discharging of industrial and domestic waste, threatening to flood surrounding areas. Another problem is that the oldest oil fields, which were not cleaned or rehabilitated for centuries, are still being contaminated by outdated oil equipment. The issue of the collection and utilization of communal waste and rubbish has only been addressed in 2008 by the decision to build a modern waste-burning factory in the area. The biggest worry, however, relates to the intense construction in the polluted areas and the author suggests a whole range of measures to address the urgent environmental problems of the villages.

As a whole, this book is the first attempt to draw attention to the life of the communities living in the resource-rich areas on the shore of the Caspian. The enormous oil wealth generated by the “oil booms” at the fields of Balakhani, Sabunchu, Surakhani and Ramani villages during the last two centuries not only helped to raise Baku to the level of a European capital at the turn of the 20th century, but also contributed to the creation of the internationally-renowned Nobel Prize. How much the original owners of these wealthy lands benefited from the development of oil is analyzed in the following pages.

Part 1. The Reforms and Oil Revenues - Consequences and Implications for the Communities in the Historical Perspective

Leila Alieva

The influence of the development of hydrocarbon resources on the life of communities became the focus of the recent studies, as the oil development moved to the densely populated and ethnically diverse areas of the world. Frequently, the oil development in such areas is characterized by the conflict and instability, poverty and inequality. The control, which both the state and multinational corporations nowadays have over the most lucrative resources, causes various reactions from the side of the local communities, from the attempts to change the nature of control over the development of oil to the resistance to hydrocarbon extraction.

The most outstanding example of the adverse effects of the oil development in such areas is the Niger Delta with its profound oil-related violence, or “petro-violence”, where “youth militancy, communal violence and intense struggles over customary authority” spread over two decades or more.

The “paradox of plenty”, attributed to the adverse effect, which the large scale commercial development of oil has on development and resource distribution under the conditions of weak state institutions makes clearly a significant contribution to the conditions of communities in the oil bearing areas.

On the other hand, oil development directly influences democratization. The lack of democratic institutions in the country/producer of oil by the time of its commercial development hinders their further development and promotes consolidation of the authoritarian trends with inevitable effects on social welfare of the population, including the local communities.

The scholars of the subject might find the history of Azerbaijani oil and the communities of Absheron peninsula – the site of the world oldest development of oil – an attractive case study, revealing specific conditions under which the resource distribution may benefit wider layers of the local population.

At first sight the current conditions of communities in formerly oil producing lands of Absheron peninsula are in contrast with communities in the other natural resource extraction areas of the world, like in Nigeria or Columbia. The situation is stable, luxurious villas co-exist with poor neighborhood of locals and refugees peacefully against the background of daily observed the dynamism of the oil boom construction. However, as our study shows, there is much in common between the communities in different geographic areas. None of them could avoid consequences of the unbalanced resource distribution in the “petro-state”. Although abandoned by the oil industry around half a century ago, the villagers of the formerly richest lands in the world are now facing difficulties with employment, struggling with low living standards, problems with communal services, and shortcomings of health and education systems.

The current conditions of the communities are in particular contrast with their ancestors a century ago, when during the period of private ownership of oil bearing lands some of them even got an access to the enormous oil riches of their villages and turned into the oil magnates. Then, however, the history of the region was full of more dramatic pages of violence and conflict.

In fact, the complex and dramatic history of Baku oil is somewhat an apprehension of most of the challenges the oil industry is facing today in terms of the effects in some areas of the world.

The current chapter studies complex relations between reforms and oil development, and its effects on the life of communities, researching conditions, under which opportunities for the local population in entrepreneurial activities, jobs and social welfare are created.

It aims in showing some crucial factors determining most optimal conditions for the communities of the oil bearing areas to benefit from the resources, which their lands contain.

Of two oil booms which Azerbaijan experienced during one century (in the end of 19 –early 20th and in end of the 20th- early 21st), this paper focuses on the pre-Soviet period, which has a greater relevance to the topic of the study, when the oil extraction was on-shore. With all the unfairness of expropriation of lands and discrimination of the Azerbaijani landowners as compared to their Christian neighbors, three major events after Russian colonization had a significant impact on the economic, social and political development of the local population under the tsarist rule in the 19th century: legalization of the private property rights, reforms of the judiciary by Alexander the 2nd and “privatization” of the oil industry.

The analysis proved the issue of land ownership and property rights to be critical factors in determining conflict and power in the environs of Baku.

Land Ownership in Azerbaijan before and after Russian Colonization

The land in independent Azerbaijani khanates which occupied the larger part of what is called South Caucasus and part of the North Caucasus by the time of colonization of Russia belonged to the class of owners - khans and beks, along with mosque altogether three types of ownership. First are the lands owned by khan (forests and pastures) which he could lend it for temporary or even for the life long use. Forests could be used by the population freely. But the other types of utilization of land was taxed, such as in the Ilisu Sultanate, the so called “keshkel” equal to 1/10 of the harvest would be collected as a tax.

Secondly, there were communal lands, belonging to the local population, which could be given to the beks and meliks by khan, who would render them a right to use parts of their income. However, the right did not extend to the sales of land. The peasants were obliged to pay by part of their harvest and by the unpaid labour to the beks.

The third ownership of land was the most protected, as it could be inherited and was originated from the lands “mulk” given to the beks by khans for allocation of the captured in the warfare and immigrants. Yet, without the renewal of the decree with every new khan, granting the rights on property, the ownership of land would loose its force. For utilization of these lands the peasants were obliged to pay 1/30 of their harvest as part of the “mulk” to the beks.

Many sources point that the lease of the oil wells was used before the Russian conquest and introduction of this system in the oil bearing lands by imperial authorities.

The dwellers of the villages around Baku traditionally were involved in the diverse agricultural activities, along with extraction of oil, salt and production of lime.

Baku and its environs were characterized by the development of fishing, saffron and the plant marena. Intensification of trade and development of crafts in the 9-10th centuries turned Baku into the center of diverse crafts and an important sea-port, bringing together traders from Russia, Iran, Byzantine, China, India, Iraq and Syria. Sara Ashurbeyli writes, that Baku and environs were closely connected economically – “dachas” on Absheron provided the markets of Baku with fruits, such as figs, grapes and pomegranates, as well as the meat of sheep and antelope. The environs of Baku, located on the Absheron peninsula, supplied the city with agricultural goods, which exceeded local demand and were also items of export. The towns around Baku were the source of raw materials for diverse crafts flourishing in the city. Baku traded with China, India, Moscow, Siberia and Western Europe.

In the 17th-18th century Baku acquired a special significance for Russia, which was trying to gain access to the best port on the Caspian for the transit trade of silk. Russian occupation led to a substantial decline in the economy of the region and the city. During the Russian-Iranian wars, the fortress of Baku was an important military target. The local population, whose rebellion was severely suppressed by the colonizers, resisted the consequent Russian conquest and military rule . The ethnic composition of Baku began to change towards greater diversification.

With the conquest of Azerbaijani khanates by Russia as a result of two Russian - Iranian wars, the land previously owned by khans and beks was confiscated along with the oil wells. By 1840 the military rule was eventually replaced by the civilian with the Russian law dominating in all civil and criminal matters, except for the family law, which was regulated by the religious courts.

Two laws on ownership and authority, or “rescripts”, followed colonization of khanates by Russians. The first one – in 1841- deprived all the previous owners, local aristocracy, of exercising authority over towns and collecting taxes with the life long grants from the crown as a compensation. The next rescript decree in 1846 “ brought to an end of the centuries old Azerbaijani institution – the legal state ownership of lands and formally bestowed the hereditary and unalienable rights of the Muslim landholders to the tul lands and realized mass transfer of property titles into the private hands”

The next rescript in 1847 granted peasants right to own 5 desiatin of lands for each, who reached 15. In exchange the peasants were supposed to pay taxes to the landowner. Baharli describes 7 types of such taxes. The full rights of land ownership was granted to the peasants only in 1912. So by early 20th century the territory of Azerbaijan was 8, 940, 382 desiatin, of which 65% were productive lands. Non-productive lands constituted 35% and included rocks, mountains, rivers, swamps, deserts and salty areas. In 1919 57,7% of land belonged to the peasants, 23,3 – to “special owners”, 19% - to the state. According to Swietochowski, majority of beks were entitled only to 6,5 desiatin of land, only slightly exceeding that of peasants. Only 4% of the landlords had an estate of 1, 500 and higher.

Judicial Reforms of Alexander the 2nd

After the peasant reform by the Alexander the 2nd the number of reforms were conducted, such as judicial, financial, police, military, educational, censorship, zemskaya ( self - governance). The judicial reforms were compiled on the basis of recommendations of the commission and taking into account the systems existed in the Western Europe. The judicial reform of the 1864 is viewed in the context of the Russian history as an extraordinary, or even a revolutionary, due to the fact that it established an independence of courts from the executive.

