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Nobel Brothers and the Capitalist Oil Boom in Pre-Communist Russia
Russia’s Caucasus was the site of a frenzied oil boom for almost a half-century (1873-1920) before the Bolshevik communists captured Azerbaijan, confiscated all oil wells and refining factories, as oil barons fled the region. The primary entrepreneurs who led and sustained the oil boom were two Swedish brothers named Robert Nobel (1829-1896) and Ludwig Nobel (1831-1888), sons of the underwater mine warfare inventor Immanuel Nobel (1801-1872), and brothers of Alfred Nobel (1833-1896), dynamite inventor and funder of the Nobel prizes. 
Map showing Azerbaijan. Source: http://upload.wikimedia.org/wikipedia/commons/5/50/Europe_location_AZN2.png; accessed December 3, 2007.
Volga River drainage system. Source: http://cabri-volga.org/img/cabri_map_599.gif; accessed December 3, 2007.
Robert Nobel Discovers Baku, Azerbaijan 1873 Ludwig Nobel, a successful inventor and brilliant entrepreneur-manager, built up a great gun factory in St. Petersburg, the capital of Russia. He obtained a valuable government contract to manufacture 9.5 pound “Berdanka” infantry rifles, a Russian variant of the Remington, invented by American firearms expert and inventor Hiram Berdan in 1868, and standard issue for the Russian army from 1869-1891. Ludwig needed high quality wood for the rifle butts, and dispatched his older brother Robert in March 1873 south to the Caucasus to search for the best walnut trees that supposedly grew there. (1-3) To reach the Caucasus, Robert chose the fastest way. He traveled down the Volga River to Tsaritsyn (later Stalingrad, now Volgograd) and then to Astrakhan in the Volga delta on the Caspian Sea, and finally south on the Caspian Sea by steamer 600 miles to reach the Aspheron Peninsula on whose southern aspect lay dusty, windy, barren Baku. 
Ludwig Nobel. Source:
http://www.azer.com/aiweb/categories/magazine/63_folder/63_photos/63_123.jpg; accessed December 3, 2007. 
Robert Nobel. Source:
http://upload.wikimedia.org/wikipedia/commons/thumb/0/07/Robert_Nobel.jpg/200px-Robert_Nobel.jpg; accessed December 3, 2007. The steamer’s Dutch captain named De Boer and Robert discussed oil about which Robert was familiar from earlier experiences selling kerosene in Russia. (4) In the early 1860s, Russian cities such as St. Petersburg and Moscow had changed the type of fuel used for street, building, telegraph, and railroad and water transport lighting. Instead of oil, they opted for the cleaner, brighter and less expensive kerosene. (5) Robert had been involved in selling lamps and lamp fuels during the 1860s. Captain De Boer and his brother owned several parcels of oil-rich land in Baku and a small refinery, and wanted to sell their holdings. Robert was interested and, upon reaching Baku, visited their holdings, observed the primitive methods of extracting and processing oil, and offered De Boer for his property the 25,000 rubles advanced by brother Ludwig for purchase of walnut wood for manufacture of the Berdanka gun butts. (6) Leasing Oil Rights from the Tsar In 1821, Tsar Alexander I had set up a special franchising system for those who desired to produce and sell petroleum. “The rights to drill and pump petroleum on a specific site were extended on a monopoly basis for four-year periods,” notes Goldman. (7) “However, the lease could be revoked at the end of that time and there were no options for renewal. This precluded most serious exploration and drilling activity and caused the leaseholders to extract as much as they could during the four years of their lease with little or no thought about maximizing the long-run output of the area. This system prevailed until January 1873, when a more efficient public auction system was introduced.” (7) Robert Nobel Improves Petroleum Refining Processes 1873 Ludwig and Alfred, when advised of Robert’s fait accompli, “looked upon the scheme with as much enthusiasm as they had viewed his other projects”, which included fireproof bricks, kerosene, iron, and glycerine. This time, however, Ludwig and Alfred were wrong about Robert’s investment. Robert embraced his newest enterprise with gusto, learning the nature of the refining business as an oil and kerosene producer rather than a salesman. (6) Within a short time, Robert figured out a better way to refine crude oil to produce higher-grade kerosene, which could compete with American kerosene, which Russia imported in vast amounts in the early 1870s to meet domestic demand. (5) The usual way of producing kerosene from crude oil, which workers scooped out of oil seeps and oil pits dug with spades, was to boil the oil in a large cauldron heated by a single boiler until only kerosene remained. (6) Fixated on kerosene in the kerosene age of illumination of the mid-19th century, no one at the time thought of processing other petroleum products from the crude oil. “After extraction of the kerosene, what remained was either burned or allowed