It was during this period that a sharp rivalry began between Russia and the US for control of the world oil market. This dramatic stage in the relationship between the two powers is covered in detail in Professor Aleksandr Vasilenko’s work, entitled “The Petroleum Factor in Geopolitics at the Turn of the 19th-20th Centuries,” which is included in the anthology The Eve of the Petroleum Era [Predvestiye ery nefti].
For John D. Rockefeller and his Standard Oil Company, the beginning of the 1880s did not presage any special concerns for its monopoly position in the area of trade in petroleum products. In Europe, Russian kerosene first appeared in small volumes in 1882, and American experts evaluated it as a very timid attempt by Russian companies to enter the European market. Data from the Mining Department indicated that in 1882, Russia exported 31,450 barrels of crude oil, 3,360 barrels of mineral oil and vaseline, 27,260 barrels of kerosene, 84,420 barrels of lubricants, and 12,000 barrels of residual oil. In the same year, the US exported 559,955,000 gallons of various petroleum products. If we consider that 1 barrel = 42 gallons, we may calculate that Russian exports amounted to a pitiful 1% of American exports.
In 1874, commercial adviser Vasily Kokorev (1817–1889) became one of the founders of Russia’s first vertically integrated oil company, the Baku Oil Company.
A share of the Baku Oil Company (1874).
In 1874, noted entrepreneur Pëtr Gubonin (1825–1894), together with Vasily Kokorev, founded Russia’s first vertically integrated oil company, the Baku Oil Company.
A view of the Baku Oil Company’s Surakhany Refinery (1870s).
Sketch of the still and mixer of the Baku Oil Company’s Surakhany Refinery (1870s).
The Mining Institute in St. Petersburg (18th century), many of whose alumni made great contributions to the development of the Russian oil industry.
Russian mining engineer’s badge (established in 1866).
Map of oil fields on the Absheron Peninsula (late 19th century).
Panorama of oil fields on the Absheron Peninsula (late 19th century).
In 1879, noted entrepreneur Ludvig Nobel (1831–1888) founded Russia’s second vertically integrated oil company, the Nobel Brothers Petroleum Production Company.
In 1875, entrepreneur Robert Nobel (1829–1896) entered the oil business and became one of the founders of the Nobel Brothers Petroleum Production Company.
Famous inventor Alfred Nobel (1833–1896), as one of the founders of the Nobel Brothers Petroleum Production Company, actively participated in the development of the oil business in Russia.
A view of one of the refineries of the Nobel Brothers Petroleum Production Company (late 19th century).
The first Russian tanker, the Zoroastr, owned by the Nobel Brothers Petroleum Production Company, made regular trips in the Caspian Sea beginning in 1878.
A view of the Konstantinovka Refinery (Yaroslavl Province), where V.I. Ragozin & Co. Mineral Oil Production Partnership’s industrially produced oil lubricants, which earned honorable mention for their quality in many European countries (late 19th century).
A share of V. I. Ragozin & Co. Mineral Oil Production Partnership (1880).
Emperor Alexander III (1845–1894), the first Russian monarch to visit the oil fields on the Absheron Peninsula in October 1888.
Casket containing samples of crude oil and petroleum products, presented by Russian oil industrialists as a gift to Emperor Alexander III in October 1888.
However, if the managers of Standard Oil had been privy to the content of the Nobel Brothers Petroleum Production Partnership’s general shareholders’ meeting in April 1883, they may have found their self-confidence seriously shaken. In its address to the shareholders, the Partnership’s Board said, in part: “Having on its side the undoubted advantage of the Baku oil sources over American ones... Russian kerosene has a broad field for distribution in countries bordering Russia.... The company’s goal was first to displace American kerosene from Russia, and then begin to export kerosene to other countries.... American kerosene has now been completely displaced from Russian markets, and in the past year the company had already begun to export its products to Austria and Germany.”53
Production data from this period show that Russian entrepreneurs were already making great strides to change the existing state of affairs on the European oil product market. In 1884, the port of Batumi exported 449,808 barrels of crude oil and petroleum products, including 330,621 barrels of kerosene, 76,210 barrels of lubricants, 42,325 barrels of residual oil, and 652 barrels of crude oil. At the same time, deliveries to the Russian Black Sea ports of Odessa, Sevastopol, Kerch, and Kherson for domestic consumption comprised 209,138 barrels of crude oil and petroleum products, including 183,560 barrels of kerosene.
In the same year, 21,628 barrels of crude oil and petroleum products were exported from Baku directly to Persia, including: 14,014 barrels of kerosene, 1,008 barrels of residual oil, and 6,617 barrels of crude oil.
On October 31, 1886, Baku oil industrialists wrote a letter to Prince Aleksandr Dondukov-Korsakov, head commander of civilian affairs in the Caucasus, stating: “The Baku oil industry has reached such a degree of development that it could easily supply not only all of Russia, but also a large part of Europe with lighting and lubricating materials in the quantity that they need.”
This assertion proved true in the coming years. In 1890, Russia exported 4.9 million barrels, including 3.5 million barrels of Russian kerosene sold on the European market. At the same time, US exports were 523,295,000 gallons of kerosene, including 343,078,000 gallons to Europe. Simple conversion shows that in 1890, Russian exports already amounted to 41.1% of total American exports, and 43.9% of exports to the European market.
Not surprisingly, the American government was quite concerned about the increasing activity of Russian oil companies in Europe. Therefore, the government gave Standard Oil management its blessing to take extremely tough action against Russian companies in all aspects of sales activity, using the most diverse means, including unfair methods of competition.
To this end, the American company began creating a wide network of subsidiaries around the world. In Great Britain, it formed the Anglo-American Oil Company in London on April 24, 1888 with a fixed capital of £500,000. Trading of American kerosene in Germany passed into the hands of the company Deutsch-Amerikanische Petroleum Gesellschaft, founded on February 22, 1890 with capital of 9 million marks (40% of whose shares belonged to Rockefeller and his partners). On March 10, 1891, the American Petroleum Company was founded in Rotterdam, with a capital of 5 million florins, to trade kerosene in the Netherlands, Belgium, and Luxembourg; 51% of its shares were owned by Americans. Sale of American kerosene in Italy and Switzerland was carried out by the Società Italo-Americana del Petrolio company, founded in Venice on May 16, 1891 with a capital of 2.5 million lire, 60% of whose shares belonged to the Standard Oil Company.