As a result of the reforms in judiciary the class courts under control of the governors was replaced by the new system of courts, which was open to all citizens. The reform statutes included special procedures for cases involving government officials and some political cases, as well as established two simple courts – the justice of the peace courts and the volost courts, which were accessible to ordinary persons ( townsfolk and peasants), separation of the judiciary from the administration, elected and equal public judges, courts of jurors, advocacy, principle of competitiveness. The court reform introduced the principle of independence of judges, established special court districts, which did not coincide with the administrative divisions.

The history of Russia’s property rights is complex. Only the Certificate to the nobility in 1785 eliminated the right of state to confiscate the property.

Catherine the 2nd by the Manifesto of 1786 extended right of land ownership to the resources and right to lease for building refineries to the other persons.

After reforms in administration and creation of ministries the Manifesto of the 25th of June 1811 made the Ministry of Justice responsible for all the judicial affairs.

Before the judicial reform 1864 the judiciary was under strong control of the political power.

Implementation of the judicial reform was completed in Russia by the 1899 with significant delays in the peripheries of empire. The implementation of reform was however, selective, depending on the geography of the area. For instance, in some areas the elected institute of public judges was not implemented due to political sensitivities. The implementation of reform in regions, like Siberia, was conducted with certain modifications, reflecting local characteristics. In these cases, some principles of the reform may have been already traditionally practiced and “affected trial procedures, activities of judges and people’s involvement in justice, making them receptive to future changes”.

The reform in the Caucasus was implemented in 1866, but also with significant modifications. The criminal cases were taken away from the courts with jurors and given to the crown court. The public judges were not elected but appointed by the Minister of Justice. In addition, in 1889 the counter reform was undertaken, which eliminated the public judges , except for the capitals and Odessa, limited the principle of independence of judges etc.

Yet, with all its shortcomings and delayed implementation the judicial reforms in the period from 1864 until 1889 created a unique window of opportunities for the subjects of the empire to promote their access to the resources and improve their wellbeing.

In the oil rich Baku the struggle for the oil bearing lands intensified competition, raised stakes and caused a strong need in qualified lawyers and attorneys. The cases, when the landowners of Absheron peninsula won over the powerful competitors in the land disputes thanks to the independent judiciary were not so seldom.

Manaf Suleymanov tells the story of famous local attorney Karabek, who helped the peasant Hadji-Yusif of the Balakhani village to win in the land dispute with the vice-roy Mikhail Vorontsov his inherited plot Baba Bostani ( The Grandfather’s Garden) based on the customary law. These cases of peasants winning over the powerful rivals in the legal disputes although were not of a daily occurrence, but yet confirmed certain efficiency of the legal reforms of Alexander the 2nd even in the peripheries with the far stretching consequences for the local communities.

Reforms in the Oil industry

The development of the oil industry was driven by the needs of domestic and international markets in the middle of the 19th century. First of all, by that time Russia developed a diversified economy and professional bureaucracy with an influence of the technical intelligentsia, which allows to speak about relatively strong state institutions. . The leading economic branch was a textile industry .

In 1885 – 1887 53,2% of all the workers of Russia were occupied in the textile industry. The machine building industry was most quickly developing branch – from the 270 factories in 1880 it increased to 835 in 1900 with the produced value of 56 mln. to 208,8 mln. roubles and number of workers from 48 thousands to 148, 2 thousands people. Mining industry, responding to the market demand also increased its production. In 1887 it exploited 390, 915 workers, while in 1897 544, 335 workers. In 1900 it had ( without 4, 226 queries) 14, 9% of total factories, 30,2% of workforce and 16,9% of the value. Oil industry exploited 27,000 workers in 1901 ( in 1879- 1, 800) . The development of the national economy to sustain pressures of the international market required fuels, first of oil and its products.

After Russian colonization all the Baku oil wells – both belonging to khans and the private ones- were confiscated, except for those of Selimkhanovs in Bibi-Eybet. Some owners would get compensation, like the one year pension, which would be far from the real cost of the property. Those, who managed to retain their property with the oil wells, were obliged to sell the oil to the state and were prohibited to sell the oil elsewhere. In the early 19th century the system of lease was introduced by the tsarist authorities. The first lessee ( 1807-1808) was Tarumov , who received not only oil wells, but slaughterhouse, fisheries, salt, wine who was obliged to give annually 112, 500 roubles in return. For the oil development – digging, exploring, extraction, transportation , storage - the forced manual labour of the local villagers of Balakhani village was used. Before 1830 the oil was transported also by the villagers from Binagadi and Bibi Eybat. But in the 30s this right was extended only on Balakhani villagers., who were involved both in the cleaning and repair of wells. In the 1820s Balakhani had 121 house with 829 inhabitants ( 344 men and 448 women). They were involved both in the agriculture and oil works.

According to Martellaro the lease system only modified the previous monopolistic forest and mineral rights of the Crown. The lessee had the right to occupation, use and control of land for the purpose of extracting oil, but only for 4 years without an option for renewal. The obvious disadvantages of the short lease included environmental consequences of the intense oil extraction, pressure in terms of working hours on the oil workers, but most importantly disincentive of entrepreneurs in making major capital improvements.

The demand of speedy industrialization in Russia , as well as introduction of the new technology stimulated development of the oil production. The technique of oil extraction has also experienced technological changes with introduction of pumps. The labour of Balakhani villagers appeared to be insufficient. The villagers would usually alternate to be able to process their plots of lands, crops, gardens and cattle. Balakhani workers with increasing qualification and experience would develop into masters. In 1829 the forced labour was cancelled and the hired labour started to be introduced at the oil wells. The ultimate cancellation of the forced labour in the oil fields took place in the 1864. In 1863 there were total 180 oil workers.

Thus the lease system, which was utilized by the tsarist authorities to develop the Baku oil wells from 1807 until 1872 with some periods of the state control was rather hindering growth in the oil industry.

To accelerate the development of the oil industry the Russian authorities cancelled the lease system and introduced the legislation of the February 1872 “ The Rules about a) The oil development and the taxes on the photogene production b) The transfer of the treasury oil resources of the Caucasus and Trans Caucasus, previously on lease, to the private hands”. Samedov cites the following data . The treasury lands were 322 desiatin of oil bearing lands, of which 142 were distributed to the bureaucrats and elite of Russia for special services, while remaining 180 were divided on the pieces of 10 desiatin each of total value 555 thousand roubles and submitted to the auctions which were announced in June 1872. As a result of 4 auctions in 1872 the treasury got 3 mln. rouble exceeding the anticipated value 5 times. 94,5 % of the sum was paid by the local entrepreneurs for 80% of all oil wells.

Introduction of the new system – open sales of oil bearing lands – brought big benefits to the treasury from sales and lease, as well as to the entrepreneurs, as they got large pieces of lands at low cost. It stimulated a powerful flow of capital in the oil industry, by privatization of the oil industry and creation of conditions of competition.

Until the auction in 1896, when more than half of the plots went to the Nobel brothers, the local entrepreneurs got an advantage of the open sales with strict rules of regulations and with cheap price of lands. After the introduction of auctioning of the oil lands, those who were in the first round – 1870s – benefited most of all because of the cheap price of lands. (the price for 1 desiatin price was tens of roubles while in the early 20th century- hundreds of thousands). This “window of opportunity” gave the locals, including representatives of the Baku villages, in spite of discrimination from the side of the tsarist authorities, a chance to participate in the development of the oil resources, technology, trade and transportation.

Liberalization and “privatization” of the oil industry accompanied by the strengthening of the legal protection of property rights and reforms on independence of judiciary by Alexander the 2nd with all their imperfect nature promoted appearance of the first generation of the local “oil magnates”, along with formation of the Azerbaijani national bourgeoisie.

After cancellation of the lease system the capital invested in the oil industry, in particular in refineries, was mainly local. In 1872 the number of refineries reached 200, but then dropped to 103 in 1875. According to the same source, these were the owners of refineries who were the “lobbyists” for the reforms in the oil industry, as they did not have a right according to the lease system to trade their products. The taxes on refined oil also served an obstacle to the development of refineries, before they were temporarily cancelled in 1877.

Development of the oil industry led to the emergence in Baku of such productions as machine building and metallurgy, ship repair, cement, mechanical industry, numerous workshops. The foreign investments in the oil industry increased after the appointment of Sergei Witte as the minister of Finance, who in fact did not take into account the decree limiting acquisition of the oil bearing lands in the Caucasus by the foreigners of 3 June 1892. By the beginning of the 20th century the foreigners acquired 25 local oil companies, with the leading role of the British capital ( in 1903 there were 12 British companies with the capital of 60 mln. roubles, or third of all invested capital)

The foreign investors such as Nobels, Rothschild, not only applied innovative technologies and pushed development of the oil industry and infrastructure, they have brought the business culture with its care for the social welfare of their workers and personnel, environmental awareness and education and trainings. Lev Polonski’s book quotes an archive document – an agreement with a local landowner, Balabey Alibeyov, on construction of a pipeline in the village of Keshla. This document offers an interesting insight into the environmental policy of oil companies during that period: “Under the present agreement, if pipelines built on this land by the Caspian-Black Sea oil and commercial company burst for any reason and cover public land or land allocated to individual peasants, the Caspian-Black Sea Oil and Commercial Company must pay one rouble for every sazhen of damaged land” .