to run back into the ground”, notes Tolk. (6) Burning the crude oil in large vats caused the air to choke with sooty, acrid black smoke in the refinery area outside of Baku, which acquired the name “Black Town” (Tchornygorod, or Cherny Gorod). Baku itself acquired the name White Town (Bielygorod) and was where the emerging oil barons built lavish villas such as the Noble family’s estate named “Petrolea”. Using his new refining techniques, Robert built (with money advanced by Ludwig) an all-Swedish-run Robert Nobel Refinery, which was the best of the 140 refineries crammed into Black Town at the time. Swedish chemist Erland Theel, engineer and production chief August Avelin, and machine shop foreman Martin Westvall, were responsible for making unprecedented breakthroughs and “for achieving what in later years would be expected of anyone associated with a Nobel company: being the first, producing the most reliable product, establishing new standards, setting a pace which others had to follow, providing goals and guidelines in all phases of a new industry”. (8) Robert’s refinery for producing kerosene was very successful. In 1863, Russia imported 24,000-40,000 tons of kerosene annually from the U.S., which could ship it less expensively to Petersburg or Moscow or even to Tiflis (capital of Georgia, Caucasus) than the Russian producers could transport their own product (“Baku-sludge” kerosene) from nearby Baku. The arrival to St. Petersburg in 1876 of 300 barrels of Robert’s refined “lamp oil” signaled the end for American kerosene distributors in Russia. “As Nobel production soared and Ludwig entered the arena, American sales [to Russia] steadily declined. By 1883 they [Americans] were completely shut out of the [Russian] market,” notes Tolk. (8) Robert’s kerosene burned with the low level of odor and the high level of intensity that characterized the American product. Robert Nobel Drills for Oil 1876 Once Robert had conquered the refining business, he began to drill for oil in April 1876. Baku by that time had around 70 producing wells and a host of “gushers” (“spouters”, “fountains”), including the first one in June 1873 called the Vermishev fountain. Its owner, the Kahlafi Company, watched the gusher rage completely out of control for four months. “Millions of barrels ran back into the sands but enough was saved to plummet the price of oil from 45 kopecks a pood to a record low of 2 kopeks a pood [a pood is the equivalent of 36.11 pounds]. Vermishev still had enough power two years later to send a nine-foot thick column more than 40 feet into the air.” (9) 
Hand dug oil wells. Source:
http://azer.com/aiweb/categories/magazine/ai102_folder/102_articles/102_oil_chronology.html; accessed December 3, 2007. 
Oil wells near Baku pumping oil into reservoir lakes more than 100 years ago. The ecological disaster still plagues the region. Photo: Azerbaijan National Archives. Source:
http://azer.com/aiweb/categories/magazine/ai102_folder/102_articles/102_oil_chronology.html; accessed December 3, 2007. Among countless other Baku gushers was Kormilitza, “the wet nurse, spotting 600,000 gallons a day for two years and then 60-80 tons a day for the next decade”, and the Orbelov Brothers’ gusher of more than 140,000 tons lost before the well could be capped and the flow reduced to a mere 4,000 tons per day.” (9) Tolk notes, “Visitors from America who were familiar with conditions in the Pennsylvania [oil] fields were stunned by the incredible waste. Watching ton after ton of oil being burned off or allowed to run into lake or sea or into the calcareous soil was a painful experience for those who only had seen wells slowly pumping a few hundred barrels a day.” (9) Ludwig Nobel Moves to Baku 1876 News of the incredible gushers on the Aspheron Peninsula led to the invasion by dozens of entrepreneurs who could not afford to buy a standard land parcel (2.7 acres) but could finance a parcel seven feet square for the going price of 5, 10, and then 15 rubles for ten years’ use. An additional royalty of a fixed percentage of the production went into the tsar’s treasury, as in any good rentier state. (10) In April 1876, Ludwig Nobel and his 17-year-old son Emanuel, later to lead the Nobel interests in Baku, steamed into Baku harbor. Though Robert initiated the Nobel venture in Baku, Ludwig realized its awesome potential. A born capitalist, Ludwig was about to launch a revolution in the Russian Caucasus oil industry. He examined every facet of oil production, which he later organized into four main categories: pipelines, pumps, rail transport, and storage. He noted with concern “the traditional ways of the past and the crippling restrictions of the present” on these aspects of oil production. (11) 
Early view of Baku developing during the Oil Boom, late 1800s. View from Bibi-Heybat region. Photo: Azerbaijan National Archives. Source:
http://azer.com/aiweb/categories/magazine/ai102_folder/102_articles/102_oil_chronology.html; accessed December 3, 2007. 
