ADR's oil policy and our today (1918-1920)

At the beginning of the century (1918-1920), the Azerbaijan Democratic Republic (ADR) not only gave us the values of the republic as a nation. At the same time, they presented a small-time opportunity for history to look through large economic windows. The ADR was newly established at that time. Economic relations were weak. But if we go even before the establishment of the republic, we can more accurately assess the work done in the oil sector.

In 1903, at the initiative of H. Z. Taghiyev, an agreement was signed with the participation of shipowners Bunyadov, Ashurov, Manafov, Useynov, and others, and a syndicate called the Union of Fuelling Schooners was established. The Nobel Brothers and the Mazut Union also joined them. In the early years of the ADR, certain steps were taken to conclude economic agreements and trade contracts with foreign companies, especially British, Italian, and American companies, in connection with the sale of oil and oil products. In the early years, Russia and in the following years, European countries became the main buyer of Azerbaijan's oil production.

As we know, at the end of the 19th century and the beginning of the 20th century, oil production in Baku increased even more. In 1901, Baku supplied more than half of the world's oil (667.1 million poods). (1) Tsarist Russia could not digest the loss of the "fat piece" like Azerbaijan, which came out of the sphere of its influence. One of the most important problems in the oil industry at that time was the difficulties in oil refining. As a result of the wreckage, there was a big discrepancy between oil production and refining. The total capacity of many oil refineries in Azerbaijan was 0.5 million tons. Since in 1918, the volume of oil refining in Azerbaijan fell to about 200,000 tons, oil was exported mainly in the form of raw materials. During this period, companies operating in the oil industry of Baku merged into several transnational corporations. The Nobel brothers were involved in oil refining, chemistry, and oil exports. Oil production, refining, and export were carried out by a Russian oil company. The Anglo-Dutch company Shell Trust engaged in oil production and equipment of oil refineries. More than 10 foreign companies participating in the Finance and Oil Corporation financed the development of the oil and oil refining industry. (2) The share of Azerbaijani capital in the oil refining industry was growing.

The biggest threat to the newly independent ADR was again coming from our northern neighbor. As a result of the revolution in Russia, which does not hide its hatred for an independent nation, the export of Azerbaijani oil has significantly decreased. As a result of the closure of the northern market, only 600,000 tons of the 3.6 million tons of oil produced in 1919 were exported. Oil shipments to Europe became possible only in March 1919 after the restoration of the 500-kilometer Baku-Batumi oil pipeline, which could transport 3 million tons of oil, as well as the acceleration of the construction of the Baku-Julfa railway. (3) The newly independent ADR was able to produce a total of 9.36 million tons of oil in 1918-1920. “During the existence of the democratic republic, in 1918, 185.6 poods (2.96 million tons) of oil was extracted from 3,287 fields, in 1919, 225.1 poods (3.6 million tons) of oil from 2,066 fields, and in 1920, 175.1 poods (2.8 million tons) of oil from 2,037 fields.” (4)

A century later, Azerbaijan's oil production fluctuated between 38-43 million tons per year. So, the production of 9.4 million tons of oil achieved during the 23 months of independence at the beginning of the century is at the level of 3-4 months of oil production in modern Azerbaijan. The increase in oil exports has given impetus to the development of all industries in our country.   Clean representatives of a national government, who also laid the foundations for 23 months of economic independence, were later strengthened by oil revenues.

The share of the oil sector in the state budget in the ADR’s time - 62%

In 1918, just after independence, the oil sector accounted for 62 percent of the ADR's state budget revenues. At that time, specifically in 1919, the state budget of Azerbaijan was 665 million manats. Most parts of it increased due to oil sales and taxes on this income. For those years, this figure was 30%. Another source of budget revenue was excise taxes on wine, tobacco, and, of course, oil. (5) During the 30 years of independence of the present-day Republic of Azerbaijan, even after earning $ 135 billion from oil production, it has not been able to reduce its share in the state budget. Over the past five years, 73 percent of our budget revenues came from the oil sector. At present (2020), this figure is 63%. For a country with a century of independence, the dependence on oil was lower at the beginning of the century than it is now. It is a shame that after a century of difference when we compare our oil production with the current volume, our share in budget revenues, which is 7-8 times higher, has become even more dependent than at that time.

We must change the dependence of the budget on oil. Because oil is not a guarantee of independence. But the guarantee that oil belongs to us is our independence. Let's not forget that!

Sources:

• National Encyclopedia of Azerbaijan, Volume 3, Baku, 2011, p. 55-56
• Siyavush Garayev (academician), “Transport Law”, 2008, p. 125-129
• https://az.wikipedia.org/wiki/Azərbaycan_Xalq_Cümhuriyyəti
• https://az.wikipedia.org/wiki/Azərbaycan_Xalq_Cümhuriyyəti
• https://az.wikipedia.org/wiki/Azərbaycan_Xalq_Cümhuriyyəti