Social Consequences of the First Oil Boom

The first generation of Azerbaijani oil magnates were predominantly peasants of the Baku villages. Such prominent figures as Hadji Zeynal Abdin Taghiyev, Musa Nagiyev, Murtuza Muxtarov, Shamsi Asadullayev and others distinguished in their business behaviour by two major traits : they re-invested their oil income in the real sector of economy, and they were widely involved in philanthropic activities, in particular H.Z.Tagiyev.

New system of ownership, privatization and commercialization of the oil industry, introduced in 1872, promoted a quickly forming class of bourgeoisie and independent economic groups with their interests. The new conditions reinforced speedy ( overnight) enrichment of representatives of the local population, producing oil billionaires, which included not only beks, such as Selimkhanovs, but also previously poor villagers of the oil bearing areas. Besides oil production, the enrichment could happen quickly through different other ways- dealership, speculating at exchanges, oil trade etc. The accessibility, due to the cheap price of lands, and transparency of the auctions are reflected in the composition of the auction participants, as described by M. Suleymanov: “...both Asian and European dressed, mullahs, merchants, military, oil producers , landowners, dealers, peasants , intelligentsia, judges, doctors, engineers and even beggars”

Political and social environment in Russian industrial centres, including Baku, was formed under quickly developing industrial capitalism, which contributed to the development of parties. These parties were shaped under the influence of the dominating in Europe and Russia political discourse. But at the same time, their development was conditioned by the nationalist anti colonial movement , the bearers of which were local intelligentsia and bourgeoisie.

In the quickly politicizing society these were parties and their programs, not personalities, which were determining the political process. The power of parties was rather a deterring factor against a development of the strong leaders. In fact, none of the political leaders of the Azerbaijani parties demonstrated a will to usurp or monopolize power. Politics and representation was seen mainly as an area of highly educated people, intellectual elite or nobility, with a clear “ labour division” between the businessmen- oilmen, industrialists, traders – on the one hand, and intelligentsia – on the other.

In this regards political power and economy were separated in the Azerbaijani province of the Russian Empire. Industrial bourgeoisie, however, found its own ways to influence. It tried to lobby their interests both directly, establishing personal links with the members of the government , thus creating substitution of the electoral politics, and indirectly - through associations of industrialists. “The Russian petroleum industry in the 1880s was highly and openly political, engendering public polemics, interest group pressures, corridor horse trading, and contested decisions of intense interest to the major participants – businessmen, bureaucrats and technical intelligentsia. To the extent that the institutional framework of petitions, discussions, inquiries and commissions represented the different interests and allowed them to exercise some genuine influence, as seems to have been the case, there existed a political surrogate for electoral politics” . But from the point of view of the degree of liberalization of society and formation of the open political system, they have contributed significantly as the independent economic actors ( with certain degree of loyalty to the tsarist regime in the beginning) through the support for charities, education, culture, media.

National bourgeoisie, which consisted of industrialists and population who benefited from the industrial oil boom and other branches of economy, had a crucial impact on the social and political development of the country. While social and cultural improvements was inevitable part of foreign investments (the built by Nobel houses for its workers with hospital, infrastructure, gardens are still functioning being a reminder of the business culture of the investors of a century old oil boom), the support of the national bourgeoisie of education, infrastructure, culture and modernization was going beyond simply oil industry.

Z.A. Taghiyev not only financed schools, newspapers and theatres, but supported and helped to survive to many representatives of intelligentsia, such as poets, writers and journalists. The nationalist movement was the driving force behind the creation of local parties, in addition to the branches of the Russian parties. The recruitment of the national parties with the liberal ideology was based on the widening layers of educated people, independent owners, vibrant and informed society ( at least some of its segments), liberated women, diverse economic groups and public associations. The association of oil industrialists was active in promotion of their interests and influencing decision making in the local and central government. It also funded social and health projects, construction, education. Oil millionaires supported newspapers ( not only locally, but also world wide), schools, charities, parties.

Against the background of widening political, social, intellectual movements a few infamous dramatic conflicts took place in the South of Russian Empire. The decades of discrimination, coincidence of the social and ethnic divisions, struggle for the oil bearing lands and diverse pattern of the colonial settlements contributed to the bloody events in 1905 and 1918. Political struggle in Russia and its peripheries, revolution of 1905, first world war with the interests of major world powers clashing in the strategically important region, anti-colonial movement, terrorism – all this was reflected in the conflicts in the oil rich and ethnically diverse area. The Baku and its environs witnessed strikes and fires of derricks in the oil fields, murders of foreign managers, Armenian- Azerbaijani clashes ending in predominantly Azerbaijani victims due to the privileged position of Armenians under Russian patronage.

Yet, by the beginning of the independence the pluralistic society and practice of parliamentarianism (through participation in 4 Russian Dumas), among the other factors, determined the inclusive policies, which the founders of the first democratic republic in the Muslim world introduced in the parliament of Azerbaijan Democratic Republic of 1918.

The table 1. Composition of the Parliament of the First Democratic Republic of Azerbaijan 1918-1920.

Parties and Alliances Number of Deputies

Musavat 28

Independent 18

Ittihad 13

Socialist Bloc 8

Dashnaktsutsiun 6

Ehrar 6

Hummet 5

Armenian Faction 5

Minorities (Georgians, Poles, Jews, Germans–1 each) 4

Slav-Russian Society 3

Total 96

Conclusions

The history of pre-Soviet Azerbaijan oil and its comparison with the post- Soviet Azerbaijan and other oil rich geographic areas sheds light to the most complicated issue – under which conditions the communities living in the oil rich lands can benefit most?

There might be a few options, as the history shows. Once the state and democracy institutions are in place, there is a little threat, if at all, that the oil economy may affect development and the resource distribution in an unbalanced way. In such case, the state institutions and professional beurocracies can regulate the possible “molding” effects of the oil development. On the other hand, the institutions of public control, such as strong parliaments, independent judiciary, civil society prevent the rulers from the abuse of power and provide for the fairer distribution of the oil income. Oil industry in tzarist Russia had obviously developed in the conditions conducive for its positive effects in the political and social areas for its muslim periphery. First, it was the availability of professional and strong state institutions by the time of the beginning of the commercial development of oil resources. The system of ministries and the decision making, which was strongly influenced by the intellectual elite, was relatively well functioning as a result of the reforms in the end of the 18th century. Secondly, Russian economy was diverse with the strong real sector and agriculture, so the even share of the oil industry had little chances to have “ molding” effect on the state institutions or make the empire to evolve into the “petro-state”, as it was happening with some oil rich states later in the history. Thirdly, the oil industry was “privatized”, so that all oil bearing lands were divided in small pieces and sold in the open sales to create competition and to boost the oil industry. The availability of open and transparent sales and cheap price of lands created unique opportunities for the wide social layers to participate and get an access to the oil resources. It is exactly in the first auctions when the local population – peasants of the Baku villages got an access to the oil riches, which gave the local enterpreneurs a unique opportunity to turn into the oil magnates. Most importantly, is how the local oil enterpreneurs re-invested the oil revenues. In a big contrast with the post-Soviet situation, they invested their enormous capital in the real and non-oil sector of economy such as textile, shipbuilding, fisheries. The other characteristic of the first oil boom was widely spread philantropy – these were the simple peasants turned into the oil magnates, who transformed Baku from the medieval eastern city into the well developed modern center of European architecture and culture, supported art, media and science, secular education, and emancipation of women. The distribution, investment and disposal of the oil revenues by the private actors was taken place in the conditions of the relative independence of the oil economy of state, free competition and against the background of the strong anti-colonization and national liberation movement.

2. History of the Baku “Black Gold”.

Faith of the Communities and Formation

of National Bourgeoisie

2.1. The oil wells of Baku

The history of oil extraction in the Absheron peninsula is covered in detail by historical sources of the 18th and 19th centuries. By that time, technical progress had reached a peak so there was a natural need for an energy-providing raw material. This raw material was oil. With the emergence of steam engines, which were widely used in industry and transport from the 19th century onwards, especially for rail and water transportation, more and more oil and oil products were needed.

Scientific progress resulted in oil and oil products playing a greater role in people’s lives.

European states were the first to realize the importance of oil. In the second half of the 19th century, the interest in its extraction exceeded all expectations. Oil became a more sought-after commodity than gold, diamonds, coal or other minerals.

The traditional uses of oil gradually became obsolete as the modern society of the 19th century emerged with its fast-paced technical progress. Oil would scarcely have gained its international importance had it continued to be used only for lighting and as liquid fuel.