Camels in Baku. Source:
http://azer.com/aiweb/categories/magazine/ai102_folder/102_articles/102_oil_chronology.html; accessed December 3, 2007. For example, moving the raw crude from wells to refineries in the Black City, a distance of about eight miles of flat terrain, first involved oil in wineskins and later in wooden barrels loaded on carts called arbas usually owned by Tatars. “These two-wheel conveyances had a large barrel suspended in the center and were capable of carrying between 700 and 900 pounds of oil. Horse or mule provided the power, and the payment was the main source of income for thousands of Tatars. Transporting crude from the wells to the refineries was a half-million dollar monopoly, according to Tolk (11). In 1877, a pood of oil in the fields cost 3 kopecks, while its delivery from Balakhan (an oil field on the Aspheron Peninsula) to Cherny Gorod for refining cost up to 20 kopecks. In addition to being expensive, the method was slow and “not always reliable; heat, storms, and Moslem religious observances interrupted the flow of oil. The costs were reflected in the price of the refined product and if that price were to be reduced the arbas would have to go,” explains Tolk. (12-13) Ludwig contacted the other major refiners in the hope of gaining their cooperation and cutting his own costs in building a pipeline. “He knew the project would be expensive and he wanted a united front to argue against Baku town officials who feared massive unemployment of Tatars if by some miracle the pipeline were made to work. However, the other refiners were unwilling to sacrifice any part of their independence or sovereignty over their own holdings. They were jealous of their own power and position, unwilling to join in any cooperative effort, to yield to the initiative of another. Others were simply not interested in any new idea-a lack of enterprise which had harmed and held back the land for so many years. Ludwig proceeded on his own,” notes Tolf. (14) Ludwig Nobel Builds Oil Pipeline 1877 In 1877, Alexander Barry, an American citizen, energetic engineer, and organizer of technical manufacturing in Moscow in a partnership with Tsar Alexander II, opened a construction company in Baku. (15) He joined forces with 25-year-old Russian Vladimir G. Shukhov (1853-1939), at the time a young and promising engineer who had gone to America to study petroleum methods. Barry and Shukhov introduced their ideas on using new technical tools and technologies to Ludwig Nobel. Ludwig identified his key problem: the transportation of crude oil from the fields to the refinery in Cherny Gorod. Ludwig soon contracted with Barry’s construction company to build a pipeline from Balakhany fields to Nobel’s refinery in Cherny Gorod. Its throughput would be 80,000 poods of oil a day. Shukhov purchased American-made pipes for the 6-mile, 76-mm-diameter oil pipeline, because their quality, low price, and short delivery terms were above the competition. (13) Owners of cooperages (barrel-makers), oil transport companies and Tatar carters fiercely resisted building the pipeline. Arson of the building stock in Balakhany, damage to pipes, and various other troubles during the construction induced Ludwig Nobel to resort to route guarding” through construction of eight watchtowers along the length of the line manned by Cossacks, “outbidding the carters, and paying high wages to workers.” (13) Tolf notes that the first pipeline in America at Pithole, Pennsylvania, had provoked a similar reaction from the teamsters, necessitating armed guards to fend off attacks and vandalism. (14) The first Russian oil pipeline, built by Ludwig Nobel, went into operation in 1879, and became the ancestor of the giant network of trunk pipelines that are operating in the region today. It cost $50,000 and was a boon to the Nobel Company. “The freight cost from field to refinery [decreased] from 10 kopecks a pood to a half-kopeck, and for the next few years other refiners were glad to pay the Nobel Company 5 kopecks a pood-later reduced to 1.5 kopecks a pood-for the privilege of using the cost-saving Nobel pipeline”. (14) Ludwig recovered his investment in one year, including the expenses of the Cossacks and the watchtowers. (16) Shukhov published in 1881 Pipelines and Their Use in Oil Industry, which was for many years the major guidebook for pipeline design in the world. Shukhov was the first person to research scientifically the subject