Baku Oil Industry Development from the Late 19th to the Early 20th Centuries

After the death of Hovhannes Mirzoian (1885), his widow Daria and her sons, Muscovite traders Grigor and Melkon, and also daughter Maria founded the oil production and trading partnership “Brothers Mirzoyev and KO” with a fixed capital of 2,1 million rubles.

Being representatives of the aristocratic elite of Tiflis, the Mirzoian family wisely transferred the affairs of the company to the professionals of the oil business.

The chairman of the partnership was B. Ghorganian, directors were D. Gharazian, M. Dolukhanian, H. Garsoian, T. Enfiadjiants, thanks to whom “Brothers Mirzoev and KO” became one of the most stable and successful oil companies in the region, extracting about 240 thousand tons of oil annually.

The company owned oil fields in Balakhani and Sabunchi, factory buildings in Surakhani, an oil pipeline in Balakhani, a kerosene and lubricant oil factory in Baku, numerous workshops, a chemical laboratory, a pier on the coast of the Caspian Sea, 4 sailing vessels (“Moscow”, “Arseniy”, “Prussia”, “San-Dadash”), production areas in Batumi, and warehouses of petroleum products in Moscow, Tsaritsyn, and Nizhny Novgorod. “Brothers Mirzoev and KO” remained one of the most successful companies owned by Armenians until the tragedy of 1918.

Now, let’s turn again to 1872 and ask ourselves the question: did the Azerbaijanis participate in the auction of oil fields? Yes, two of them did. The first one, Selimkhanov, paid 3,000 rubles for a plot with a starting price of 1 ruble, with which he would not play any role in the oil industry. The second of them, Haji Zeynal-Abdin Tagiyev, is worthy of more in-depth coverage.

During the entire pre-revolutionary period, there have been three relatively large Azerbaijani oil owners (the other two were Musa Nagiyev and Shamsi Asadullayev), but Tagiyev was the only one who, after learning from the Armenians, became a trustee of a number of Muslim schools and built the Baku Theater building.

The appearance of Tagiyev in the business was an oddity. He was a craftsman and a bricklayer. For unknown reasons, he became a companion of brothers Baghdasar and Poghos Sarkisians. They paid him 14,961 rubles and became co-owners of 20 his plots.

In 1882, they took part in the All-Russian Industrial Art Exhibition held in Moscow and were awarded a bronze medal for their kerosene production. After that, the names of the Sarkisian brothers were hardly mentioned in the oil business. It’s only known that Poghos Sarkisian would become a member of the Baku City Council and serve in the board of trustees of the Armenian two-year school of Baku.

His wife Elizabeth, being a fiery supporter of the ideas of “Mshak”, one of the best periodicals in the history of the Armenian media, named the ship they owned “Grigor Artsruni” in honor of the editor-in-chief of the periodical.

Ironically, the Bolsheviks expropriated this ship in 1921 and transferred it to the state oil company “Azneft.” The business of Tagiyev himself had a funny ending, but more on that later.

So, from January 1, 1873, In the oil industry of Baku, the first owners have appeared who could at their own discretion control their oil, sell and lend plots, enter into various deals, establish joint-stock companies, etc. This privatization has caused not only the “oil rush” but served as an impetus for large financial investments, rapid population growth, and the rapid development of the city.

While 1813-1873 was the period of origin and the formation of the oil industry, 1873-1899 became the era of gigantic progress, which marked the tendencies of the development of geopolitical interests and interethnic relations that were acquiring the character of historical legality. Those trends intensified with every ton of extracted, refined, and exported oil.

4,000 tons of oil was produced annually in 1850, 5,440 tons in 1863, 24,000 tons in 1872, and 6,2 million tons in 1896. In 1862, 13,392 people lived in Baku and 15,604 in 1873. In 1886, 37,530 Muslims lived in the city, as well as 24,490 Armenians, 21,390 Russians. In 1897, the numbers were 46,255 Muslims, 19,099 Armenians, and 38,965 Russians.

Privatization created a situation that gave economic freedom and guaranteed stable high returns from investments. This not only caused the inflow of financial investments from the entirety of Transcaucasia and Russia into the oil industry but also allowed Baku to become the residence of representatives of various nations. As a result, the city became multinational.

Prospects for the oil industry were noticed by the largest representatives of the Russian capital of that time, especially the Swedish-Russian Nobel brothers. They would create more than 30 industrial enterprises in Russia. In 1875, they acquired a small kerosene plant and oil fields in Baku. With European thoroughness, they would then conduct preparatory works for 4 years.

In 1879, the Nobel brothers established a huge modern complex for the extraction, refinement, and export of oil. With its numerous auxiliary infrastructures, the complex by its economic indicators occupied a leading spot in the oil industry of Baku… Until Stepan Lianosian appeared.

In 1877, the Russian government took a new radical and economically viable step: the oil industry was exempt from the excise tax, as a result of which the price of oil decreased about three times. And in 1883, American oil was completely pushed out of the Russian market. The world was “divided” between the two oil-producing countries – the United States and Russia (that is, Baku).

As rightly noted in one of the sources: “None of the branches of the Russian industry played such a significant role in the world capitalist economy as the oil industry did. Right up to the beginning of the 20th century, the Baku region has been one of the two main centers of world oil production (along with the oil regions of the United States).”

This division further had the most serious military-political and economic consequences.

An excerpt from the book of Khachatur Dadayan “Armenians of Baku”
Read also: “Armenians and Baku” by Khachatur Dadayan, The Term “Azerbaijani” Did Not Exist Before 1918, Armenians in the Period of the Russian Expansion in Transcaucasia, The Role of Armenians in the Development of the Baku Oil Industry, Armenian Oilmen During the Governmental Lease Program of Oil Fields in Baku – 1872