Oil of Russia

In response to increased exports, oil tanker fleet tonnage also began expanding at an accelerated rate. In a report for 1928, Neftesindikat remarked: “Over the last two years, the fleet has added four new ships: the Azneft, the Grozneft, the Elbrus, and Neftesindikat. Construction is nearing completion on the oil carriers Embaneft, Soviet Oil, and USSR Miners Union. Once these carriers are introduced, overall tonnage should reach 66,000 tons. In addition, Soviet shipyards are building another five ships ordered by Neftesindikat, having an overall tonnage of 44,000 tons.”

By the late 1920s, Neftesindikat had branches, agencies and firms in Milan, Vienna, Prague, Constantinople, Smyrna (Izmir), Tallinn, Helsinki, and Harbin.

Russian Oil Products, Ltd. (ROP) once again became very active in Great Britain. Exports of Soviet petroleum products to Britain amounted to 95 million gallons in the first half of 1929, a 50% increase from the first six months of 1928. Lamp oil accounted for 40.7 million gallons of that amount, automotive fuel for 38.5 million gallons, and lubricants for 9 million gallons, while heating oil and gas oil accounted for the rest. In other words, almost 11% of all petroleum products delivered to British ports came from the Soviet Union. For the year 1929 as a whole, 217 million gallons of Soviet petroleum products were delivered to the British Isles, an increase of 94 million gallons over the previous year. Expecting further growth, ROP hurriedly built additional terminals and storage facilities at ports in England, Scotland, and Ireland, while industrial production of small packages of lubricants began under the ROP name in the town of Barking. The Soviet company’s investment program was quite large for the time, £700,000. During that period, Soviet oil exports were geographically structured as follows: the largest importer of USSR oil and petroleum products in fiscal 1927–28 was Italy (with 545,000 tons), followed by the UK (427,000 tons), France (391,000 tons), and Germany (379,000 tons). The same four countries were also the leading importers of Soviet petroleum products in 1929, although not in the same order.

On February 28, 1929, The New York Times reported: “On Thursday, Deterding and British oil firms made peace with the Soviets. An agreement has just been signed for three years that not only ends the price war between the British and the Soviets (ROP) on the British market..., but also puts an end to Deterding’s political hostility towards the Soviets.... The key achievement for the Soviets is that there is no clause in the agreement regarding compensation to be paid to Deterding for the nationalized property on which he continued to make such persistent claims.”

Prominent Soviet figure Grigory Sokolnikov (Brilliant) (1888–1939), who chaired Neftesindikat at the time, commented on the agreement: “The recently concluded oil agreement in London between companies representing all the world’s largest businesses on the British market— Standard Oil, Shell, the Anglo-Persian Company, and Neftesindikat as represented by ROP—has an importance that goes far beyond resolving their commercial relations on the British market. This agreement is one of the most important phases in the process of strengthening the USSR’s position on foreign markets; it directly concerns the main issues of the policy of the imperialist powers towards the Soviet Union.... The political importance of the agreement is that, first, it was concluded with no discounts offered to former owners of oil fields and, second, as the British press emphasized, oil policy issues in England are not resolved without the participation of organizations connected with the government.”

The agreement with the Western oil corporations, however, was more of political than economic importance for the USSR. With the start of the Great Depression in late 1929, oil prices fell sharply on the global market and the Soviet Union and the Western companies were therefore unable to agree on a further price policy. Global oil production (excluding the USSR) fell 17% from 1929 to 1932, while oil output in the Soviet Union increased 56.5% in the same period. By 1932, oil production levels in the USSR exceeded refining capacity by more than 3.3 million tons.

From the start of the 1930s, the USSR understandably began to develop new, more distant oil markets. Soviet petroleum products appeared in southern China and Korea for the first time in 1931 and in Canada and New Zealand in 1932.

On the whole, the first decade of the Soviet oil industry’s development following nationalization in 1918 can rightly be considered a success. The Soviet Union managed to turn the export of oil and petroleum products into a huge source of currency revenue by skillfully taking advantage of conflicts between Standard Oil Company and Royal Dutch Shell. The Soviet oil industry not only emerged from the crisis in which it found itself during years of turmoil but also managed to restore production by first achieving the prewar production level and then surpassing it. In 1928, the USSR produced 12 million tons of oil, a level consistent with the industry’s output under the Russian Empire in the early 20th century when the country was recognized as the global leader.

At the same time, this period marked the end of any illusions within the oil industry of continued NEP-era freedoms. On December 5, 1929 the Central Committee of the All-Union Communist Party (of Bolsheviks) passed a resolution, “On the Reorganization of Industrial Management.” The “economic independence” of Azneft, Grozneft and Embaneft soon came to an end as these entities were merged as business units into Soyuzneft, the All-Union Oil Industry Association.

John D. Rockefeller’s Envoy

The oil factor was one of the key components that helped form mutually beneficial economic relations between the Soviet Union and the US in the second half of the 1920s. Ivy Lee (1877–1934), a well-known American journalist who handled public relations for John D. Rockefeller, Sr., played a key role in this process. Lee visited the USSR in 1927 and paved the way for the subsequent establishment of diplomatic relations between the US and Soviet Russia.

Relations between the two countries were rather complicated and contradictory during this period due to profound changes and social upheaval throughout the world. Like other Western nations, the US broke off diplomatic relations with Russia after the Bolsheviks came to power in 1917, a move that created serious barriers for the development of business ties which remained frozen for a long time.

US businesses, however, began visibly expressing more interest in this new economic partner in the mid-1920s. After persistent lobbying by businesses, the US government decided to allow trade with Soviet Russia in summer 1920, but only at the individual company’s own peril and risk. The business community, however, remained dissatisfied with the government’s inconsistent position on trade with the USSR since it was only through mutual diplomatic recognition that the two countries could develop trade via lending, set up embassies and consulates, simplify visa procedures, validate the rights of citizens and organizations in both countries, and participate in global politics on equal terms.

The US government’s nonrecognition policy led to an artificial decline in trade volume between the two countries, including US exports to the USSR. This policy repeatedly created all kinds of barriers and obstacles in Soviet–US economic relations throughout the 1920s. Statistics show a rather sharp decline in US exports to the USSR in fiscal 1925–26 compared to 1924–25 (94 million rubles versus 158 million rubles).