of the movement of oil and warmed-up fuel along the pipe, which was the beginning of the field of oil hydraulics. Pipelines on the Aspheron Peninsula almost replaced all other methods of oil transportation. Competitors quickly built their own pipelines. By the turn of the century, however, Ludwig remained the leader with 326 separate pipelines covering close to 70 miles. (16) Some of these pipelines led from the refineries to the Caspian Sea shoreline where refined products in barrels went into the holds of ships. Joseph Stalin Born 1878 in Georgia, Caucasus Iosif Vissarionovich Dzhugashvili, better known by his adopted name, Joseph Stalin, was born in Gori, Georgia, Caucasus, on December 6, 1978. Stalin left the Tbilisi Seminary in Georgia to become an ardent Bolshevik communist who fled to the lawless Baku oil fields across the Caucasus Mountains on June 26, 1907, after masterminding a notorious and bloody bank heist in Tbilisi. In the oil fields of Baku, he would agitate workers and organize radical strikes among the mostly illiterate Muslim Azeri and Persian workers. (17) Indeed Baku in 1907 was the revolutionary capital of the Russian Empire (more below). (18) Ludwig Nobel Designs Ships to Transport Petroleum Products 1878 Ludwig fretted over the wooden barrels and sailing ships used in the 1870s to carry brother Robert’s high-grade kerosene away from Baku to the towns and cities of Russia where a market for the “liquid of illumination” was rapidly growing. A new market was developing for the residual oil left after refining the kerosene, which required large tanks rather than barrels for shipment between harbors. “Ludwig believed that the product would compete with the more traditional sources of fuel, especially in those areas around the Caspian and the lower Volga where trees were scarce and forests depleted. At the time Russia was importing its coal from England and a domestic and less expensive source of fuel therefore was of great interest to the government and to private industry,” notes Tolf. (16) Ludwig realized that the oil industry needed ships specially designed to carry not only a few hundred barrels but tons of bulk oil in the hold. Ludwig’s idea was a cistern ship, which he called an “oil tanker”. (16) When Ludwig took his idea to shippers in the Caucasus, he roused no interest. His fellow producers were even less keen to the idea of oil tankers than to the pipelines. “They argued that if the idea was really practical, the clever Americans with all their business sense would have thought of it and would have used such tankers for transport across the Atlantic. They did not know that the Americans had in fact tried one tankship but it proved unequal to the challenges of the ocean.” (19) Another reason for switching from transport of oil by barrels to transport by oil tankers was the problem of wood scarcity. “In America wood was plentiful and inexpensive but in Russia barrels accounted for half the price of the petroleum; they had to be constructed of wood brought in from remote areas of the empire or imported all the way from the United States,” notes Tolf. “Ludwig argued the facts of the case: the standard barrel weighed 64 pounds or some 20% of the oil it held, which meant that a fifth of any cargo of barrel oil consisted of wood that could be shipped only one way; returning empty barrels any distance obviously was a false economy. As more and more oil gushed from the soil of Baku, the price of the raw product fell but the price of the barrels remained the same; in time, the barrel would be worth more than the oil. The system had to be changed.” (19) Ludwig proceeded to design and build his own oil tanker with Director Sven Almqvist of Lindhomen-Motala in Sweden. Ludwig gave the name Zoroaster, after the Zoroaster temple in Baku, to the first oil tanker in the world. Ludwig’s tanker was the first to use Bessemer steel and had built-in iron tanks both fore and aft [the engine was mid-ship] to carry its kerosene cargo of 242 tons. The ship was 184 feet long and 27 feet wide, and had a draft of nine feet; “it had to be small enough to negotiate the long journey to Baku from Sweden (where it was made) across the Baltic, through the lakes Ladoga and Onega, along the Rybinsky and Marinksy canals, down the Volga, and across the Caspian”. (20) Furthermore, Ludwig’s oil tanker had to make the long trip during the high waters of the spring thaw or it would run aground. 
