In the face of such tough competitive countermeasures by the US, the rate of growth of Russian exports to Europe soon slowed. In 1892, Russia delivered 3.5 million barrels of kerosene to Europe, i.e., over four years, growth in exports to Europe expressed in absolute figures amounted to 384,282 barrels (or 10.8%).
The Standard Oil Company’s ongoing actions clearly worked toward the realization of its strategy to displace Russia completely, especially from the European kerosene market. Whereas in 1890 Great Britain imported 787,529 barrels of kerosene from Russia and 1,357,122 barrels from the US, by 1893 American imports had grown 60% to 2,209,619 barrels, while Russian imports, by contrast, fell 5.6% to 743,094 barrels.
It’s no wonder, then, that at the end of the 19th century Russia’s focus turned toward exporting kerosene to the Far East. However, as was the case in Europe, this region was already well-supplied by US companies. In 1887, official data provided evidence of the dominant market position of the US: its kerosene deliveries to the Far East were 9,782,459 crates, while those of Russia were only 899,903 crates. If we take into account the weight difference between the kerosene in a Russian crate (74 pounds) and that in an American crate (65 pounds), it turns out that in 1887 the US delivered 635,859,830 pounds to the Far East, and Russia delivered 66,592,822 pounds. Thus, in 1887 American kerosene exports exceeded Russian exports by a factor of 9.5.
Nonetheless, by 1888, Russia was already delivering 1.1 million barrels of Russian kerosene to the region, and by 1892 this figure jumped to 2.4 million barrels. In other words, over the course of just four years the increase in Eastern exports amounted to 1.3 million barrels expressed in absolute terms, or a 55% increase.
This trend is also confirmed by analysis of data on deliveries to the Pacific coast; in 1892, the US delivered 11,253,699 crates of kerosene there, while Russia delivered 8,647,683 crates. If these figures are compared on the basis of weight, it turns out that the US delivered 731,490,430 pounds, and Russia delivered 639,928,540 pounds. Thus, the Russian share of the total volume of kerosene deliveries to the Far East region reached the substantial value of 46.7%.
We should note that while deliveries to Europe in 1893 were 2.6 million barrels of kerosene, deliveries to the Far East were 3.4 million barrels.
To summarize the above discussion, it can be noted that over a rather short period the Russian oil industry made a dramatic breakthrough, and became a serious competitor to the US, both in the markets of Europe and in those of the Far East.
The increasing activity of Russian companies in the Far East did not go unnoticed in the US. In relation to the Eastern market, John D. Rockefeller’s strategy was spelled out quite frankly by one of his confidants: “Beginning today, a struggle must begin with the Russian rivalry in the Eastern hemisphere.... This matter must be addressed energetically and with unlimited capital; otherwise, our foreign business, amounting to an annual figure of 50 million, will be very strongly affected. If this business had been left to people with unlimited power or combined efforts, Russia would now be master of all Eastern markets. Without a system of oil pipelines, cheap shipping, and an improvement in production, we would not have been able to hold the European and Asian markets against Russia, not even for one year.”
The active measures undertaken by Standard Oil in the Eastern market yielded the desired results. By 1893, the US had delivered 18,674,661 crates of kerosene to the Far East, almost 7.5 million more than in 1892. As for Russia, it was able to achieve an increase of only 3.8 million crates of kerosene during that year.
The American challenge was soon followed by a strong response from Russia. The country’s rapid construction of the Trans-Siberian Railroad, with its Chinese Eastern Railway segment, and the railroad’s commissioning created favorable new conditions for a rapid increase in deliveries of Russian petroleum products. Whereas in 1897, Russian entrepreneurs exported 4.1 million barrels of kerosene to the markets of the Far East (for comparison, only 2.2 million barrels were sent to Europe), in 1901 they exported 6.2 million barrels, and in 1904 the volume of export deliveries reached 7.3 million barrels. That is, over seven years Russian Far East exports of kerosene had reached impressive figures and had grown by a factor of 1.8.
From the viewpoint of the administration of the US, the beginning of Trans-Siberian Railroad operation significantly strengthened the Russian presence in the Far East and struck a serious blow against the administration’s policy of “open doors” and “equal opportunities.” Such considerations played into the US’s support for Japan in its war with Russia. A weakened and distracted Russia would eliminate one of the US’s main obstacles to the realization of its geopolitical ambitions, including that of increasing American kerosene exports. US President Theodore Roosevelt conveyed this position clearly in his letter of January 18, 1903 to Secretary of State John Hay: “I want the Russians to know that I do not intend to give in. With every year I am more and more certain that the country will support me in the most extreme measures in this matter.”
A tight knot of complex contradictions between the great powers in the Far East caused the breakout of the Russo-Japanese War in 1904.
The major work of the Soviet historian Boris Romanov, Sketches of the Diplomatic History of the Russo-Japanese War [Ocherki diplomaticheskoy istorii russko-yaponskoy voyny], offers a detailed analysis of the reasons for the formation of the anti-Russian bloc and describes the tactics directed against Russia on the diplomatic and military fronts (in the chapter “The Anglo-Japanese-American Block (1901–1902)” and the section “The Anglo-American Agreement”). The book also touches on the complex foreign trade factors that contributed to the outbreak of the war.
Among these factors was the American Standard Oil Company’s actions leading up to the conflict. Early in the spring of 1904, Rockefeller’s company struck a serious blow against Russian kerosene export deliveries to Europe markets. The newspaper Neftyanoye delo reported: “To understand the fierceness of this struggle, it is sufficient to remember that the price of bulk retail kerosene in the main import ports of England fell from 5¾ pence per gallon in March 1904 to 21/2 pence (that is, 43 kopecks per pood [36 pounds]), in June of this same year.... In March, the average quoted price for our boiler kerosene in Baku was 29.3 kopecks per pood [36 pounds]. Consequently, in Batumi it would cost 50.3 kopecks per pood [36 pounds], assuming constant expenses of 21 kopecks between Baku and Batumi (railroad freight: 19 kopecks, port charges: 1 kopeck, pumping and storage in Batumi, leakage and interest on freight: 1 kopeck). Comparison of these figures clearly illustrates the complete inability of our kerosene to compete with American kerosene.”
Nikolay Iznar, a well-known oil industrialist, noted in an article in the same newspaper: “At various times the necessity of keeping the market in its hands forced the Standard Oil Co. to lower prices drastically on export kerosene in New York. This reduction was sometimes so significant that, for example, in August 1904 a gallon of export kerosene was quoted at 4.8 cents, while at the same place a gallon of crude oil cost 5 cents, that is, 0.20 cents more than the refined product.”
Furthermore, in April 1904, the American financial company Kuhn, Loeb & Co., which was under the control of the Rockefeller group, opened a subscription for an initial set of Japanese bonds in the amount $25 million. A second offering of Japanese bonds was soon issued, this time for $60 million, followed by a third and a fourth. They were all successfully purchased in equal portions in the US and Great Britain.