This was primarily due to the fact that the development of Soviet trade organizations within the US depended largely on financing of purchases by banks and companies as well as a transition to short-term and long-term lending for imports. Representatives of the Soviet company Amtorg noted on several occasions that short-term loans would not increase the volume of Soviet purchases in the US. From 1925 to 1927, some licenses issued for operations on the US market had to be transferred to Germany, where long-term loans could be obtained.

Given the development of relations between the two countries in trade, concessions, science, and technology, as well as the growing number of requests from significant business circles for closer economic relations with the USSR, it became more and more difficult for the US government to justify the advisability and validity of continuing its nonrecognition policy against Soviet Russia.

The international oil business, in turn, was a kind of barometer for the political state of affairs at the time. On May 27, 1927, when the British government, in Neville Chamberlain’s famous note, accused the USSR of fomenting anti-British sentiment and carrying out subversive activities in Britain and subsequently broke off diplomatic relations with the USSR, Rockefeller’s corporation decided to take advantage of this favorable situation and go behind the back of its chief competitor Royal Dutch Shell.

It should be noted that Rockefeller’s approach to Soviet Russia was one of duplicity and double standards. Even as a staunch opponent of communism, Rockefeller nevertheless handled “the Russian issue” with a kind of dual personality. The management of one of his core companies— Standard Oil of New Jersey, led by Walter Teagle—purchased stock in 1920 in the Baku-based Nobel Brothers Petroleum Production Partnership, which was nationalized shortly thereafter. Realizing the futility of its claims for restitution following the Genoa Conference of 1922, Standard Oil displayed extreme intolerance and hostility towards everything that had to do with Soviet Russia as well as equitable business relations with its representatives. At the same time, two other Rockefeller-owned companies—Standard Oil of New York and Vacuum Oil Company—remained in constant contact with the Soviet Amtorg and Neftesindikat organizations out of pure business considerations and even began purchasing large amounts of petroleum products in the USSR.

As head of the giant oil corporation, Rockefeller in no way sought to set a common denominator for the actions of his subordinates. With Standard Oil of New York signing the first concession agreement with Neftesindikat for the construction of a refinery in Batumi in December 1926, Rockefeller was looking to carefully explore the prospects of obtaining even more favorable terms for his business in Soviet Russia in the future.

At the same time, given the ambiguous political situation in the US, Rockefeller clearly understood that this delicate mission would require the involvement of a prominent American whose activities were well-known in Soviet Russia and who was well-versed in politics, but who also was not a full-time Standard Oil Company employee.

This person could travel to the Soviet Union as a private civilian for an exotic tourist trip, and there was nobody more ideal for this role than Ivy Lee—Rockefeller’s confidant, an acclaimed journalist, and the so-called “father of public relations.” A graduate of Princeton University, Lee was a successful reporter for several leading New York publications and his work was very popular at the time. He later seriously considered the problem of relations between business and society and eventually laid the foundation for public relations. His phrase “Tell the truth” became a kind of motto for future generations of public relations specialists. Lee worked briefly at Standard Oil Company in 1914 before serving as an aide to the chairman of the American Red Cross during World War I.

In the early 1920s, Lee joined the movement of proponents for the establishment of friendly relations with Soviet Russia. In 1926, he wrote a famous letter to the president of the US Chamber of Commerce in which he presented a convincing argument for the need to normalize US-Soviet political and economic relations as soon as possible.

Unsurprisingly, Lee agreed to carry out the mission presented by Standard Oil Company following a confidential and detailed meeting with Rockefeller.

Prior to leaving for the USSR, Lee met with top officials from the American-Russian Chamber of Commerce, which had become the center of the progressive business community at the time and recognized the real benefits that could result from the normalization of economic and political relations with the Soviet Union. The president of the chamber was well-known financier and Chase National Bank Vice President Reeve Schley, while the chamber’s vice president was Allen Wardwell, the co-owner of a large law firm and a former member of the American Red Cross’s mission to Russia. The chamber’s 17 directors represented financial and insurance institutions and the largest industrial firms in the US. The Soviet representatives included members of Amtorg and the local branch of the All-Union Trade Union.

As soon as reports about his upcoming visit became public, US newspapers began publishing all kinds of sensational articles, including reports that Lee was allegedly helping the Soviets gain diplomatic recognition in the US. Lee, for his part, while not hiding his true feelings about “the government of the dictatorship of the proletariat,” believed that Soviet Russia was vitally interested in economic cooperation with the West despite its calls for the “export of revolution.” He therefore deemed it necessary to develop relations with Soviet Russia and even recognize it, but only in exchange for an end to its policy of double standards on the international stage.

Lee’s visit to Moscow was viewed as a major event and received wide attention in the Soviet press. He was given the opportunity to meet with Aleksey Rykov, the head of the Soviet government and chairman of the USSR Council of People’s Commissars.

During the long and exhaustive conversation with Rykov, the American envoy stressed that his visit was strictly of a private nature. Describing his visit with Rykov, Lee later wrote: “My sole purpose, I stated, was to regard the situation ‘objectively’ (a word the Russians love), and that I wanted primarily to see people rather than things.... Above all I wanted to see responsible representatives of the Government or the Communist Party who would be in a position to give me candidly their own personal interpretation of the philosophy underlying their regime, and their point of view as to their own situation and its relationship with the rest of the world.”

Lee asked Rykov a very pointed question during the conversation about whether there actually was a peculiar division of labor in the USSR, where the government limited itself to economic issues and signed treaties with capitalists, while the Communist International was battling these capitalists through its own organizations, and the Party Central Committee Politburo played the role of a conductor in this process. He did not, however, receive a clear answer to this question.

Lee also discussed the activities of Soviet trade unions with Mikhail Tomsky (Yefremov) (1880–1936), a Politburo member and chairman of the All-Union Central Council of Trade Unions. Tomsky told Lee that civil war, economic chaos and famine had prompted the trade unions to actively cooperate in setting up production and restoring the country’s economy and that such goals could only be fulfilled though close cooperation with the Soviet authorities. Therefore, he said, the gradual governmentalization of the trade unions was inevitable because of the need to restore the labor force and ensure people’s survival. Lee also noted that Soviet trade unions were overloaded by the multitude of targets they had to meet in addition to the predominance of Party dictates, which prevented them from fully performing their primary function—protecting the socioeconomic rights and interests of the workers. He took two impressions away from this conversation: a concession is a special privilege offered to foreign capitalists by the Soviet government, and since concession companies are managed by capitalists, the working class employs all possible means to defend their rights, including “revolutionary violence.”