Zoroaster Oil Tanker, first in the world. Source:
http://azer.com/aiweb/categories/magazine/ai142_folder/142_articles/142_235_nobel_zoroaster.html; accessed December 3, 2007. The Zoroaster went into service in 1878 on the 600-mile run between Baku and Astrakhan. Its design was copied the world over. Ludwig made no effort to keep secret any part of the design and took out no patent. Ludwig subsequently improved on the design of his tanker fleet, which later averaged 240 feet in length. In 1885, he had 11 Nobel tankers on the Caspian and two in the Baltic. The detailed evolution of the oil tanker is available elsewhere. (21) Ludwig’s oil tanker was a revolution in transportation and distribution. Tolf rates his accomplishment on a world scale equal to only one other titan, Frenchman Ferdinand de Lesseps, builder of the Suez Canal, which opened in 1869. Ludwig Nobel Designs Railroad Cars and Company to Transport Oil Over Land 1880 Ludwig saw opportunity to cut costs and improve service by designing special railroad tankcars to carry oil across land as his oil tankers did on the sea. “The pattern was the same: contact with the other major producers and receive a negative response; contact the shippers-in this case the Griazi-Tsaritsyn Railway Company and receive a negative response. Then take out pen and paper and do it yourself,” writes Tolf. (22) Once he had built his tankcars, Ludwig eventually needed to establish an entirely new organization, a company railroad with 1,500 cars, a couple of dozen locomotives, all the personnel to man and maintain the lines and equipment, the marshalling yards and sidings, repair sheds and machine shops, a storage and distribution control system.” (22) Ludwig’s petroleum depots were gigantic. The one in Taritsyn, Russia, had nine iron oil tanks holding 5 million gallons with pipelines running from wharf to the tanks. By 1900, the capacity was over 20 million gallons. Ludwig built similar depots in Riga, Moscow, and St. Petersburg, and by 1900, he had 129 depots spread all over European Russia. He had built a hugely successful petroleum combine. Yergin writes: “The great, highly integrated oil combine built by Ludwig soon dominated the Russian oil trade. The evidence of the Nobel Brothers Petroleum Producing Company could be found throughout the empire: wells, pipelines, refineries, tankers, barges, storage depots, its own railroad, a retail distribution network-and a multinational workforce that was treated better than virtually any other working group in Russia, and whose members proudly called themselves ‘Nobelites’. The rapid development of Ludwig Nobel’s oil empire in the first ten years of its existence has been described as ‘one of the greatest triumphs of business enterprise in the entire nineteenth century.’” (23) Trouble between Ludwig and Robert Nobel 1879 Robert’s little refinery had become a huge enterprise practically overnight. “Never one to surrender control easily and understandably jealous of his squatter’s rights as eldest brother and pioneer in the area and the industry, Robert planted himself squarely across the trail Ludwig was blazing”. (24) Robert opposed formation of a shareholding company in 1879. It was created anyway and thereafter Robert opposed most of what Ludwig was trying to do to organize an industry, including introducing a continuous distillation system (24-hours-day). In the fall 1879, Robert suddenly left Baku for Switzerland and the Sweden where he lived for the rest of his life. He surrendered all rights and responsibilities to Ludwig in return for a generous cash settlement and a percentage of shares in the company. Ludwig Nobel died nine years later in 1888. His 29-year-old son Emanuel (1859-1932) took control of the Nobel oil combine. Baku Oil Production Peaks and Stagnates 1901 The high point for Russia oil production came in 1901 when oil companies, including