The scientific-technical revolution, which began in the second half of the 19th century, affected all spheres of life, including the oil industry.

The uses of crude oil are quite limited. In most cases it served as a fuel. Oil processing, however, made it possible to obtain a whole range of very useful and valuable products with manifold uses. Some of these products, for example petrol, kerosene and fuel oil, were used as fuel, while others, for example, kerosene and paraffin, were used for lighting. Others were used as lubricants. Oil was also used to make products that were used for medical and cosmetic purposes, such as vaseline, pesticides (insect poison, naphthalene) and solvents, to prepare aniline dyes, and for construction purposes.

Petrol was a primary product of oil processing, and it was broken down into a whole string of light and heavy types. Light petrol is the name given to types of petrol with a specific weight of 0.72 grams per cubic metre, while types of petrol with a higher specific weight were called heavy petrol.

It must be noted that petrol was first distilled from oil by the British physicist Michael Faraday. Travelling in Europe, Faraday visited laboratories in a number of countries, and this marked the beginning of his independent research. As a result of this research, Faraday established that if oil is left in an open vessel for a long time, some of it will evaporate, while the rest will become heavier. If we put oil into a glass vessel with a diversion channel, cooler and thermometer attached to it, and then heat it, the oil will gradually start boiling and discharging steam. This will flow into the cooler, cool, turn into a liquid and collect in a vessel. This liquid had a markedly smaller specific weight than the oil put into the primary vessel.

Subsequently, various surveys established that the transient liquid - the distillate – is at first transparent, then it grows yellow as the temperature rises, and finally, it darkens. The oil remaining in the vessel will have a heavier specific weight as it discharges the distillate. This separation process was called oil distillation.

The academicians Gmelin and Lerche, who visited Baku in 1735, recorded that Baku residents distilled oil. Lerche wrote in part: “…Oil does not start burning quickly, it has a dark brown colour, and when it is distilled, it becomes bright yellow. The white oil (the product of oil distillation – author) is slightly turbid, but as you distil it, it becomes light-coloured like alcohol, and burns quite quickly.”

Lerche’s remarks clearly show that long before Faraday obtained petrol in a laboratory, the secret of oil distillation in order to obtain a flammable product was known to Bakuvians. Muhammad ibn Najib Bakran, a Persian-speaking author, described various sorts of oil, including white and black oil extracted in Balakhani, and the processing of black oil into white oil, calling this distillation.

Petrol was, and still is, the most volatile oil product. Mixing with air, petrol vapour can create a combustible blend. Given this combustibility, the mechanic Marcus designed the internal combustion engine in 1875. The creation of the internal combustion engine using gas and petrol brought about the invention by Rudolf Diesel in 1913 of the internal combustion engine, which uses the heavy products of oil distillation. This invention revolutionised the oil business. Initially, he tried to create an engine powered by coal dust, but he succeeded only when he used purified oil, i.e. heavy petrol fraction, as fuel.

Kerosene, the fraction that followed petrol, was used mainly for lighting and heating in so-called oil stoves, which were widely used to cook food. In some cases, kerosene was used as fuel for kerosene engines. Continuing the process of distillation, people obtained solar oil which, like kerosene, was used in special lamps to provide a source of lighting.

The secondary processing of solar oil provided lighting oils such as astraline and pyronaphta, which had a heavier specific weight and a higher flash temperature. This made them safer. For this reason, these oils were preferred to kerosene for lighting crowded public places, ships and lighthouses.

Alkaline waste obtained during the kerosene purification process was used in soap-making, as well as in the manufacturing of insecticides and products to prevent wood from rotting.

Fuel oil, which remained after light fractions of petrol, kerosene and solar oil were distilled from oil, was tested to find out whether it could provide lubricants.

The main value of fuel oil is that it can provide a whole string of special lubricants which have many advantages over those from vegetable oil.

The use of fuel oil as fuel immediately displayed its advantages over other types of petrol.

The history of Baku is related to the history of oil. Rich oil deposits were a powerful factor that affected the course of Azerbaijan’s historical development, especially in the 19th and 20th centuries. In the consciousness of the people, oil was perceived as the basis of both prosperity and all trouble – black blood.

Before the Russian invasion, the Baku Khanate occupied the whole territory of the Absheron peninsula, which was treeless and barren but rich in sources of oil and salt - the main wealth of the peninsula. All soil in the Absheron peninsula consisted of limestone, with a lot of fossilized shells, sandstone and clay.

In his report of 6 September 1850, the district head, M. T. Dementyev, wrote: “…There are also sources of black oil here and there are wells installed on them. They are located in the villages of Balakhani – 87 and Binagadi – 5, as well as on the Beybat tract – 25; in the village of Surakhani there are 16 sources of white oil. Besides that, there are sources of thick black oil on the Isle of Svyatoy and in the Bagcha and Shubani tracts…

“The residents of Baku district are engaged mainly in arable farming, and their welfare depends on the harvest. They also cultivate saffron, cotton, a small amount of tobacco, and many of them have gardens with fruit trees and grapevines. Some of them have vegetable gardens where they grow melons, watermelons and other vegetables… The climate of Baku district is hot, which helps corn and other plants to grow faster. The northern wind blows here all the time, which is good for residents’ health…. Plants sprout in the district in early March, flourishing at the end of the same month and ripening from May onwards. Thunderstorms never occur here, and there are no noticeable differences of climate in the same belt. There are no extremely cold winters in the district, which is why residents live in houses with heaters and windows, with doors always open and serving as windows; during the hot season, they live mainly in gardens. The air is quite healthy for both residents and troops stationed in the district.

“Northern and southern winds are more common and on hot summer days they cool the air and are very favourable to people’s health. In winter, the northern wind rages almost all the time, for periods ranging from four to nine days, but this has no impact on residents’ health. Rains here usually start in mid-October and continue until January. In spring, they resume from the middle of February to the middle of March. Rains here are not frequent and droughts are common; in such cases, fields are irrigated by only dew and fog. There are no rivers in the district and floods do not occur…

“Fogs occur in spring, but rarely. They disappear as soon as the sun shines and the wind blows; even in autumn, they have no influence… on vegetation…

“There is no hail in Baku district. Snow usually falls in January and continues until the end of February. In mountain villages, there is more snow and it lies for several days. Frost is insignificant, which is why rivers and lakes never freeze.”

The first information about Baku refers to white, not black oil. The Arabic geographer of the 10th century, Al-Mas’udi, writes that there are sources of white oil in Baku, not elsewhere. This is a littoral city in Shirvan.

Another author, Al-Qarnati, writes that there is black and white oil near Baku in the Shirvan region. On the whole, medieval authors repeat each other. Let’s take, for example, a number of reports about Baku quoting translations from Arabic and Persian: Al-Istarhi (10th century) reports on the Sea of Tabaristan, mentioning the littoral cities of Derbend and Baku where there are sources of white and dark grey oil.

Abu Dulaf (942-952) writes: “I went 80 farsahs to Great Tabaristan, until I reached a so-called place called Bakuya, … where I found a source of oil, the daily fee for which reached 1,000 dirhams, and nearby there is another source that constantly gushes white oil, like jasmine oil, day and night…”

Yaqut al-Hamawi (13th century) reported: “Bakuya is a city in Derbend district in the Shirvan region. There is a source of oil there, the rent for which reaches 1,000 dirhams, and nearby, there is another source that gushes white oil, like mercurial oil, day and night… A merchant I trust told me that he had seen a plot of land that burnt all the time.”

Moses of Kalankatouts reported in the “History of Albania”, praising his homeland: “The country of Albania is wonderful and enchanting, with many natural gifts. The great Kura River flows quietly through it… The surrounding fields are abundant in bread, wine, oil and salt.”

Hamdullah Qazvini (14th century) reported: “Oil… there are many sources of it, and the most abundant ones are located in Baku. On the surface of the earth here, people dig wells and extract oil, and the water pumped into these wells pushes the oil to the surface.”

Abd al-Rashid al-Bakuvi (15th century) reported: “Bakuya: there are known deposits of pitch and sources of oil here. Oil is extracted every day by more than 200 herds of camels. Nearby, there is another source that gushes day and night, oil which is white like jasmine oil:… Near the sources, there is solid yellow soil which burns like candles. People snap off pieces of it and take them to the city to heat their houses and baths (The author is probably talking about paraffin here).

“At a distance of one farsah from the city, there is a place that produces an eternal fire. Near this fire, there is a village where residents are Christians. They burn lime and deliver it to the city on carts.”

Lime stone sellers

Most researchers believe that the village and eternal fires described by Al-Bakuvi belong to Surakhani and the fire temple located there.