During a meeting with prominent Party journalist Karl Radek (Sobelson) (1885–1939), Lee expressed particular interest in communist propaganda, specifically, how it was organized, who directed it and whether the “united forces” of the government, Communist Party, and Communist International stood behind it.

Towards the end of his visit, Lee met with Deputy People’s Commissar for Foreign Affairs Maxim Litvinov (Vallakh) (1876–1951), with whom he had a productive mutual exchange of views on specific areas of Soviet-US cooperation that could be improved. Lee stressed that the American people and government had a friendly attitude towards the Russian nation and its citizens, but the Soviet government had no credibility in the West because of its strong opposition to private property rights and its refusal to pay past debts.

Based on certain indications, Lee thought he would have the opportunity to meet personally with Stalin, who was by that time the Central Committee Secretary General, but the meeting never took place.

The American journalist recorded his impressions of his visit to the Soviet Union in two books titled USSR: A World Enigma and Present-Day Russia. The first book was released in the US in 1927 not long after his ten-day visit to Moscow, while the second appeared the following year with significant additions.

In his books, Lee did not predict the rapid downfall of the politicians he met, but did detect some contradictory beliefs and a lack of unity in the Soviet leadership. He distinguished the radical Bolshevik internationalists—the advocates of the dictatorship of the proletariat—from the nationalist-minded Bolsheviks, whom he considered to be pragmatists. Lee tried to evaluate the personalities of two radical Party leaders, Leon Trotsky and Nikolay Bukharin, based on their statements in the press, which he quoted in his book. He considered Bukharin the most dangerous radical for the world community, citing his inflammatory Communist International speeches. Lee was well aware that such slogans as “Down with imperialism!,” “Proletarians of all countries, unite!,” and “Factories to the workers!” did not pose a real threat to the US or the Western world. There was nothing behind these slogans except a desire to influence mass consciousness in the direction the Bolsheviks wanted. Lee maintained that the strongest antidote against this was a high standard of living.

Lee unexpectedly discovered a key thought in Leon Trotsky’s writing, of which he took note: if clear signs of the economic downfall of capitalism were not seen in the West in the next few decades, the USSR would not be able to surpass it in terms of labor productivity and product quality. It was pointless to chase an express with a freight train, and the Bolsheviks would have to admit that their Marxist theory-based socialistic experiment had proven to be a fatal mistake. Lee had no doubts that capitalism would win out despite the shortcomings of Western civilization, and the Soviet system would have to adapt to capitalist society by initially borrowing its accomplishments and then ultimately joining it.

As for establishing diplomatic relations with the US, Lee said the USSR needed to meet several preliminary conditions. It had to earn the respect of the global community by fulfilling all of its international obligations, even to the capitalists, and exile all organizations calling for revolution in other countries. In this regard, he emphasized the deconstructive role of the Communist International. “The Russian people as a people are all right. The great enemy of mankind is the Communist International. The supreme problem is how to drive a wedge between the Communist International and the Russian people so that the Russian people them selves will come to feel that they want none of the International or its works.” In addition, as an advocate of liberal values, he called for introducing “real freedom of thought, action and belief in the USSR and creating a judicial system based on the principles of true justice and law.

Even though for obvious reasons he concealed the actual role he was playing in fulfilling Rockefeller’s instructions during his trip to Moscow, Lee represented his ideas as his own personal thoughts and even arranged for his book to be printed privately. In the US, he was nevertheless accused of conducting the policy of the Red Commissars in the country and of having being “bought” by the Soviets.

Soviet authorities were not particularly thrilled with the book, either. While Deputy People’s Commissar for Foreign Trade Lev Khinchuk called the book “timely and important as an expression of the position of the business community,” he also found the ideas put forward in the book unacceptable for Soviet society. The popular Soviet newspaper Za industrializatsiyu [“For Industrialization”] wrote that “Ivy Lee expects the communist spirit to ‘disintegrate’ from the development of trade.”

Nevertheless, it can be said with a certain degree of confidence that Lee’s visit produced positive results, as he might have presented another decisive argument for the Soviet leadership to finally chart its course towards the possible expansion of multilateral cooperation with the United States.

On September 1, 1927, the Politburo founded the Permanent Commission for Technical and Scientific Relations with America. The commission included Aleksandr Serebrovsky, the head of Azneft who had visited the US three years earlier and met personally with Rockefeller.

That same year, the American-Russian Chamber of Commerce opened a permanent representative office in Moscow. The chamber’s subsequent activities were crucial in coordinating the efforts of the most forward-looking and clear-headed members of the US business community towards normalizing political and economic relations with the USSR, as well as expanding trade and economic ties between US banks and companies and Soviet economic organizations. The fact that members of the American-Russian Chamber of Commerce were the ones concluding the largest financial and trade contracts with the USSR economic agencies in 1927 and 1928 illustrates the importance of the chamber’s role.

Even after the US State Department and Department of Commerce lifted some restrictions on lending for Soviet purchases in the second half of 1927 and trade volume increased, the nonrecognition policy nevertheless continued to have a negative effect on the development of economic relations between the two countries.

By 1927–1928, further growth in US-Soviet economic ties and pressure exerted by business groups on the US administration to create an environment in which such ties could expand finally prompted the US government to lift a number of restrictions on trade and economic relations with the USSR.

One of the biggest changes in this new policy was renewed lending for US exports to the USSR. In October 1928, Amtorg signed a contract with General Electric for a five-year loan worth up to $26 million, to be used to buy electrical equipment in the US and export it to the USSR. The agreement with General Electric led to more active talks with other large companies such as Ford Motor Company and General Motors. On May 31, 1929, talks with Ford culminated in the signing of a large contract for shipment of automobiles and spare parts to the USSR in addition to providing technical assistance in building the Gorky Auto Works.

US exports to the Soviet Union were on the rise in 1927 and 1928, and the USSR became the biggest importer of several types of US engineering products. In 1928 the USSR imported 10.1% of all tractors exported by the US, 4.6% of all metal-working machinery, 7.1% of all mining equipment, 6.9% of all petroleum equipment, 8.9% of all excavators, and 1.6% of all electrical equipment. In 1929, these percentages all increased, roughly doubling for tractors, metal-working machinery, and electrical equipment.