the Nobels, extracted some 12 million tons of oil from the Baku oil fields, yielding half the world’s oil. A comparable figure for the United States in 1901 was 9,500 million tons of oil. (25) “But while American production of crude oil reached 12 million the following year and continued to climb every year but one until 1924, it took Russian production until 1929 to exceed the 1901 level”. (25) Probably the most important reason for the stagnation in Russian oil production beginning in 1901 was the growing labor and civil unrest in Baku on the Caspian Sea and in Batumi on the Black Sea (a pipeline had been built between Baku and Batumi between 1897 and 1907). One of the main agitators of the labor and civil unrest was Bolshevik communist, Joseph Stalin. Stalin-Led Labor Strikes in Tiflis and Batumi In late 1899, 21-year-old Stalin and his Marxist co-conspirators, many of whom, like Stalin, were expelled from Tiflis Seminary in Georgia, were organizing a strike, which was one of the first full-scale radical mobilizations of workers in Georgia, Caucasus. (26) On January 1, 1900, they paralyzed Tiflis when the drivers of its Belgian-owned trams stopped work. Captured and jailed briefly by the tsar’s secret police, Stalin was released and immediately began agitating again, this time encouraging workers to strike across the city. The railway workshops were the hub of this agitation. (26) Stalin lectured to the workers, many of whom were ex-peasants, “Why are we poor? Why are we disenfranchised? How can our life be changed? His answer was Marxism and the Russian Social-Democratic Workers Party.” (26) 
Joseph Stalin 1902. Source:
http://www.bbc.co.uk/blogs/ni/Stalin_1902.jpg; accessed December 3, 2007. 
On May 1, 1900, Stalin spoke in front of an illegal gathering of 500 workers in the mountains above Tiflis. During the next three months, strikes broke out in the factories and on the railroads of Tiflis. Stalin and his friends decided to instigate a “demonstration” on May 1, 1901. The 2,000-strong demonstrators marched toward the city square as the Tiflis police and Cossacks hired by the province swooped down on the advancing group, wounding 14 workers and arresting 50. Stalin escaped and moved to the oil boomtown of Batumi, a subtropical frontier-town on the Black Sea dominated by the Russian Empire’s great financial-oil dynasties, the Nobels and the Rothschilds. As noted above, the Nobels had built a pipeline across the isthmus between Baku and Batumi, where they refined the oil and loaded it into the oil tankers destined for European markets. (By contrast, when they shipped oil across the Caspian Sea, from Baku to Astrakhan, it was destined for Russian markets.) Batumi boasted 16,000 Persian, Turkish, Greek, Georgian, Armenian and Russia workers, almost a thousand of them at the refinery. “The workers, often children, lived miserably in [Batumi’s] Oil City on reeking streets, with overflowing cesspools beside oozing refineries. Typhus killed many. But Batumi’s millionaires and foreign executives, especially the English, turned this backwater into a pleasure town with a seaside boulevard, white Cuban-style mansions, sumptuous brothels, a casino, a cricket pitch and an English Yacht Club.” (27) This dissonance in standard of living struck Stalin as unjust. Within three months of Stalin’s arrival in Batumi, the French Rothschilds’ oil refinery caught fire (January 4, 1902). The workers helped put out the fire, which meant they were due a bonus. Stalin, who worked at the refinery, joined a deputation to meet the Rothschilds’ French manager. The Rothschilds knew the fire had been arson and refused to pay the bonus. Stalin called a strike and headed for Tiflis (11 hours by train) to get his printing press to broaden the strike. When he returned to Batumi, the town was in an uproar. The Rothschilds were worried about their oil shipments and