{"id":12427,"date":"2020-06-05T14:33:23","date_gmt":"2020-06-05T14:33:23","guid":{"rendered":"https:\/\/blogs.transparent.com\/russian\/?p=12427"},"modified":"2020-07-08T03:41:07","modified_gmt":"2020-07-08T03:41:07","slug":"20-years-of-attempting-to-diversify-the-russian-economy-part-ii","status":"publish","type":"post","link":"https:\/\/blogs.transparent.com\/russian\/20-years-of-attempting-to-diversify-the-russian-economy-part-ii\/","title":{"rendered":"20 Years of Attempting to Diversify the Russian Economy \u2013 Part II"},"content":{"rendered":"

\u201cRobert has returned to Baku from the east coast of the Caspian sea<\/a><\/span><\/em>. He has found excellent naphtha at a depth of 70 feet on Cheleken<\/a>. Now he has the raw material…”\u00a0 \u00a0 \u00a0 \u00a0<\/em> \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0A quotation from a letter of Ludvig Nobel to his brother Alfred Nobel on October 31, 1875<\/span><\/p>\n

Last time,<\/a> we pointed out that Russia wanted to get rid of the oil and gas export dependency; looked at the beginning of the petroleum industry in Russia. Today, we will glance at some other major events in oil history.<\/p>\n

\"\"

Image by Rustam Bikbov from Flickr<\/a> ,\u00a030 \u043b\u0435\u0442 \u0434\u0435\u044f\u0442\u0435\u043b\u044c\u043d\u043e\u0441\u0442\u0438 \u0422\u043e\u0432\u0430\u0440\u0438\u0449\u0435\u0441\u0442\u0432\u0430 \u043d\u0435\u0444\u0442\u044f\u043d\u043e\u0433\u043e \u043f\u0440\u043e\u0438\u0437\u0432\u043e\u0434\u0441\u0442\u0432\u0430 \u0431\u0440\u0430\u0442\u044c\u0435\u0432 \u041d\u043e\u0431\u0435\u043b\u044c 1879-1909<\/a><\/p><\/div>\n

 <\/p>\n

Golden Gold and Black Gold<\/h2>\n
\"Gold\"

Image by James St. John Flickr<\/a><\/p><\/div>\n

Mikhail Sidorov1<\/a><\/sup>A researcher of the Russian North since 1859, gold miner, entrepreneur, merchant, writer, zoologist<\/span> was a Siberian goldmine<\/em> (\u0437\u043e\u043b\u043e\u0442\u043e\u0301<\/span>\u0439 \u043f\u0440\u0438\u0438\u0301<\/span>\u0441\u043a<\/em>) owner, who discovered over 200 deposits of gold<\/em> (\u0437\u043e\u0301<\/span>\u043b\u043e\u0442\u043e) <\/em>in the Siberian taiga<\/a>2<\/a><\/sup>A very large biogeographic region covered much of\u00a0Russia<\/a>\u00a0from\u00a0Karelia<\/a>\u00a0in the west to the\u00a0Pacific Ocean<\/a>\u00a0(including much of\u00a0Siberia<\/a>). Russian taiga has spruces, pines and larches depending on the region, while the\u00a0Eastern Siberian taiga<\/a> is a vast larch forest<\/span>.<\/span>\u00a0<\/span>In 1860, he found numerous placer gold deposits. Soon the residents reported that they found natural oil streams<\/em> (\u043f\u043e\u0442\u043e\u0301<\/span>\u043a\u0438<\/em>) on the Ukhta riverbanks. Large-scale oil prospecting in the resource-rich<\/em> (\u0431\u043e\u0433\u0430\u0301<\/span>\u0442\u044b\u0439 \u0440\u0435\u0441\u0443\u0301<\/span>\u0440\u0441\u0430\u043c\u0438<\/em>) Ukhta <\/span>began only in 1868. In 10 years, he arranged the oil industry there. But after he suddenly passed away in 1887, all work was halted. Geologists returned there only 40 years later. Today, the only place of oil and gas extraction using the underground mining<\/em> (\u043f\u043e\u0434\u0437\u0435\u0301<\/span>\u043c\u043d\u0430\u044f \u0440\u0430\u0437\u0440\u0430\u0431\u043e\u0301<\/span>\u0442\u043a\u0430<\/em>) method is located next to Sidorov’s well in the Timan-Pechora Basin3<\/a><\/sup>Between Timan Ridge<\/a> and the Ural Mountains<\/a> in northern Russia<\/span>, which contains 180 oil and gas deposits.<\/span><\/p>\n

<\/h2>\n

Siemens<\/h2>\n
\"Siemens\"