In 1928 and 1929, Graver Corporation provided Winkler-Koch cracking units to the Batumi refinery on the basis of a long-term loan. Graver Corporation later also supplied cracking units to refineries in Tuapse (1930) and Yaroslavl (1932). Other US companies that supplied equipment to the Soviet refining industry from 1928 to 1930 included Foster-Wheeler Corporation (New York) and Badger and Sons (Boston).

Relations between the two countries were bolstered by concession agreements and special contracts on technical assistance signed by Soviet organizations and US companies. As of October 1, 1928, there were nine US concessions active in the USSR and six contracts under which US companies were providing technical assistance, including in the oil industry. By the late 1920s, Soviet-American economic relations were at a level either equal to or higher than the USSR’s relations with Great Britain or Germany with respect to key areas of economic cooperation.

It should be noted that Ivy Lee made two more visits to the USSR and lived to see the establishment of diplomatic relations between the US and USSR in 1933. During the last years of his life, his biggest concern was that Soviet Russia, after pushing for accelerated industrialization and collectivization, not become totally isolated from the global community. “The Russians turned from the ideas of the internationalists to their domestic affairs and realized that they would soon become economically independent and could manage without the United States,” he told his friends. Lee gave his own government just one piece of advice—develop relations with Soviet Russia in such a way that once it saw the achievements of other countries, it would gradually and voluntarily renounce socialism and communism. This is how he suggested solving the “the world enigma of the USSR.” It is now clear that Lee’s prophecy came true; it just took more than 55 years to happen.

Engineer Kapelyushnikov’s Turbodrill

The aggressive implementation of a government program to retool the oil industry was producing visible results by the mid-1920s. The American method of rotary drilling had replaced the rod-tool drilling method in drilling equipment, and by fiscal 1928–1929, rotary drilling had become the undisputed technique of choice in the domestic oil industry (used for 86.7% of drilling in Baku and 73.2% in Grozny). The new technology resulted in a more than tenfold increase in drilling speed and a reduction in drilling costs. Less casing pipe was consumed during well casing using the American method than the old rod-tool method since the well structure was simplified, the initial diameter was reduced, and fewer pipe strings were used. The volume of steel pipes used at production fields was cut by 65–75%, and the cost of drilling decreased from 111 rubles per foot in fiscal 1923–24 to 53 rubles per foot in fiscal 1927–28. Aleksandr Serebrovsky, head of Azneft, said his company realized more than 100–120 million rubles over those four years solely as a result of the improved drilling method.

At the same time Soviet oil fields were starting to employ the new US method, testing began on a new well drilling method which was to open a new era in the development of the oil industry and was the brainchild of the talented Russian engineer Matvey Kapelyushnikov (1896–1959). Kapelyushnikov graduated from the mechanical department of Tomsk Technological Institute in 1914 and then worked as a design engineer for a company in Baku. In May 1920, he was appointed chief engineer at one of Azneft’s largest production companies. After analyzing the drilling business and correctly concluding that rotary drilling was replacing the archaic rod-tool drilling at fields on the Absheron Peninsula, Kapelyushnikov very perceptively uncovered a serious flaw in the American method. In rotary drilling, the engine rotor that spins the drill string holding the drill bit is located on the surface, so if the drill pipe string is very long, all that weight has to be rotated just to spin the small drill bit which is drilling rock at great depths. Only a small part of the energy used for rotation is used productively, while the rest is wasted. Pipes gyrate, their outer walls rub against the rock walls of the borehole, and the inner walls are worn away by the sand that is always present in clay drilling mud. As a result, the drill pipes wear down quickly, break, become warped, and require frequent replacement.

Kapelyushnikov began to ponder ways to rectify this flaw. A detailed study of scientific and technical literature pointed him in the right direction and he realized the only solution was to construct a reliable, high-performance downhole drilling motor.

Technical solutions for building downhole drilling motors and similar drilling technology appeared at the end of the 19th century and resulted in a hydraulic downhole motor (Brandt, 1875), a turbine downhole motor (Westinghouse, 1883), a rotating downhole hydraulic motor (Russian engineer Kuzma Simchenko, 1895), a downhole hydraulic motor (Valitsky, 1895), and a turbine ram for quick-blow drilling (Prushkovsky, early 20th century). The inventors designed these drilling devices so that the motor controlling the drill was not located on the surface but attached directly to the drill bit to rotate it. Design flaws prevented these motors from being put into actual use, but still, all downhole motors had one thing in common—the drill bit was rotated directly without intermediary gear mechanisms.

Kapelyushnikov’s hard work finally produced the long-sought-after result: the first efficient downhole motor—the geared turbodrill. Kapelyushnikov submitted a patent application for the invention in Moscow on September 26, 1922.

The first test design of Kapelyushnikov’s turbodrill weighed about one ton. The turbodrill’s cylindrical shell held a motor with a single-stage turbine, which was put into motion by the flow of drilling mud pumped in via the drill pipe. The turbine was connected to the drill bit via a gearbox which reduced the drill bit rotation speed.

The turbodrill prototype was tested for the first time in summer 1923 in water off a pier belonging to the former Baku Oil Company. It was then tested at a well at the Surakhany oil field. Several feet were drilled during this test, which was conducted in the presence of Party official Kirov and all the Politburo members of the Party’s Baku committee. In 1924, at the Surakhany oil fields, the world’s first well was drilled using Kapelyushnikov’s turbodrill, with a depth of about 2,000 feet.

Tests of the downhole motor designed by Kapelyushnikov confirmed the motor’s operating capability. The benefits of such a turbodrill, namely that only the drill bit rotates during drilling, were immediately apparent to petroleum engineers. The heavy pipe string did not rotate and only ran along the inside of the well as it became deeper. It turned out that it was much easier to drill with the turbodrill at great depths since the pipe did not cause any friction with the well wall. The accident rate with pipes also declined considerably compared to the old rotary drilling method. With the support of Kirov, huge orders were placed with the Maltsev mechanical plant for production of the new turbodrills.

The Soviet government gave Kapelyushnikov two major awards for his invention: the Order of the Red Banner of Labor and the Order of Lenin. The government of the Republic of Azerbaijan granted him the title of Hero of Labor of the Azerbaijani Socialist Soviet Republic.