decided to settle the strike, including a 30% pay raise, a triumph for Stalin. The Rothschild managers were determined to avenge Stalin’s success. They dismissed 389 troublemaking workers from the refinery on February 29, 1902. The workers struck and General Smagin, governor of the province that included Batumi rushed into town to lead the suppression of the strike. He told the workers they had a choice: to go back to work in the oil refinery or go to Siberia. The following day, Stalin arranged demonstrations outside the Batumi police station where police were detaining striking prisoners. A huge crowd gathered outside the jail and then started to charge soldiers and Cossacks who were monitoring the situation. The soldiers fired their arms, killing 13 demonstrators and injuring 54. Stalin was ecstatic: “Today we advanced several years,” he said. “We lost comrades but we won.” “As in many other bloody campaigns, the human cost was irrelevant, subordinate to its political value,” writes Montefiore. “The whiplash and saber render us a great service, hastening to revolutionize any innocent bystanders,” noted Stalin. Young Leon Trotsky (1879-1940) was impressed by the Batumi massacre: “It stirred the whole country”, he said. (28) Strikes in the Batumi area occurred almost annually until the 1905 Revolution when production fell over three million tons and exports were cut in half. Neither production nor exports were to recover in any significant way until long after the 1917 Revolution. (29) Stalin-Led Labor Strikes in Baku In June 1907, Stalin headed for Baku to stir things up. There he took on oil barons, and Menshevik and Bolshevik “rightists”. He “prospered to become the revolutionary and criminal kingpin of the Oil Kingdom. It was through Baku that he, belatedly, found a national Russian role, graduating from ‘an apprentice to a craftsman of the Revolution,” writes Montefiore. (30) On September 19, 1907, for example, Russian nationalists murdered an Azeri (Muslim) worker named Khalid and as a protest, the workers went on strike. Stalin spoke at the funeral demonstration. Baku soon became a Bolshevik city, and Stalin pushed for radical strikes using Muslim Bolsheviks who adored him. Tycoons Sympathetic to Bolsheviks in Baku? Many tycoons and middle-class professionals in Baku were sympathetic contributors to the Bolsheviks, notes Montefiore. For example, Berta Nussimbaum, wife of an oil baron and mother of the writer Essad Bey, was a Bolshevik sympathizer who financed Stalin’s illicit communist press with her diamonds. (31) The Rothschild’s managing director David Landau regularly contributed to Bolshevik funds. Their contributions may have been attempts to deflect Stalin from blackmailing or kidnapping them. Stalin was running protection rackets at the time. It was difficult to differentiate donations from protection money, “because the felonies Stalin now unleashed on them included ‘robberies, assaults, extortion of rich families, and kidnapping their children on the streets of Baku in broad daylight and then demanding ransom in the name of some ‘revolutionary committee’, states Sagirashvili, who knew Stalin in Baku.” (31) 1917 Russian Revolution On March 12, 1917, Stalin arrived to Petrograd (St. Petersburg) from one of many Siberian exiles to join the Bolshevik Revolution. The Revolution had an immediate impact on oil production, which fell from 10.8 million tons in 1916 to 8.8 million in 1917. 
“The Red Army (with their armored train) entered Baku on April 27, 1920, demanding the resignation of the Azerbaijan Democratic Republic (ADR) Parliament and effectively ending Azerbaijan's control over its own oil resources. Most of the Oil Barons fled to Iran, Turkey or Europe. Photo: Azerbaijan National Archives.” Source:
http://azer.com/aiweb/categories/magazine/ai102_folder/102_articles/102_oil_chronology.html; accessed December 3, 2007. 