Quite a detailed description of the fire temple was given in the book “In the Oil Kingdom” by V. L. Lvov: “… In front of us, white serrated walls with a square tower in the middle and a big gate with a dome leading into the courtyard could be seen against the dark background of the sky. Pipes rose above the tower and the walls, with tongues of fire rising into the air. We stepped into the temple together. We were met by a guard who guided us everywhere, offering explanations. The temple has a wide courtyard, surrounded by walls so wide that three or four people can easily stand on top, and below, inside the walls, there are small cells of former solitary fire-worshippers. The temple itself is in the middle of the courtyard. It is a quadrangular tower with an entrance in the form of a gate on each side. In the middle of the tower, there is a quadrangular stone with a round dent. At the bottom of the stone, there is a pipe that belches gas. The corpse of dead fire-worshippers used to be put in this room and burnt on the fire emerging from the earth. The roof of the tower consists of a dome with bulges at the corners. A vertical iron staircase leads upstairs. After going upstairs, I found a comfortable platform there with pipes belching gas. I also entered the dark gloomy cells and climbed the wide walls that surrounded the courtyard, watching from everywhere the original sight of the fires that flared from the pipes and twisted as the wind blew.

The Fire Temple in Surakhani

“The area where the temple is located stands out because of deep cracks in many places in the earth, from which burning hydrocarbon gases emerge. If you light them, they burn uninterruptedly, emitting a specific smell and constantly changing the fanciful form of their flames. This place has been visited since time immemorial by believers from India, who regarded these flames as holy and worshipped them.

“In the nahiyas (regions) of Baku, there are a number of areas that are unfit for farming (so-called shurs – saline land). If a man or horse sets foot there and loiters, they will burn their feet. Passing caravanners dig holes in such places, quickly putting copper dishes [with food] in them, and the food is immediately cooked by the heat of the earth.

“People engaged in oil extraction go down into the wells day and night, collect oil and place it in waterskins. Then merchants buy it and deliver it to different countries. Oil has eight colours, but the best oil is yellow. Black oil is the property of the shah. This black oil of Persia is supplied to Uzbekistan, Iraq, Kurdistan, Georgia and Dagestan and to castles located on the Ottoman border, and it is used for lighting in those countries.

“It is needed as a military reserve to defend castles and cities. Even for the Persian shah and the Ottoman capital, burning lamps are made from Baku oil. The oil is guarded day and night, because if fire touches it, it will burn until it runs out. For this reason, there is always a mountain of sand lying ready near sources of oil. If a source of oil catches fire, all the reayya and berayya (free people and labourers) immediately rush there to put out the fire by smothering it with sand, for there is no other method.”

This list of oriental sources is not exhaustive, but and it is also worth mentioning a number of Western European authors whose works reported Baku oil.

The most detailed information about oil extraction in Baku is provided by the German traveller, E. Kaempfer, who visited Absheron in 1683. This author’s travel notes stand out for their accurate information and are of great interest as the most reliable source, not just about the history of extraction, but also about the history and ethnography of the region.

This work was published in Latin in 1712 and is difficult to find, which is why we quote here individual translations from a publication by Academician M. P. Petrushevskiy, published in 1949.

“Their depth [the depth of oil wells] is 30 and more, and this is rounded up to 40 elbows, not because the strands [strata] are at such a depth, but because they are dug deeper so that the liquid percolates through at night and stays in them until workers extract it the next morning.”

Then, Kaempfer describes one well that was deeper and more productive than all the others: “…Oil was extracted from it with the help of a device installed above – a gate that was rotated by two horses taking turns, and the work did not stop – only for several hours at night. The oil was kept in special storerooms.” Speaking about one such room, Kaempfer said that it was a big vaulted room, seven steps wide and 17 steps long, but he did not measure its depth… “It was quite comfortable not just for storing, but also for pumping oil out of there as it was open on both sides and equipped with staircases by which you could go down to any level.”

Kaempfer, who visited the Fire Temple in Surakhani, described “burning fields”, eternal fires and pilgrims – fire-worshippers - reporting leaks of white oil and saying that 1,000 steps to the northwest from the “eternal fires”, there was a wonderful source of white oil which was located in a pond 100 steps long and 50 steps wide, with banks that were slightly lower than the surrounding area.

Early 18th century sources provide comparatively detailed information about Baku oil, oil wells, their properties and amounts of storage, processing and transportation.

The eastward expansion of the Russian Empire brought not only political but also economic benefits, including oil. Excerpts from some sources of that period are given below:

I. G. Gerber writes in his book “A Description of the Countries and Peoples along the Western Coast of the Caspian Sea” (1728): “Certain workers, with their own homes attached to these oil wells, live near those wells.” Then the author reports that gas was used for lighting in the homes of people who installed a reed in the floor and “lit it as a candle”.

This method of lighting was ethnographically recorded in Surakhani and continued until the beginning of the 20th century.

I. Ganvey (1747) described the technology of separating oil from water, saying that “this process was carried out by constantly allowing oil to leak through gutters via rows of holes or tanks. Thus, the water or the heavy part of the oil with which it was mixed settled in the first hole.”

Lerche’s information (1722) about a gushing well in Balakhani is also interesting. The well provided 500 batmans of oil (187.5 poods (x16 kg) per day).

After the signing of the Treaty of Gulistan, on 12 December 1813, the khanates of Baku, Guba and Derbend were finally incorporated into Russia. Information about the population and the social composition of Baku and its surroundings can be found in a report by Commandant Lieutenant-General I. I. Repin to the State Expedition of the Supreme Georgian Government.

A report on the number of residents of Baku Castle and its suburbs, indicating their national and class affiliation and the sum of taxes imposed on them as of 1810, submitted to the State Expedition of the Supreme Georgian Government by Commandant, I. I. Repin.

10 September 1810

Number Taxes In khan abazes

(An abaz (abbasi) – Persian silver coins worth 20 kopecks

Homes Souls Roubles Kopecks

1 2 3 4 5 6

Persians of the Ali sect (Azerbaijanis)

Beys 25 98 These three titles are exempted from all taxes

Mullahs and Saids 87 199

Nukers 15 43

Merchants 184 295 The Baku government has imposed taxes on all these seven groups on the basis of khans’ laws, considering their fortunes and businesses as of 1810

Those who sell different peasant items 93 323

Those who use kirjims (big barge-like flat-bottomed boats – author) 17 45

Various artisans: tailors, shoemakers, blacksmiths, carpenters and so on. 174 387

Ploughmen 130 277

Draymen 33 78

Those who do menial work in the city 139 309

Total 897 2,154 2,481 20

Armenians

Priest 1 2 Exempted from taxes

Small traders 11 24

Various artisans 6 16

Those who do menial work in the city 53

Armenians 24 55 2534 20

Jews

Rabbi 1 1 Does not pay any taxes

Workmen 2 6 From these two types of taxes 25

Various small traders 7 19

Jewish 10 26

Total 931 2235 Total number of taxes imposed on them 2560 20

A report about the population and the revenues that came into the treasury from the city of Baku and the province

30 April 1813

Number of souls Those who pay an annual tax in khan abazes into the treasury

1 2 3 4 5

Roubles Kopecks

Baku Castle

Residents of different ranks in the castle and in its outer settlement 1,892 2,481 20

The province

Villages

1. Guzdek 70 66 Run by Haji Zurab Bey on the basis of previous khan rights that allow the bey to use residents of the village three days a year to sow and harvest his bread

2. Geokmali 145 118 80 Run by a headman elected from residents every year without any privileges over other residents

3. Kobu 135 103 40 Run by Haji Zurab Bey on the basis of the aforesaid khan rights

4. Khyrdalan 92 79 20 Run by Haji Zurab Bey on the basis of the aforementioned khan rights

5. Khojasan 84 55 Run by Haji Zurab Bey on the basis of the aforementioned khan rights

6. Bilajari 112 116 60

7. Saray 183 193 60 Run by Muhammad Bey on the basis of the aforementioned khan rights

8. Mazazir 73 81 40 By a headman elected every year

9. Novkhani 202 228 80 By Haji Nur Muhammad Bey on the basis of khan rights

10. Jorat 88 114 40 By an elected headman

11. Fatmai 177 160 60 By Asgar Ali Bey on the basis of khan rights

12. Binagadi 138 136 40 By Gasim Bey on the basis of khan rights

13.Digah 91 112 20 Run by Manaf Bey on the basis of the aforementioned rights

14.Mahammadli 68 81 40

15.Goradil 25 28 60 By a headman elected every year

16.Kurdakhani 85 127 60

17.Pirshagi 98 114 40

18.Buzovna 263 215 50

19.Shagan 51 63 80

20.Mardakan 94 81 40

21.Zig 71 59 40

22.Amirjan 216 171 40

23.Ramana 80 92 40

24.Balakhani 286 228 40

25.Kuley Mahmud 71 77

26.Mashtaga 582 653 40 By Galbali Bey on the basis of khan rights

27.Bilgah 93 103 40 By Habib Bey on the basis of khan rights

28.Nardaran 139 169 40 By Karim Bey on the basis of khan rights

29.Zira 94 83 60 Hashim Bey on the basis of khan rights

30.Surakhani 90 77

31.Kala 332 323 40 Run by Mammad-Shirin Bey on the basis of the aforementioned khan rights