Further testing revealed, however, that the distinct advantages of Kapelyushnikov’s turbodrill as compared to rotary drilling were somewhat blunted by the fact that the turbodrill could only operate for a few hours at a time and the average operating speed of turbine drilling lagged behind that of rotary drilling under identical conditions. The weakest components of the first turbodrill design were the turbine and the gearbox. The turbine could only operate for a few hours, while the moving parts of the gearbox wore down quickly as a result of high pressure and the flow of drilling mud entering the crankcase, requiring frequent replacements.

The news of Kapelyushnikov’s patent was published in the Soviet press on August 31, 1925. The patent was officially granted for 15 years effective September 15, 1924. Curiously enough, Kapelyushnikov had applied for and received a patent in Great Britain back in October 1923.

The invention of a turbodrill in the USSR soon attracted the attention of the US engineering community. In 1928, the US journal Petroleum asked Kapelyushnikov for a description of his invention and invited him to present a report on the turbodrill at the World’s Fair of Petroleum Equipment in Tulsa, Oklahoma in 1929. In addition, Standard Oil of New York and Texaco Inc. asked Amtorg officials to demonstrate well drilling using the turbodrill at US oil fields. The Soviet government decided to grant the request and sent a drilling crew to the US led by Kapelyushnikov with two gear-based turbodrills.

Kapelyushnikov presented reports in the US on the operating principles of his turbodrill and then demonstrated drilling with the downhole motors the crew had brought from the USSR at a well owned by Texas Oil in Earlsboro, Oklahoma.

In an interview with a leading Soviet newspaper, Kapelyushnikov commented on the early stages of his trip: “We agreed to drill consecutively, first with the rotary drill and then with our turbodrill. The experiments showed that under identical conditions, i.e., a depth of about 700 meters [2,300 feet], with 16.5 liters [4.4 gallons] of drilling mud being pumped per second, the turbodrill drilled 60% faster than the rotary method—which amazed everybody. Energy consumption by the turbodrill was about a third of the amount used in rotary drilling. As we wrote to Moscow, this success resulted from the powerful pumps and rolling cutter bits. We also discovered several more flaws in the design of the turbodrill. We determined that the drilling mud needs to be cleaned of sand, which sometimes comprises up to 50% of the mud. The presence of sand led to severe wear on the blades in the single-stage turbine. At the same time, the idea arose to build a multistage turbine like the one successfully designed by engineer Lyubimov.”

The Soviet drilling crew conducted more demonstrations with the turbodrill in the US over the next two years and on the whole withstood a tough test by experienced and demanding US drilling specialists.

Emphasizing the crew’s success, Kapelyushnikov described the results of the turbodrill testing: “The appearance of our turbodrill in summer 1929 made a big impression on American drilling equipment manufacturing engineers as well as drill operators. Petroleum engineering groups in America are currently very interested in the problem of deep drilling at 10,000 feet since it is extremely difficult to drill at such depths using the rotary method. Following the testing of the turbodrill, US petroleum publications have recently been printing more and more statements saying that the delivery of drilling power to the bottomhole is the only solution to the problem of deep drilling.”

The two years Kapelyushnikov’s crew spent working at US oil fields likewise made an enormous impression on the international business and engineering community. Several foreign companies—and not just US firms—began contacting Soviet trade representatives, and Kapelyushnikov directly as well, with proposals to purchase or license the new invention. The Soviet government, however, decided instead to make further improvements to the turbodrill on its own and retained the exclusive rights for its use. Little justification for this decision could be found, though, since the Soviet Union did not produce rolling cutting bits or powerful pumps at the time and did not employ methods to clean drilling mud satisfactorily. Under such conditions, the introduction of turbodrilling, which would be pursued vigorously over the next nine years by Party leadership as well as Sergey Kirov personally, failed to produce the desired result. Turbodrilling accounted for only 1.1% of drilling throughout the country in 1927, and by 1932 this share had only increased to 3.9%.

The turbodrill was used for the first time in the New District at the Grozny oil fields in 1928. Grozneft noted in its industrial and financial plan that “18,478.6 meters [60,625 feet] were drilled in the New Grozny District in the 1927–28 operating year using the rotary method, of which turbodrilling accounted for 483.7 meters [1,587 feet].”

The turbodrilling system introduced by Kapelyushnikov provided a clear direction for how to resolve complex engineering challenges that would be faced in building a commercial version of the turbodrill, which occurred in 1934 when a creative group of Soviet engineers led by Pëtr Shumilov developed a multistage gearless turbodrill. By 1940, this group had built a new multistage turbine equipped with a reinforced single-stage gearbox that provided the required drilling speed directly on the shaft and could be adapted to drill every kind of rock seen in the field. This not only changed the negative attitude that drilling experts had displayed towards downhole motors but also led to the adoption of turbodrilling in almost 80% of USSR drilling operations.

The 1929 Ukhta Expedition

The USSR’s transition to a policy of accelerated industrialization in the late 1920s forced Party leadership to devote more attention to the exploration and development of hydrocarbon resources in new areas, including the Timan-Pechora region.

By that time, the Komi (Zyryan) Autonomous Region had been in existence on this territory for eight years, and questions had begun to arise about the region’s economic foundation, including its industrialization, and about the development of the Komi territory’s natural wealth, both its forests and its subsurface resources, but above all Ukhta petroleum. Fundamental changes needed to be made to the economy of the primarily agricultural region, which was not in a position to resolve such issues on its own, owing to a lack of roads and a proper work force. Party leadership thus came up with the idea of using prison labor to carry out economic operations under the supervision of special agencies. They were called correctional labor camps, and their mission was to develop natural resources in the remote areas of the European part of the North.

On June 27, 1929, the Politburo passed a secret resolution, “On the Use of Prison Labor,” which was officially put into effect by a resolution of the USSR CPC on July 11. The Joint State Political Directorate [OGPU], a state security organization, was put in charge of its implementation. After receiving approval from the Politburo, the OGPU began implementing the project. On June 28, the OGPU set up the Northern Special Purpose Camp [SEVLON], which was given instructions to develop natural resources near Ukhta and Pechora, explore for crude in Ukhta-Izhma District, cut down forests in the Arkhangelsk Region, and build a railroad from Pinyug to Ust-Sysolsk (179 miles) and a highway from Ust-Sysolsk to Ukhta (205 miles).

