In 1813 – 1825, the extraction of oil and salt in Transcaucasia was leased to third-party companies, bringing the treasury an annual income of 130 thousand rubles (77% of oil, 23% of salt). It should be noted that at that time, oil had no industrial value. Instead, it was used for lighting, lubrication of skin and wheels, and for the treatment of livestock from skin diseases.
The first attempt at refining oil dates back to 1823 when the Dubinin brothers, the serfs of the Countess Panina from the Vladimir region, established the production for “turning black oil into white” in Mozdok, North Ossetia. The resulting “coal oil” would then be exported to Moscow and Nizhny Novgorod, but it wouldn’t attract any attention.
In 1825, the government began to independently manage the oil fields but failed, and revenues fell to 76 thousand rubles. The following year, the state abandoned its monopoly and leased the oil lands to Azerbaijanis.
In 1826-1832, the income received by local residents was so miserable that the government again took up oil production on its own but again failed. The average income from oil wells and salt copies was 100 thousand rubles, which forced Russia to completely abandon its own oil production and move to a contract system.
In 1850-1854, the largest oil contractors were the Tiflis merchants Kukuja-Nyan, Babanasian, and General Ter-Ghukasian, who all paid around 110 thousand rubles in annual rent. In 1854-1863, Ter-Ghukasian was the largest oil contractor with a rent 117 thousand rubles. In 1863-1867, Hovhannes Mirzoian took the lead with 162 thousand rubles. In 1867-1873, it was again Mirzoian, but with a rent of just 136 thousand rubles.
This step of the Armenian capitalists deserves special attention. According to official data, in 1846, the entirety of trade relations between Russia and the Transcaucasia was managed by Armenians. The turnover of this trade amounted to 5,534,600 rubles.
The lease of Baku oil lands from 1850 testified that the representatives of the Armenian commercial capital who had become rich from various contracts were trying to find new areas for investment. They prudently changed their orientation and switched to the still infant oil industry which they themselves would have to develop. Their efforts would become an indirect cause of the coming Armenian tragedy.
Oil was obtained from wells, funnel-shaped pits 25-30 meters deep. The oil came out with the water but, being lighter, floated to the surface. The oil was collected, poured into waterskins, and transported on ox-pulled carts, donkeys, or camels.
There were cases when oil mixed with gas burst out of the ground, immediately enriching the land plot owner. In 1877, such a fountain occurred from a well owned by H. Mirzoyan, and, surprisingly, the fountain would not dry out in the following 7 years.
The acquired petroleum – basically unprocessed oil – had a very narrow scope of application. Petroleum required processing, which was for the first time attempted by Russian entrepreneur Kokorev. In 1857 in Suraxani, Azerbaijan, he founded a processing plant. And in 1863, the factory produced its first kerosene.
Armenians immediately followed his example. In 1862, a kerosene plant was founded by A. Vermishian, in 1863 by G. Melikian, in 1865 by Tatosian, in 1869 by Ter-Hakobian and Sharabandian, in 1870 by Kalantarian, and in 1871 by Dildarian and Taraian. Thus, the oil industry was founded in the literal sense of the word.
What was Baku like at the time? In 1851, Russian researcher Kozma Spassky-Avtomonov wrote about his impressions of Baku: “The city consists of extremely curved narrow lanes which you can only pass through on foot or on horseback with difficulty. The squares are small and irregular, the bazaar street is also narrow, and the shops are badly arranged.
In the fortress and the suburbs, there are 1992 houses, 505 shops, 23 streets, 3 squares, and 2 bridges. There are no factories, no commercial establishments. There are 294 local merchants. 75 of them are ship-owners, 67 are sellers of factory and manufactory produce, 28 are non-resident traders, 2 are Persian entrepreneurs. 231 traders are from other cities.”
This provincial town of the Caspian province founded in the 6th century by the Shah of Persia Anushiruwān became the administrative center of the Baku province – which was also founded in the 6th century – on November 6, 1859.
The petroleum industry began to develop, fueling the soon-to-be gravediggers of Armenians.
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