32.Turkan 32 41 80 By Aliverdi Bey on the basis of khan rights

33.Hovsan 64 59 40 By Gasim Bey on the basis of khan rights

34.Bulbula 33 28 60 By Muhammad Guli Bey on the basis of khan rights

35.Zabrat 38 57 20 By Ashur Bey on the basis of khan rights

36.Sabunchu 59 59 40

37.Keshla 56 77 Run by Mammadyar Bey on the basis of khan rights

Total

The number of residents in all 37 villages 4,602 4,641 80 Taxes on residents of the castle and the province are divided every year by the Baku city court and village headmen, depending on the state of every resident

In Baku Castle and in the outer settlement 1,892 2,560 20

Total 6,494 7,202

Some literary sources of the late 19th and early 20th centuries report that before the Baku Khanate was incorporated into Russia, almost all oil wells, except for two wells that belonged to Gasim Bey Selimkhanov by hereditary rights, were used by the Khan of Baku Huseyn Guli Khan himself, and that until 1820, oil extraction from the oil wells of Baku was free, while the Russian government did not receive any revenues from oil reserves. However, archive documents show that from 1812, the Russian government received revenues not just from oil resources, but also from salt lakes:

Apart from the aforementioned tax on Baku Fortress and its provinces, the following show estate and articles that yield revenues

Oil wells

1. In the village of Balakhani, 10 versts northwest of the castle. All this was farmed out by the Georgian state expedition to the nobleman Zurap Tarumov from 1 July 1812 for four and a half years with a fee in Russian silver due to the treasury every year [roubles]

2. In the village of Binagadi, 12 versts north of the castle. 625

3. In the village of Beybat, five versts south of the castle.

Salt lakes

1. In the village of Masazir, 14 versts north of the castle.

2. In the village of Zig, five versts northeast of the castle.

Articles

1 The right to have dye houses in the castle and villages Farmed out by the same expedition to the resident of Baku, Aleksandr Makedonskiy, from 1 July 1812 for four and a half years with a fee in Russian silver due to the Russian treasury every year

9

2. Sale of hot wine

3. Tax from the sheep slaughterhouse

There is a small caravanserai in the castle

Fishing on the sea coast in Baku province

In his report to the tsar on 30 July 1813, the commander-in-chief in Georgia, Lieutenant-General Rtishev, wrote: “The oil wells are abundant in Baku province and are the primary source of its wealth. Since the very beginning of the existence of Baku, they have yielded important revenues to the khans who owned them and always farmed them out with the full right to dispatch oil abroad without any duties. With the conquest of this province… this item remained in the treasury for more than a year under the jurisdiction of the military chief of Baku district, yielding revenues that were insignificant compared to the expense of the maintenance of workers, cleaning of wells and other needs…

“For this reason, it was recognized as useful to farm them out as before on the basis of khan rights, and the consequences indicated that such a measure is the most profitable for the treasury, for this item, and others, including quite insignificant ones, yielding a farming-out fee of 450,000 in banknotes in four years without any concerns or expense to the treasury.”

This shows that the farming-out system used by the Baku khans continued to exist as the then highest government institution – the State Expedition of the Supreme Georgian Government – simply legalized the right to farm out oil wells in order to obtain annual revenues.

In his essays on the history of the Baku oil industry, K. A. Pazhitnov provides a detailed description of the contract regarding the handover to the nobleman Tarumov :

“On 6 July 1816, this contract was signed between the State Expedition of the Supreme Georgian Government and the governor’s secretary, Mark Matveyev, the son of Tarumov, on farming out to him the oil extracted in Baku province, with the following points:

“First: He, Tarumov, shall maintain the mountain earth oil and oil springs in Baku province from 1 January 1817 for a period of four years - to 1 January 1821, namely: mountain-earth oil, or what they call black oil here in the village of Balakhani, at a distance of 15 versts from the city of Baki - four big ones – first Khalafi, second Agayi, third Zabrat and fourth Alibegi; and 73 medium-sized and small ones that are situated near each other and those which are within a distance of at least three versts. In the village of Binagadi, at a distance of 15 versts from Baki – five small ones, near the village of Beybati, at a distance of seven versts from Baki in the direction of the sea – 19, and the total number of big, medium-sized and small springs is 101. There are 15 springs of white oil between the villages of Amirganjani and Surakhani, at a distance of 20 versts from Baki, and they are all similar and much smaller than the black oil ones.

“Second: The lessee has to maintain in an operational condition those oil wells that are located under the ground, some of them being up to a depth of 20 sazhens, and encased in wood and in part stone, preventing them from collapsing or clogging up, using workers and his wealth to this end…” Then the essays report that according to a report by the department of taxes and duties dated 26 October 1821, earlier, namely from 1 July 1812 to 1 January 1817, a contract for white and black oil, salt, a number of slaughterhouses, the sale of hot wine and a dye house was signed with the titular counsellor, Tarumov, for a period of 4.5 years, with a farming-out fee of 62,500 roubles in silver or 250,000 roubles in banknotes to be paid to the treasury. “As the term of contracts with lessees of articles liable to quit rent approached in 1812, and having summoned those who wanted to rent those articles again, the state expedition issued an order… to publicize all the revenues of the treasury there through its counsellor, dispatching him to the cities of Yelizavetpol, Baku, Guba and Derbend so that he can review those articles and hold auctions on the spot, setting conditions in case someone from among the local residents wishes to rent them and submits them to the expedition for consideration.”

There is an inaccuracy in the Essays here. According to the aforementioned archive document, “apart from the mentioned tax on Baku Fortress and provinces…” the right to have dye houses in the castle and villages, sell hot wine, collect duties from the sheep slaughterhouse and so on was granted by the expedition to the resident of Baku, Aleksandr Makedonskiy, for a fee of nine roubles in silver to the Treasury.

The quote from the archive document “apart from the mentioned tax on Baku Fortress and provinces…” and information from the “Essays…” show that the oil wells which belonged to the khans of Baku before the Russian occupation of the Baku Khanate and which were taken over by Russia were farmed out by the government and yielded quite large revenues from the very first day, i.e. from 1808 to 1872.

It is also known that a local resident, named Mullah Najaf Ali, filed a complaint about Tarumov because Tarumov had seized an oil well that the khan handed over to his father in 1787. This complaint was examined and Mullah Najaf Ali was paid a pension of 120 roubles per year.

During the whole period of this farming-out system, oil extraction from 415 oil wells totalled 1.5-2 million poods, according to various sources. Under this system, oil sites were farmed out for a period of four years, which is why lessees did not seek to expand their businesses by investing large amounts of money, but extracted as much oil as possible from the wells without engaging in any technical improvements.

In Ragozin’s opinion, having farmed out oil and salt fields in 1820, the government actually abandoned all responsibility for the development of these fields. Its primary preoccupation was trying to ensure its own revenues, while concern about the interests of the fields was expressed only in the form of naming prices for crude oil, and a lessee had no right to sell it for a higher price. The brevity of this four-year tenure discouraged lessees from developing the industry. When the government changed the system and took control of this industrial enterprise itself, it always incurred losses. For this reason, it finally decided in 1850 to farm out all oil land on condition that a lessee did not sell crude oil for more than 45 kopecks per pood.

The diagram given below shows oil extraction from 125 oil wells from 1818 to 1863, i.e. until the abolition of the farming-out system.

The diagram shows that the highest amount of oil - 395,470 poods - was extracted in 1863, i.e. in the last year of the farming-out system, while the lowest amount – 180,000 poods – was extracted in 1833. Overall oil extraction from 125 wells during the existence of the farming-out system was 8,615,680 poods, or about 240,000 poods per year.

This diagram is drawn up without considering extraction indicators from two oil wells that belonged to the Selimkhanov brothers. According to K. A. Pozhitnov’s approximate calculations , the Selimkhanov brothers extracted 10,800 poods each from two oil wells in 1824 and from 1834 to 1846; 7,316 poods in 1847; 12,830 poods in 1848; 17,800 in 1849 and 17,800 in 1862.

Oil in poods

1818-1863

Oil extraction from 125 state run and farmed out oil wells

Thus, if the average production of one well that was farmed out or run by the state was 1,920 poods per year, the average output of the two oil wells owned by the Selimkhanov brothers was 3,948 poods, i.e. almost double.

Oil wells were not always farmed out, but were also run by the state.

Apart from black oil, white oil was also extracted in Baku, and after purification it was often used to treat rheumatism, scurvy, skin complaints and other diseases.

The diagram shows white oil extraction per annum based on information provided by Pozhitnov.

White oil extraction, poods

The overall sum of revenues from black oil extraction received by the treasury is given in the diagram below.