Prior to this, OGPU officials met in Moscow in spring 1929 to determine what measures needed to be taken to implement the important mission of exploring for oil fields in the region. As part of preparations for the meeting, the OGPU consulted with two respected geologists: Professor Aleksandr Chernov, a well-known researcher of the Pechora territory, and former Deputy Director of the Geologic Committee Nikolay Tikhonovich, who was also a prisoner at Butyrka Prison. He later recalled: “I was invited to a meeting by eight people I did not know. They asked me point-blank how to get to Ukhta, what kinds of things to take, what kinds of equipment, how many provisions, etc. I wrote down the route for them and what kind of supplies to take. I wrote that everything needs to be brought there, right down to the last nail. I showed them two routes: the old route and the sea route by which heavy cargo could be transported.... We organized an expedition of 195 people.”

What emerged from the Moscow meeting was a route for the expedition, a plan for transporting complex drilling equipment and instruments to the taiga and roadless region, and a group of qualified workers that had been selected for the mission from among the prisoners. In May 1929, the OGPU central office sent two senior officials, Sergey Sidorov and Eduard Skaya, to the Solovetsky prison camp to resolve some practical issues. Meanwhile, necessary equipment was being prepared for shipment to the Pechora territory. All-Union Communist Party (of Bolsheviks) [AUCP(b)] members Dmitry Rusanov, a fifth-year student in the geologic department of the Mining Academy, and Ivan Kosolapkin, a drilling expert from the Grozny fields, were invited to take part in this work. By July 1929, the expedition staff had been assembled at the Solovetsky camps and provided with the necessary equipment.

The National Archives in the Komi Republic provide details about the trip and the first months of the OGPU expedition. These documents include copies of dispatches to the director of the department for the northern camps from OGPU expedition head Sergey Sidorov (in August–September 1929), a report on the travels of the Ukhta Expedition, and a report on the condition of the Chibyu fields. Among other things, the reports say, “The expedition began loading onto the USEVLON ship Gleb Boky on the pier of the city of Kem at 7 a.m. on July 5, 1929 and finished at 11 p.m. the same day. The ship could not accommodate all the cargo, which resulted in more than two rail cars worth of flour as well as some food and household goods being left behind in Kem. A group of 139 prisoners was then loaded onto the ship, which left the Kem pier at 2 a.m. on July 6.”

On August 21, 1929, the OGPU expedition arrived at its destination at the mouth of Chibyu Creek, where the Chibyu production field of the former Neft Partnership had previously been located, and where the production field of the Arkhangelsk Regional Economic Council had been located in 1920–21. All the buildings at the former field had been boarded up and sealed by the Izhemsk Local Economic Council. A cursory inspection revealed a steam engine, two boring and drilling machines, a kerosene refinery taken from the field of the engineer Gansberg, and other equipment. Expedition member Aleksandr Kulevsky recalled the trip in his memoirs: “We arrived in Chibyu during the day and my heart sank at the sight of the wild and bleak picture we saw. A black, ridiculously oversized single tower and two miserable huts surrounded by nothing but taiga and swamps.”

The crew, already exhausted from the difficult trip, faced an enormous amount of work. Fifteen barges had to be unloaded immediately and the remaining structures needed major repairs. Meanwhile, barracks, a sauna, a bakery and several other facilities had to be built in order to somehow accommodate the crew.

Bad weather and the approaching fall drove the prisoners to complete work as quickly as possible. On the second day after arriving, they were split up into different work areas and a 12-hour workday was established. They began repairing the surviving facilities, installing equipment, and logging.

A second group of 50 prisoners, including 20 specialists, arrived via the same route along the Izhma River in October 1929. Two of these specialists were the well-known geologist Nikolay Tikhonovich, who later took over the camp’s geologic service, and Ilya Ginsburg, a specialist in geology and mineralogy who was to handle the extraction of radioactive water from the Ukhta field. Mining engineers also arrived, including Pëtr Antonov, Konstantin Erdely, Zinovy Khurgin, Andrey Voloshanovsky, and Ivan Kosolapkin, the drilling expert from Grozny.

Also arriving with this group were OGPU officials who would later go on to become the core of the Ukhta-Pechora camp: Yakov Moroz, G. Ivanov, V. Gauk, and others.

The final structural touch was put on the expedition in late October and early November 1929 when, on November 2, Chekist Yakov Moroz (Iosema) (1898–1938) was appointed head of the expedition with special authority.

The expedition members went to work with a minimal amount of equipment and a small work force. During the initial stage, the geologists were asked to determine the actual probability of extracting commercial crude. Their attention was first drawn to the presence of oil shows and the likelihood of its commercial extraction. They determined that the well drilled by the Neft Association in 1917 had produced a slight oil flow after being repaired. This, combined with oil flows at other wells, enabled the expedition to produce the first five tons of oil in the region over a four-month period in 1929.

Geologist Nikolay Tikhonovich (1872–1952) determined the best area to drill new exploratory Well 5, and the well was sunk and construction began in late November 1929. However, the winter of 1929–1930 was especially harsh, creating serious difficulties for the expedition, and the transition from preliminary excavation to drilling was not made until April 4, 1930, and it was not until October 25, at a depth of 1,270–1,275 feet, that light crude began to flow out at a rate of more than 4 tons per hour. The Chibyu industrial field of Devonian oil had been opened and the first major success of the OGPU’s Ukhta Expedition had been recorded.

In April 1930, the Pechora Group was formed as a part of the Ukhta Expedition to perform further geologic work. It was comprised of Nikolay Zhigalovsky, the head of the group; Konstantin Voynovsky-Kriger, the head of operations; Semën Zhemchuzhin, the topographer; Andrey Dukhovsky, the collector; and seven workers. On April 8, the group set off on horseback and on foot for a month-long trip to the village of Medvezhskaya, where a farmer named Loginov had discovered oil shows near the Little Kozhva River.

Once the ice began to melt in Pechora in late May, the group was able to travel to the prospective area, which was 50 miles from the mouth of the river. The low levels of surface oil shows they found there were not sufficient to confirm the presence of a large oil field. The Pechora Group nevertheless decided to focus on the Ydzhid-Kyrt region, where a coal deposit was discovered.

