During Serebrovsky’s visit to the US, he conducted negotiations with the management of the Sinclair Oil Corporation for the purchase of $25 million worth of American refining equipment. And although the deal fell through, Serebrovsky’s presentation nonetheless prompted the Soviet government to purchase cracking units overseas and to enlist the help of foreign companies and specialists to get the acquired equipment working properly. Subsequently, the use of American technologies and equipment made it possible to produce a series of products that were new at the time (cracked gasoline, etc.). Moreover, modernization of the industry made it possible to produce special grades of lubricants (bright stock) from specific grades of Baku petroleum. The expansion in the production of high-quality petroleum products also made the goal of industrializing the national economy a much more realistic endeavor. Before that, no serious discussion had been possible on developing the industry for the domestic manufacture of tractors, automobiles, ships, etc. Moreover, the modernization of the refining sector played a key role in meeting the government’s fuel needs, as the improvement in fuel quality opened the way for the wholesale construction of modern military hardware.
Serebrovsky also paid special attention during his American business trip to acquiring the equipment necessary to create a modern domestic infrastructure for the production of drilling and refining machinery. The development of such an infrastructure allowed not only a subsequent reduction in the Soviet oil industry’s dependence on massive deliveries of imported equipment, but also accelerated the industry’s development by saving significant financial resources. As Serebrovsky noted: “Indeed, if we acquired all the equipment we needed overseas, we would not have enough foreign currency. If we ordered it at factories in the center of the Soviet Union, the equipment would be very expensive and would not arrive by our deadlines. Therefore, we first put our Baku machine– production plants on a firm basis by equipping them with machine tools ordered from America. We built two basic plants: one for making drills and drilling equipment, and the other for making only downhole pumps. The plants were built according to an American design and operated according to American methods.”37 At his initiative, in 1925 the VSNKh created a standing committee on the oil industry to study the organization of production and to purchase machines and equipment overseas.
Thus, starting in the mid-1920s, the Russian oil industry succeeded, with the broad participation of foreign capital, in realizing a policy of replacing imports and instead supplying the industry with well-drilling and operating equipment that was domestically produced according to American models.
As for marketing and sales, again taking American experience into account, Aleksandr Serebrovsky spoke out against the situation that had developed in the domestic industry, where all produced petroleum products came under the complete control of Neftesindikat, which sold them on the domestic and foreign markets. “The basis of business is production, and production must be the master of trade. Neftesindikat’s position will only be correct if it becomes merely an office for selling the trusts’ marketable output, and if the People’s Commissariat for Finance and the authorities do not consider it to be a separate enterprise.”38 He considered overcoming the divorce of trade and production, which contradicted all world practice, to be the most important precondition for introducing true cost accounting and for checking the trust’s performance empirically.
Incidentally, similar proposals were made by other oil specialists, including Ivan Strizhov and Mikhail Barinov. However, the Soviet political leadership disregarded their recommendations, and during the NEP years oil enterprises never actually switched to true cost accounting. Here, the decision regarding the organizational form of trade in petroleum products was made primarily on the basis not of economic considerations, but of ideological and political ones caused by an internal Party struggle and a striving not to allow the restoration of capitalism.
As for the specific effects of Aleksandr Serebrovsky’s trip on the development of export oil trading, it laid the foundation for large-scale cooperation with American companies concerning deliveries of Russian oil on the foreign market. The first major Soviet export contracts with American oil companies were signed in 1924 and 1925, which had great significance for strengthening both Soviet and American positions in world trade in petroleum products. By early 1928, the oil industry had become the USSR’s largest export industry, and by the late 1920s, income from international trade in petroleum products was able to compensate somewhat for the sharp decline in grain export revenue.
Understanding the pressing need to master advanced technology, Aleksandr Serebrovsky made arrangements with the management of a number of American oil companies to schedule trips abroad for Soviet engineers and workers to study American technology in the oil industry.
The first group of oil workers sent to America for periods ranging from six months to two years consisted of 20 workers and 15 engineers. They were well-received in America, since the companies manufacturing the equipment and striving to deliver it to the USSR in greater and greater volumes were interested in training the personnel that might be handling their machines. With the help of these companies, Soviet specialists were sent around to factories, drilling sites, and fields to learn production practices. According to Serebrovsky’s plan, the specialists were sent to various American companies to study specific technical processes: pumping, gas recovery, cracking, etc.
Social questions did not escape his close attention and during his trip, the “Red director” Serebrovsky paid special attention to the living arrangements and daily life of American oil workers. In particular, he paid attention to the buildings in which American oil workers lived. These cottages had a well designed, convenient layout and an attractive exterior. Also important was the fact that these buildings were simple to build.
Striving to solve the extremely acute housing problem at the Baku fields, Aleksandr Serebrovsky ordered a whole small town of these cottages from American manufacturers. This measure not only succeeded at improving the housing conditions of oil workers, but also served to adorn the suburbs and several residential neighborhoods of Baku with very original buildings of constructivist-style architecture, thus transforming the city and giving it a unique flavor.
Along with the structural parts and equipment for the cottages that had been ordered, other objects also arrived in Baku that were strange for those times: mobile clinics, gas kitchen stoves, washing machines, vacuum cleaners, and even soccer balls. It is interesting that upon returning from America, Serebrovsky took the initiative to organize soccer teams at the fields and arrange the first soccer match in Baku. The Azneft team, which was later called Neftchi, became one of the most popular teams in the country. Thus, an unexpected outcome of Serebrovsky’s trip to America was the development of soccer on the Absheron Peninsula.
From today’s perspective it is easy to see that the impressive results of Aleksandr Serebrovsky’s trip to the US in 1924 laid a very productive foundation for successful and mutually beneficial Russian-American cooperation in the area of oil.
In the context of the ongoing energy dialog between Russia and the US, the experience of the 1920s cannot, of course, provide ready answers to the numerous questions now facing the management of Russian and American oil companies. Nevertheless, it provides modern managers rich factual material for analysis in making administrative decisions for the development of mutually beneficial cooperative efforts with foreign companies and attraction of foreign capital into the business as a whole.