“The Nobel Brothers’ oil wells in Balakhani, a suburb of Baku. The derricks were so close to each other, making the risk of fire eminent, and the noise level horrendous. Photo: Asbrink Collection” Source:
http://azer.com/aiweb/categories/magazine/ai102_folder/102_articles/102_oil_chronology.html; accessed December 3, 2007. Workers walked off the job to demonstrate their insistence on more control over managerial decision-making, notes Goldman. (32) In Baku, workers’ and soldiers’ committees, the soviets, were soon demanding great sums of money from industrialists and putting their representatives on managerial and administrative staffs, notes Tolf. (33) Tolf continues, “Short of fuel, raw materials, and supplies of all kinds, Nobel, Lessner, Renault, and most of the other factories succumbed to the chaos and closed down. All Volga transport was nationalized but that only worsened the situation. Then the factories were nationalized and the owners and managers dismissed. Salaries and pensions were terminated, bank deposits seized, and the ordinary bourgeois permitted to draw only 150 rubles a week. Prices skyrocketed: a sack of flour cost 800 rubles, a pood of sugar 1,000, gasoline 50 rubles a pood...A series of shops were opened where jewelry and other valuables of the dispossessed could be sold and the bourgeoisie took to the streets to perform any kind of labor to keep from starving...Orders flowed from Moscow in a staccato procession of proclamations, seizing Nobel installations...It was War Communism, total centralization and control of the economic life of a country now declared to be a military camp.” (33) The Soviets declared formal confiscation on June 6, 1918, when the fields were officially nationalized. Then production fell to 4.1 million tons.” (32) The Nobels Escape Baku Emanuel Nobel, his wife and his children, dressed in peasant clothes, drove over the steppes directly to Stavropol, still under the control of the White Army, in 1918. A few hours later they left by train for Kiev (as the Red Army entered Stavropol), and from there traveled by train to Warsaw where Emanuel by chance met the son of an old business friend in Berlin. He quickly arranged for their journey to Berlin and from there Emanuel had no trouble getting to Stockholm and safety. An Independent Azerbaijan and the Nobels Make Good The Turks briefly occupied Baku in September 1918, providing the opening the old Baku investors had awaited. The British sent in an expeditionary force in November 1918, pushed the Turks out of Baku, and tried to set up an independent state of Azerbaidzhan (Azerbaijan). “This was not solely an anti-Bolshevik gesture, but also an anti-Russian step to protect Persia and block Russian access to British India...With the British takeover and denationalization of the oil fields, hopes in the European stock markets soared on the expectation that the weak Bolsheviks would never come back.” Goldman continues, “Moving fast in hopes that it could establish a presence in the area where previously it had been weak, Standard Oil of New Jersey signed a contract in January 1919 with the independent government of Azerbaidzhan. It paid one-third of a million dollars for drilling sites. The Nobels toyed with the idea of selling their shares to the Anglo-Persian Oil Company, but quickly grabbed yet another offer from Standard Oil. A tentative agreement was signed on 12 April 1920. Despite the fact that the Bolsheviks retook the area later that month, Standard remained convinced the Bolsheviks would not be able to hold on. Reflecting its confidence, it paid Nobel half a million dollars for some additional land. Ultimately Standard Oil paid Nobel several million dollars for its stock which, of course, had already become worthless.” (35) Standard Oil was not alone in its speculation fever; Shell Oil and other European investors also bought what turned out to be worthless shares. “The end of Baku was surprisingly swift”, notes Tolf. Lenin decreed “a week of plundering” in Baku. “The revolutionary proletariat ‘oppressed and deprived by brutal capitalists of the very necessities of life’ were allowed one week to search the homes of the ‘capitalist bloodsuckers and their parasites’ for clothes, money, furniture, utensils. Opposition to the decree, to the search, constituted a revolt against the state and was punishable by death. Homes and offices of executive, engineers, technicians were requisitioned and only those individuals judged essential to the industry were given the option of remaining on the job.” (36) Bolsheviks Need Oil Expertise and Ask Foreigners to Return The Soviets soon learned that the proletariat lacked the managerial and technical expertise to run the vast oil enterprise in Baku. In 1921 oil output had fallen to a low of 3.8 million tons, a level not seen since 1889. Lenin, noting that Russia was not quite ready for pure Marxist communism, endorsed limited capitalism in March 1921 under his famous “New Economic Policy”. He requested the return of foreigners to restore oil production. When this had been accomplished, the Soviets systematically revoked the foreigners’ concessions and deported them. By December 1930, most of the foreigners had been closed out, except for Standard Oil, which was allowed to retain its concession at the kerosene refinery built in Batumi until 1935. (36) Summary The Swedish Nobel brothers and other capitalist entrepreneurs in the 1870s opened up the vast oil resources of the Baku region and built an astonishing oil combine that serviced the world. Fifty years later, Bolshevik communists nationalized the oil industry and deported foreigners from Baku and Batumi. Since the dissolution of the Soviet Union on December 25, 1991, capitalists have returned to the Caspian oil basin to harvest its vast resources. 
Graph Azerbaijan oil output. Source:
http://upload.wikimedia.org/wikipedia/en/2/2f/Oil_production_az.gif; accessed December 3, 2007. Sources:
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