In addition to performing a large amount of construction work, the prisoners were also hurriedly building oil derricks. Whereas only two derricks were built in 1929, ten were erected in 1930. Atotal of 4,167 feet of hole were drilled in 1930, compared to only 768 feet in 1929. Significant progress was also seen in 1930 in the extraction and processing of Devonian crude. Some 97 tons were extracted that year, with 49 tons refined and 12 tons of kerosene produced. The expedition also discovered large coal reserves while recovering radium from Ukhta field formation water. A road was built connecting the Ukhta oil-bearing area with other parts of the country, and a real opportunity emerged to create an industrial base for the Komi Autonomous Region.

The size of the expedition increased significantly in late 1930, reaching 824 people by the end of the year. Of this number, 445 individuals were working outside the main Chibyu base, while the rest were working at internal facilities.

The main outcome of the OGPU’s Ukhta Expedition in 1929–30 was the creation of a solid foundation to subsequently increase production of crude reserves, coal and other subsurface resources discovered by the expedition. Camp leadership highly praised the significant results the expedition had achieved. Lazar Kogan (1889–1939), head of the Main Administration of Prison Camps [GULAG], expressed gratitude to the head of the Ukhta exhibition, Yakov Moroz, and the entire management group for the “exceptional energy and perseverance they displayed in performing difficult assignments of special national importance.” The archives do not indicate how the OGPU rewarded the prisoners whose heavy labor made it possible to achieve these results.

Soviet political leadership viewed Kogan’s report on the success in the Timan-Pechora region as confirmation of their strategy. A special commission led by Valery Mezhlauk (1893–1938), the deputy chairman of the VSNKh, was set up as part of the Labor and Defense Council in 1931. This commission held several meetings in April 1931 that were attended by representatives of the OGPU, Soyuzneft, the Main Geologic Exploration Administration, the People’s Commissariat for Water Transportation, the Northern Territory, and the Komi Autonomous Region. In a resolution dated April 18, 1931, “On Ukhta Petroleum,” the commission decided “to allocate five percussion drilling units; approve a program for the drilling of 17,185 meters [56,381 feet] of exploratory wells in various parts of Ukhta, Verkhne-Izhma, and Pechora in 1931–32; send a gravimetric group from the Main Geologic Exploration Administration to work in the Ukhta-Pechora region in summer 1931; and allocate an additional 2.56 million rubles for 1931 from the reserve of the USSR CPC in addition to the 1.2 million rubles previously allocated.”

On April 21, 1931, the VSNKh passed a resolution, “On the Development of a Fuel Base in the Northern Territory,” which proposed that the Ukhta Expedition considerably expand its exploration operations for crude. The People’s Commissariat for Water Transportation was instructed to provide support for expedition cargo shipments and to reinforce the Pechora river fleet, while the People’s Commissariat for Railroads was instructed to cover the prepared section of the Ust–Vym–Ukhta road with gravel during the summer season of 1931. The decree also called for the construction of three to four exploratory mines near Vorkuta and the Adzva (a tributary of the Usa River) and for the production of at least 7,700 tons of coal.

In summer 1931, the OGPU’s Ukhta Expedition was transformed into the Ukhta-Pechora Correctional Labor Camp, and OGPU Senior Major Yakov Moroz was appointed its director. Five territorial camp divisions were created: Chibyu, Vodnin, Verkhne-Izhma, Pechora, and Usa (the center was the village of Ust-Usa, which would shift later to Vorkuta). Each camp division was comprised of several sites “filled” to varying extent—from several hundred to several thousand prisoners—and had its own director, office building, registration and distribution department, accounting department, commandant’s office, mess hall, food and clothing storerooms, medical unit with dispensary, hospital (about 20 beds), cultural and education center, mandatory isolation cell for punishment, and camp investigative unit.

The central management structure of the Ukhta-Pechora camp also began to expand at the same time. The prisoner personnel center turned into the registration and distribution department and other divisions were also set up, including a civilian personnel department, a special department, an encoding bureau, a general accounting office, a medical department, a cultural and educational department, a central isolation cell for punishment, an OGPU operations department, a central hospital at Vetlosyan, a separate paramilitary security service unit, a camp prosecutor’s office, and a camp court.

On November 16, 1932, the USSR Labor and Defense Council passed a resolution, “On the Organization of the Ukhta-Pechora Trust,” charging the trust with “exploring and developing subsurface resources of commercial value in the Pechora Basin and all auxiliary work related to it; building railroads and dirt roads; constructing housing and cultural institutions; and building repair plants to support existing and future mines, oil fields and river shipbuilding.... The OGPU is charged with the trust’s management.” OGPU officials immediately approved the Charter of the State Ukhta-Pechora Trust, with detailed regulations for its extensive production activities.

The first preparatory stage of the Timan-Pechora region’s industrial development had been completed. The village of Chibyu had been built in the area where the Chibyu Creek meets the Ukhta River and was surrounded by a large number of camp sites that previously had provided labor for the construction of industrial and housing facilities. In a relatively short time, the prisoners had built a power station, a machinery and repair plant, and a refinery, which at the time consisted of an atmospheric tube installation and bitumen production equipment. In addition, minable radium deposits were also discovered near the Chut River during the search for crude. A field was set up to extract the radioactive water and a concentrate plant was built to recover radium via a complex chemical process.

The First Permian Oil

During this period of accelerated industrialization, systematic geologic exploration for crude oil was carried out for the first time in several promising regions of the country in response to instructions from Soviet Party leadership.

In early May 1929, the VSNKh Presidium declared it necessary “to perform an extensive search for new oil fields” and “to draw up a plan for the broad survey of the Urals to search for oil and gas fields.” The Uralneft state trust of the Ural oil industry was set up not long after this declaration. News from Perm about the discovery of the first oil field in the Urals had a major impact on the decisions passed by VSNKh officials.