Image by Flying Puffin Flickr<\/a><\/p><\/div>\n

In the 60-70s of the 19th century, the famous German electrical company Siemens & Halske was one of the major investors<\/em> (\u0438\u043d\u0432\u0435\u0301<\/span><\/span>\u0441\u0442\u043e\u0440\u044b<\/em>) in the Russian oil industry. Three brothers Werner, Carl, and Otto Siemens4<\/a><\/sup>A family of German technology and telecommunications industrialists, founders, and today, largest shareholders (of Siemens AG<\/span> leased<\/em> (\u0430\u0440\u0435\u043d\u0434\u043e\u0432\u0430\u0301<\/span><\/span><\/span>\u043b\u0438<\/em>) Mirzan, Shirak, and Eldar oil wells in Georgia5<\/a><\/sup>A country in the Caucasus region of Eurasia, was a part of Russia<\/span>, where they built a new oil refinery. Otto Siemens initiated asphalt<\/em> (\u0430\u0441\u0444\u0430\u0301<\/span><\/span><\/span>\u043b\u044c<\/em>\u0442) paving in the Caucasus.<\/p>\n

 <\/p>\n

<\/h2>\n

Nobel Brothers<\/h2>\n
\"Nobel_Prize_Medal\"

Image by Adam Baker Flickr<\/a><\/p><\/div>\n

The decisive role in the oil industry of Baku belonged to the family of Swedish industrialists<\/em> (\u043f\u0440\u043e\u043c\u044b\u0301<\/span><\/span>\u0448\u043b\u0435\u043d\u043d\u0438\u043a\u0438<\/em>) Nobel<\/a>. Three brothers Robert6<\/a><\/sup>A businessman, industrialist and investor<\/span>, Ludvig7<\/a><\/sup>An engineer, businessman, one of the world’s richest men<\/span>, and Alfred8<\/a><\/sup>A Swedish chemist, engineer, inventor, businessman, philanthropist. The inventor of dynamite, instituted the Nobel Prize<\/a><\/span> Nobel made a significant contribution to the Russian oil history. Together, they founded The Petroleum Production Company Nobel Brothers, Limited, or Branobel<\/a> in 1879, which at one point produced\u00a050% of the world’s oil. Robert started the business<\/em> (\u0431\u0438\u0301<\/span>\u0437\u043d\u0435\u0441<\/em>). After analyzing the production (\u043f\u0440\u043e\u0438\u0437\u0432\u043e\u0301<\/span>\u0434\u0441\u0442\u0432\u043e)<\/em>, transit<\/em> (\u0442\u0440\u0430\u043d\u0437\u0438\u0301<\/span>\u0442<\/em>), transportation<\/em> (\u0442\u0440\u0430\u043d\u0441\u043f\u043e\u0440\u0442\u0438\u0440\u043e\u0301<\/span>\u0432\u043a\u0430<\/em>), storage<\/em> (\u0445\u0440\u0430\u043d\u0435\u0301<\/span><\/span>\u043d\u0438\u0435<\/em>), and marketing<\/em> (\u043c\u0430\u0301<\/span><\/span><\/span>\u0440\u043a\u0435\u0442\u0438\u043d\u0433<\/em>), Ludvig began the engineering<\/em> (\u043f\u0440\u043e\u0435\u043a\u0442\u0438\u0301<\/span>\u0440\u043e\u0432\u0430\u043d\u0438\u0435<\/em>) process. Alfred Nobel, the famous scientist<\/em> (\u0443\u0447\u0451\u043d\u044b\u0439<\/em>), helped financially (\u0444\u0438\u043d\u0430\u0301<\/span><\/span>\u043d\u0441\u043e\u0432\u043e)<\/em>. Branobel created its own transportation and distribution<\/em> (\u0440\u0430\u0441\u043f\u0440\u0435\u0434\u0435\u043b\u0435\u0301<\/span><\/span>\u043d\u0438\u0435<\/em>) network, including oil pipelines<\/em> (\u0442\u0440\u0443\u0431\u043e\u043f\u0440\u043e\u0432\u043e\u0301<\/span>\u0434\u044b<\/em>), oil terminals (\u0442\u0435\u0440\u043c\u0438\u043d\u0430\u0301<\/span><\/span><\/span>\u043b\u044b) <\/em>and railway lines (\u0436\u0435\u043b\u0435\u0437\u043d\u043e\u0434\u043e\u0440\u043e\u0301<\/span>\u0436\u043d\u044b\u0435 \u043b\u0438\u0301<\/span>\u043d\u0438\u0438)<\/em>.<\/p>\n

The Rothschilds<\/h2>\n
\"Waddesdon_Manor\"