Farmed out

State-run

Revenues from the sale of oil in 1808-1963, roubles

Analyzing this diagram, we can conclude that revenues almost doubled starting from 1821. Overall revenues from oil extraction during this farming-out period, i.e. in more than 37 years, totalled 3,567,104 roubles, or on average, 95,868 roubles per year. The share of private lessees accounted for 51.2 per cent (in 239 months) and totalled 1,788,993 roubles, while the state’s share accounted for 49.8 per cent (in 207.5 months) and totalled 1,778,111 roubles. The average annual income, with account taken of the different duration of private ownership and state management, totalled: 89,824 roubles per year for private lessees and 102,828 roubles per year for state management. Thus, we can see that the treasury received slightly higher revenues from state management than from private lessees. For this reason, there were disagreements in government circles over whether state or private management was better. For example, Musin-Pushkin, one of the organizers of research into the riches of the Caucasus, suggested abolishing the farming-out system and basing oil production on the German system, i.e. involving as many industrialists as possible in oil extraction.

At the World Exhibition in Paris, Dmitriy Ivanovich Mendeleyev expressed the following opinion about the development of the oil industry: “Obstacles to the oil business in essence lie in the exploitation of oil sources. The oil sources of the Caucasus are handed over to lessees. These lessees have no interest in starting a big and troublesome business on only a short-term lease or in spending money on exploration and test drilling and digging nine wells in order to recover their expenses with the 10th well. Maybe this 10th well will be discovered when the farming-out period expires or when the lessee is no longer able to enjoy the benefits of his enterprise given the certain degree of risk inevitable in the oil business.”

Indeed, this was the case. A lessee who was granted the right to extract oil for four years sought to make as much profit as possible for the smallest possible capital investments, which resulted in the barbaric depletion of oil reserves. This subsequently played a negative role in the development of the Baku oil industry. The lack of funding to deliver crude oil to consumers forced them to spill oil into ditches dug near the oil wells, causing considerable environmental damage.

For this reason, Mendeleyev was one of those who suggested abolishing the oil farming-out system and selling the oil deposits to private individuals. He suggested selling them in small lots in order to boost oil industry competition.

But in spite of these comments, the farming-out system continued to operate for a further 10 years, i.e. from 1863 to 1873, with oil extraction reaching 10 million poods of oil (See the diagram).

Oil extraction in the final years of the farming-out system, poods

Until the 1860s, oil was also extracted from primitive wells and holes in the USA. The first borehole sunk by Drake provided a large amount of oil, which boosted oil extraction. In a 10-year period, from 1863 to 1872, about 300 million poods of oil were extracted from 1,000 operating wells in Pennsylvania (See the diagram).

Oil extraction in Pennsylvania in 10 years

On seeing the Americans’ success, the Transcaucasian Commercial Association in 1866 filed a petition with the government to start drilling work. However, the government rejected this petition thanks to the erroneous view of the geologist Abikh who thought drilling on the Absheron peninsula would be useless.

The first reports giving oil well figures are provided by the 16th century Iranian author Amin ar-Razi, who recorded the presence in Absheron of “500 wells from which black and white oil is extracted”.

Among authors of the later period, the Turkish traveller Evliya Celebi (17th century) gave a detailed description of oil wells, oil extraction and gas reserves, as well as providing a lot of interesting ethnographic information: “Near the city, there are rich oil sources of different colours in seven places.”

The construction of one well is described by I. T. Drenyakin in the “Description of Shirvan” (1796). He writes: “About nine versts from the aforementioned lake [Masazir] towards the southeast, in the village of Balakhani, there is an inexhaustible white mineral well with a faulty wooden frame, measuring 2.5 arshins in width and with a depth of 13 sazhens, fenced off by a covered stone wall. Apart from that, in many places there are springs that produce black oil which residents take free of charge to lubricate the wheels of their carts.”

Judging from this description, the well was about 30 metres deep and about 1 metre wide, reinforced internally with wooden boards and rings and was surrounded by a fence. It is noteworthy that residents took free oil for their household needs.

Oil wells were dug manually by professional workers using the following method: “When they plan to build a well somewhere, they first dig a well to the very first source of oil; this hole is rounded like a cone and, in order to facilitate pumping from depth, ledges are made on the sides so that workers standing in them can hand over soil to each other.

“On solid soil, the upper diameter of the well is large enough for oil vapour to emerge from it without hurting the workers, while in loose soil they dig a hole twice as wide as it is deep because the sides of the hole will tilt at an angle of 45 degrees, and the soil will no longer crumble”.

“After that, they build wooden or stone walls for the well from the bottom of the hole”.

Oil was pured into holes

“While building these wooden supports in the well, they place four thick bars at the bottom of the hole, locked together; they build the walls of the well on these bars, making them out of rows of beams tied together with logs or boards. Placing several rows one on top of the other, they stick two or three inches of wormwood on their external side and fill the whole area between the walls of the well and the hole with soil. The diameter of the well is from two to three feet at the top, while the bottom is much wider so that oil collects there. For the same reason, holes of different size are made in the walls of the wells, depending on the flow of oil”.

“When a big well is very deep, they make the ends of the rows one arshin long, at intervals of one or two arshins, and tightly fix them in the ground. In this way, the whole construction is divided into two parts, each of which has its own foundation and the bottom parts cannot be damaged under pressure”.

The drilling of new wells

“Stone is used to build wells that are not so deep: they are either quadrangular or round like a jug; the former can have a diameter of two to three feet.”

The workmen who dug oil wells were in great danger. The deeper the well, the more gas there was. This is why it was extremely dangerous to stay at the bottom for any length of time. Numerous diggers were poisoned, then lost their eyesight or even died.

On oil extraction, it is reported: “Waterskins or leather bottles, which looked like ordinary sacks, were used to scoop oi”l.

“If the oil was lifted by horses, larger waterskins were used made of horse, bull or buffalo skin; if people did the lifting, then smaller waterskins were used made of sheep or goat skin. In this regard, various sources identify their capacity differently – from one bucket to 2-3 or even five poods. The edges of the waterskin are sewn onto an iron ring, to which two iron arches are attached, coming together at the top at right angles so that a cord can be tied to them. This cord is used to lift the waterskin using a manual winch or horses. The manual winch consists of a wooden shaft fixed on supports. In the middle, two bars are fixed perpendicular to each other and poles are attached to their ends.

…In order to scoop oil using such a winch, three people are needed, two of whom move their winch both manually and by treading on the poles, while the third person operates the cord to ensure that the waterskin does not touch the walls of the well and spill out the oil. If waterskins of oil are lifted by horses, only one person is needed, and it is done in the following way.

Oil wells were covered with wood (a) and stone (b)

…Over the middle of the well, an immovable block which rotates on an iron axis is fixed at a height of four or five feet on two bars dug into the ground on both sides of the well. On one side of the well, slightly higher than its mouth, two horizontal rollers are placed on one surface at a distance of three or four feet.

..A cord goes through the immovable block, and the waterskin is attached to its end by an iron ring. Another cord, which goes through the rollers, is attached to the bottom where there is a hole. Both cords are attached to the middle of the roller, to which the horse is tied, and they are long enough for the waterskin to bend in two when it is lifted.

…When the waterskin is lowered to the bottom, the worker pulls the upper cord, which quickly lowers the waterskin and scoops the oil. After being filled, it is lifted, bending in two so that the liquid it contains is in the middle, and when it is lifted above the well hole, the lower short cord straightens and the oil is decanted out of the hole.”

An inscription on one of these manual wells reads that it was dug by Master Allahyar Mammad Nur oglu and was put into operation in 1594.

According to Voskoboynikov, most of the oil wells were dug at different times and were either partially or fully renewable: “… for example, according to residents, three years ago a stone inscription was found in a cellar near the Galafi well saying that the Galafi well was rebuilt 200 years ago. The Chambu, Haji-Zurabi and other wells were also renewed under the last khans.”

It is interesting that most of the wells were given proper names such as Urusi, Chambu, Shah-Saf, Sovzechal, Sharapani and others.

By the beginning of 1863, there were 218 operating state-owned wells and two private wells belonging to the Selimkhanov brothers in the Baku oil fields, according to a report by Koshkul. By the beginning of 1873, the number of wells reached 415, i.e. in 10 years the number of wells increased by 195, plus an additional borehole drilled by Mirzoyev in 1872.

The depth and daily extraction from some wells in the period 1862-1870 are given below:

1862 1870

Name of the well Depth, sazhens Daily oil extraction, poods Name of the well Depth, sazhens Daily oil extraction, poods

Galafi 12.2 90 Aliman 1 15.2 610

Agayi 12.2 75 Saparov 2 13 376

Zabrat 8 75 Mikhaylovskiy 11 355

№ 65 4 – 6 40 Mirzoyev - 308

Gazi 11.4 32 Jabar 15.2 281

Alibeyi 10.2 30 Salahi 9.2 164

Vorontsovskiy 7 30 Saparov 1 9 140

№ 37 4.1 28 Galafi 13 86

№ 102 5.1 21 – 27 Ag Akbar 14 79

№ 66 4 – 6 25 Agan 11.2 54

№ 35 4.1 20 Aliman 2 11.2 54

№ 36 4.1 17 Gazi 11 32

The exploitation of oil wells caused some difficulties. In order to avert any drop in the flow of oil, the wells were regularly cleaned because sand fell into the well as the oil was scooped out. Furthermore, the oil flowing from different strata to the bottom of the well carried with it mineral particles, and they contaminated the bottom of the well. Moreover, when oil was extracted in an open way, it turned into kir under air pressure and this also reduced the flow of oil.