Image by Keith Dixon Flickr<\/a><\/p><\/div>\n

In 1883, the Transcaucasian Railway9<\/a><\/sup>The first railway in South Caucasus<\/span> was opened. It connected the Baku oil region with the Black Sea<\/a> port of Batumi10<\/a><\/sup>Currently, the capital of the Autonomous Republic of Adjara<\/a> and the second-largest city of Georgia<\/span>. Russian oil now reached the world market. Many foreign investors started to present essential interest toward it. Russia started selling (\u043f\u0440\u043e\u0434\u0430\u0301<\/span><\/span>\u0436\u0430)<\/em> oil bonds (\u043e\u0431\u043b\u0438\u0433\u0430\u0301<\/span><\/span>\u0446\u0438\u0438)<\/em>. Soon, almost all of these bonds were consolidated in the Paris banking house of the Rothschild family11<\/a><\/sup>The most famous of all European banking dynasties, which for 200 years exerted great influence on the economic and, indirectly, the political history of Europe<\/span>, led by the legendary financier (\u0444\u0438\u043d\u0430\u043d\u0441\u0438\u0301<\/span>\u0441\u0442)<\/em> Alphonse James de Rothschild12<\/a><\/sup>A French financier, vineyard owner, art collector, philanthropist, racehorse owner\/breeder, and a member of the Rothschild banking family of France<\/span>.<\/p>\n

\"Shell_Logo\"

Image by Open Grid Scheduler \/ Grid Engine Flickr<\/a><\/p><\/div>\n

In a short time, Rothschild’s company became the leader (\u043b\u0438\u0301<\/span>\u0434\u0435\u0440)<\/em> in oil exports from Russia. In 1889, they had 59% of Russian kerosene exports. The Rothschilds dominated the Russian market, while the Nobels were the more efficient producers. Two corporations merged. In fact, it was a collusion. A new company, named Nobmazut appeared in 1903. This resulted in a high increase in the cartel’s share (\u0434\u043e\u0301<\/span>\u043b\u044f)<\/em> in petroleum product sales. But in 1912, the Rothschilds sold their shares to Royal Dutch Shell, better known as Shell, one of the largest oil and gas companies.<\/p>\n

\u00a0Wars and Revolutions<\/h2>\n

At the beginning of the 20th century, Russia faced wars and revolutions, which were inevitably characterized by an extremely negative effect on the oil and gas industry.<\/p>\n

One of the first steps of the Soviet government in overcoming the crisis (\u043a\u0440\u0438\u0301<\/span>\u0437\u0438\u0441)<\/em> was the nationalization (\u043d\u0430\u0446\u0438\u043e\u043d\u0430\u043b\u0438\u0437\u0430\u0301<\/span><\/span>\u0446\u0438\u044f)<\/em> of industrial enterprises (\u043f\u0440\u043e\u043c\u044b\u0301<\/span>\u0448\u043b\u0435\u043d\u043d\u044b\u0435 \u043f\u0440\u0435\u0434\u043f\u0440\u0438\u044f\u0301<\/span>\u0442\u0438\u044f)<\/em>. All oil-producing and refining companies, warehouses (\u0441\u043a\u043b\u0430\u0434\u044b\u0301<\/span>)<\/em>, transportation facilities were declared government-owned property. In 1918, the oil sector was monopolized (\u043c\u043e\u043d\u043e\u043f\u043e\u043b\u0438\u0437\u0438\u0301<\/span>\u0440\u043e\u0432\u0430\u043d)<\/em>.<\/p>\n

\"Oil

Image by Jordan Green Flickr<\/a><\/p><\/div>\n

The country\u2019s economy was in ruins in the post-revolutionary period as well. Even the nationalized oil giants could not produce the necessary economic results; productivity steadily fell. On November 1, 1919, only 204,000 barrels of oil remained in Soviet Russia. It wasn’t until 1920 that the quantity of crude supplied from Baku increased.<\/p>\n

In the period of 1920-1930, Soviet Russia (RSFSR – Russian Soviet Federative Socialist Republic<\/a>) was engaged in the recovery of the oil industry.<\/p>\n

However, by the time that restoration was complete, and the country had formally adopted the name Union of Soviet Socialist Republics,\u00a0World War II<\/a> began.\u00a0<\/span>Without oil, it would have been impossible to confront a technically equipped (\u0442\u0435\u0445\u043d\u0438\u0301<\/span>\u0447\u0435\u0441\u043a\u0438 \u043e\u0441\u043d\u0430\u0449\u0451\u043d\u043d\u044b\u0439)<\/em> fascist army. From the outset of the war, one of the military’s strategic missions was to protect the oil wells. The entire industry of the USSR was rebuilt in a military fashion, and the oil industry played a decisive role in it.<\/p>\n

We will continue this discussion in the next part<\/a>.<\/p>\n