In order to clean oil wells, a worker used a rope to go to the bottom and manually remove the sticky substances that accumulated there and reduced the productivity of the well. Naturally, as oil evaporated, especially in summer, the worker was subject to great danger and his work was sometimes unbearable.

In order to ensure more successful development for the oil extracting and processing industries, it was necessary to solve the problems of delivering crude oil from the oil fields to refineries and to facilitate their sale.

At the initial stage of the development of Baku’s oil industry, crude oil was delivered from fields to consumers in a most primitive way – in waterskins and barrels loaded on special carts or camels and then in barrels with a capacity of 20 poods. Every cart carried up to 25 poods of oil. Tens of thousands of carts plied the poorly-maintained roads, delivering oil to the refineries. The fee for delivering crude oil, even for short distances, was several times greater than the cost of the oil. Delivery could only take place in good weather because the cart-owners refused to transport oil when there were strong winds or rain, thus depriving the oil refineries of their raw material. At times, the delivery cost of one pood of crude oil reached 7-10 kopecks.

Oil was extracted from wells with the help of horses

“The transportation of one pood of oil from the fields to the Black City , at a distance of 12 versts, cost at least five kopecks. Since three poods of oil were used in the production of one pood of kerosene, transport expenses raised the cost of one pood of kerosene by 15 kopecks, and this accounted for 30 per cent of its cost when the price of kerosene was 45-50 kopecks,” K. I. Lisenko reported.

The construction of oil refineries near oil fields following the example of the entrepreneurs Kokorev and Mirzoyev, who built their factories in Surakhani, was not possible for two main reasons: firstly, they occupied areas that could be used for drilling new oil wells and did not solve the problem of delivering the finished product to the consumer. Furthermore, the government authorized the construction of factories only in the so-called Black City.

Some time later, the Nobel Brothers Petroleum Company carried out the following survey of local communication lines : “Oil fields were concentrated at a distance of 15-16 versts from Baku and 10 versts from the sea front, whereas the oil refineries were located along the Bay of Baku, at a distance of two of three versts from the city. The fields were separated from the refineries by an area that had no vegetation at all and was totally covered with sand which was blown from one place to the other by the strong winds that dominated the area in summer. The area was bisected by earth roads that had never been repaired and had been used by thousands of two-wheeled carts pulled by just one horse.” Then the survey said: “The Absheron peninsula, due to the lack of water and its bad vegetation, is not really fit for keeping large herds of draft animals. Transportation itself was not uninterrupted and depended on the climate because oil delivery stopped in bad weather. Factory owners also suffered a lot from constant strikes by cart-owners. In these conditions, the factory owners had no chance to take on urgent orders. Due to their complete lack of control over the situation, they often had to stop oil processing and the workers had to sit idle, waiting for the raw material.”

Thus, primitive oil transportation from the fields was a significant obstacle to the development of the oil industry. Naturally, such oil delivery to consumers was quite expensive and increased the cost price of oil, and this had a negative impact on the end product.

Cheap delivery of the crude oil in tanks to factories and major warehouses was essential to secure major development of the oil industry. In this connection, the Nobel Brothers Petroleum Company initiated construction of semi-deep and deep oil tanks.

Initially, the oil reservoirs which remained from the time of the khans were used to keep oil. These oil reservoirs, in the form of underground stone buildings, were built not just in areas where oil was extracted. Lerche mentions three such oil reservoirs near Baku and 15 in the Bayil and Bibi-Heybat area.

The local population had been familiar with the construction of underground oil reservoirs since the 16th and 17th centuries. They built underground warehouses using a substance based on white lime and plastered them from the inside with a cement solution prepared according to ancient recipes. The cement was made from lime and a mixture of ashes and camel and donkey dung, vine syrup, eggs and goat’s wool. The roofs of the warehouses looked like domes and were covered with a coating of kir, which was quite abundant in Baku.

A report to the State Expedition of the Supreme Georgian Government, dated 18 January 1825, says:

“There are 82 state-owned wells in the village of Balakhani. The construction of all the wells is good.

The wells which constructed of stone are:

1. Ambar; 2. Kiomenter; 3. Kiomenter; 4. Hasan-Ali; 5. Sharapani; 6. Puskanachal; 7. Urusi; 8. Gabli; 9 Abol; 10. Daryagi; 11. Daryagi; 12. Gala-Galafim; 13. Bichagi.

The wells constructed of wood are:

1. Petrusi; 2. Saoage; 3. Ali-Beyi; 4. Gadoni-Zurabi; 5. Marzagi; 6. Gazi ; 7. Chambu; 8. Shah-Safi; 9. Kabli-Huseyn; 10. Kioment Gala; 11. Agan; 12. Galosvakhana; 13. Gaydari; 14. Irzaguli; 15. Khanami; 16. Petrusi; 17. Sovzachal; 18 Shah-Safi.

The remaining 51 wells are constructed of stone on top and wood at the bottom.

There are 12 stone cellars to keep oil in the village of Balakhani.

There are eleven useable wells.

There is one damaged well.

Note: This cellar is divided by partitions into four small cellars that are linked by means of small holes. The dome of one of these small cellars has collapsed.

In the Balakhani cellars there are 4,898 halvars of black oil left from Mr Tarumov. Namely:

In the Khalafi cellar – 655 halvars

In the Zabrat cellar – 498 halvars

In the Agadoni cellar – 340 halvars

In the Agayi cellar – 80 halvars

In the Agayi Kchi Dazgi cellar - 276 halvars

In the Chambu cellar – 85 halvars

In the three cellars near the Agayi well – 2,964 halvars

Note: Each of these three cellars is divided by partitions into four small cellars which are interconnected.

There are five state-owned wells of black oil in the village of Binagadi.

The construction of all wells is good and they are made of stone.

In the village of Bagche and Shubani there are no wells. Black oil is extracted from small holes here.

There are 16 cellars to keep black oil in Baku Castle: nine of them are good and seven are damaged.

Note: These cellars have no visible damage, but oil is leaking from small holes in the walls.

Mr Tarumov has 220 halvars of black oil in these cellars.

Mr Tarumov has 90 poods of white oil in Baku Castle.

Note: The white oil is kept in clay jugs dug into the ground in two small stone constructions near Baku Castle.”

The growing demand for oil in the second half of the 19th century and even greater demand for it in the early 20th century led to a global oil “boom”. For example, by the beginning of the 20th century the main oil-rich lands in Sabunchu, Surakhani, Balakhani, Binagadi, Zabrat and Ramana were divided mainly between the oil companies and private individuals operating them.

This third stage in the exploitation of oil sites, which began at the end of the 20th century, changed the appearance of the oil fields. During the three technical stages in the development of these sites, most of the oil extraction structures from the Middle Ages to the early 20th century were destroyed.

However, oil wells dating from the second half of the 19th century and the early 20th century remain intact on the territory of Balakhani, two kilometres southeast of the village, and oil can still be found there. The diameter of the wells is 80 centimetres. They consist of metal pipes with riveted rings. Most of these wells/pipes are strengthened with masonry. They are densely located in the area. The mouths of three manual wells have been found at this site. The wells are both round and square. Wooden fasteners, consisting of vertical boards and horizontal round bars, still remain intact. Around the wells, reinforcing logs and the stonework that serve as a basis for strengthening the gate also remain intact. This construction and method of fastening, which are described by various sources in detail, can clearly be seen at these wells.

In the village of Balakhani, underground oil reservoirs made of stone also remain intact. They are rectangular in shape, with arches on both sides and steps leading to the bottom. The walls are plastered with white lime. Along the centre of the arched openings, there are drainage holes for the oil.

The oil reservoirs cover a territory of about one hectare. There are 16 underground constructions here. Remains of tiling, ceramic pipes and stone oil pipelines show that this unique complex dates from the 14th-18th centuries. It is notable that underground depots were also built at this site in the 19th century. These oil warehouses and reservoirs were first described by Kaempfer, and were confirmed by other sources.

The stone arch of an underground oil depot

This type of oil reservoir construction was used by the Nobel Brothers Petroleum Company to store crude oil and oil residue. In order to store oil products, the Nobel Brothers Petroleum Company built oil tanks with iron rivets and a conical roof.

Underground (a) and overground (b) oil reservoirs in Balakhani

Near the stone oil reservoirs, metal reservoirs of the early 20th century remain intact and, according to available archive documents, they belonged to the Nobel Brothers Petroleum Company. On the basis of interviews with the local population, it was established that the stone oil reservoirs were restored and strengthened not just in the 19th century,