The trailblazer of the Perm oil rush was mining engineer Pavel Preobrazhensky (1874–1944), a former Omsk government minister under [White Army leader] Admiral Kolchak, who fell into the hands of the Bolshevik tribunal and only just managed to avoid being shot as the result of a personal appeal made by writer Maxim Gorky to Lenin. Preobrazhensky’s death sentence was commuted to exile in Perm, where he began working as a geology professor at Perm University. Shortly thereafter, the Geologic Committee’s Ural Division asked him to research the archives of the former owners of Perm mining and salt plants, a group that included the businessmen Stroganov, Lazarev, and Ryazantsev, among others. In the archives, he found reference to a local pharmacist who, at the request of a technician from one of Nikolay Ryazantsev’s plants in Solikamsk, analyzed samples of yellow salt with bright red streaks in 1910 and discovered a considerable amount of potassium in them. Professor Preobrazhensky also studied samples of rock taken during the drilling of several brine wells and discovered samples of pink salt while examining the salt collection at the Berezniki Soda Plant, where several boreholes had been drilled. Reports from 1916 indicated that samples from the Lyudmilinskaya brine well had included sylvinite (KCl + NaCl). In addition, a 1918 analysis of brine from a Solikamsk plant revealed slightly elevated potassium content in several samples from the salt mines at Solikamsk and Usolye. Preobrazhensky also noticed that the Perm salt had a slight light-blue and yellow tint and a bitter taste. All of these factors gave him reason to conclude that this region had prospects for potassium. Based on an analysis of the materials he had collected, as well as the research of well-known scientist Nikolay Kurnakov (1860– 1941), Preobrazhensky presented a report to the Geologic Committee’s Ural Division on the Solikamsk region’s prospects for potassium salts and proposed a plan for exploration drilling.

Soviet agriculture was in dire need of vast amounts of potash fertilizers at the time and had been relying on imports from Germany, and so the Geologic Committee as well as the VSNKh paid close attention to Professor Preobrazhensky’s report and were very hopeful about reported prospects. That same year, Preobrazhensky was promoted to the position of senior geologist in the nonmetallic minerals exploration department of the Geologic Committee’s Leningrad Division.

On the basis of his preliminary work in the Kama River Valley and with the Geologic Committee’s permission, Preobrazhensky began planning and preparing an expedition. Even in those difficult times, sufficient funds were found to organize a geologic expedition to prospect for potassium in the Solikamsk region. The professor decided to conduct exploratory drilling near the former salt mines and began prospecting in spring 1925. He managed to acquire a Calyx drilling rig, brought in a mobile steam power plant from Leningrad, and transported the required drilling equipment and tools from the Caucasus and Urals. One of his major challenges was determining where to drill the first well. After analyzing all the geologic data, Preobrazhensky selected an area just outside the city of Solikamsk, on the shore of the Usolki Creek, which fed into the Kama River. Drilling of the first well began in early September 1925. On the night of October 5, the well hit a thick mass of potassium salt (secondary sylvinite with KCl content of 17.9%) at a depth of 301–303 feet. Well 2, which was located about a mile to the west, revealed a potassium deposit more than 360 feet thick. Thereafter, large potassium deposits were discovered in all the wells drilled in 1926, eventually culminating in the opening of the famed Verkhnekamsk potassium salt field. Preobrazhensky later said that drilling produced “stunning results.” The 19 wells drilled in Solikamsk and Berezniki all revealed thick layers of carnallite and sylvinite.

In an effort to delineate the boundaries of the new field more clearly, Preobrazhensky decided to drill the 20th well in an area near Verkhnechusovskiye Gorodki [Upper Chusovaya River Settlements], where table salt had been produced since the time of the Stroganovs. On October 18, 1928, the crew of drilling expert Prokopy Pozdnyakov began drilling a well on the shore of the Rassoshka River. Core drilling was used for much of the work, with retrieval of rock cores to the surface. At a depth of 509 feet, rocks were drilled that could have contained potassium salt, but no signs of the salt could be found in the well. Preobrazhensky nevertheless insisted work be continued, and on March 30, 1929, a column of cracked rocks was brought to the surface from a depth of 1,076–1,086 feet containing traces of petroleum and escaping gas. On April 16, oil-covered rock was raised from a depth of 1,198–1,217 feet, which was described in a drilling journal as “an exuberant film of oil with gas bubbles.” The heavy oil of the Kama Valley had made its first appearance.

The geologist Slyusarev delivered the first bottle of oil to the Ural Regional Economic Council in Sverdlovsk on April 26, 1929. The regional newspaper Uralsky rabochy [“Ural Worker”] reported the news the next day in an article titled “Oil Found in Urals.” On April 28, the seventh Ural Congress of Soviets opened in Sverdlovsk. As the Party had issued a directive at the Congress “to decisively strengthen the prominence of the Urals and make it one of the most important industrial regions of the USSR” over the next five years, the first batch of oil was seen as a kind of gift to the regional leadership. The Perm delegate’s address was followed by the ceremonial presentation of a bottle of oil and oil-bearing rock samples to the Congress, as well as optimistic assurances that a “second Baku” would soon emerge in the region. The local newspaper Zvezda [“Star”] triumphantly published an article on April 30 stating: “Oil Discovered in Perm Region.”

Drilling work near Verkhnechusovskiye Gorodki intensified following the discovery of oil. At a depth of 1,312 feet, the oil-saturated limestone turned watery, a sign that the lower boundary of the petroleum deposit had been reached. Drilling operations were stopped on May 1, 1929 out of fears that an oil gusher could be produced and there would not be sufficient earthen dikes or containers to collect the oil.

On May 4, 1929, Zvezda wrote: “Another pearl has been added to the countless riches of the Urals—Permian oil. The size of the reserves and what kind of revolution it will create throughout the entire Urals economy will be seen in the near future. The bedding of the oil reservoir is located in the heart of a solid industrial triangle between Perm, Chusovaya and Lysva and is also in close proximity to the industrial mining railroad.”

Moscow soon received word of the oil prospects in the Kama Valley, and the VSNKh Presidium passed a special resolution, “On Oil Exploration in the Urals,” on May 7, 1929. The minutes of that meeting state: “It is hereby noted that, when the Geologic Committee was drilling an exploratory well for potassium salt on the Chusovaya River at a distance of 10 versts [6.6 miles] from the Komarikha railroad station, porous limestone containing oil and gas was found at a depth of 350 to 400 meters [1,148 to 1,312 feet].... The discovery of oil in the Central Urals near a number of metallurgical plants is enormously important. A widespread search for new oil fields in the Urals must be launched.”⁴²

The government’s decision to accelerate the development of the Perm field was proven correct on May 12, 1929, when Preobrazhensky, the head of the geologic expedition, sent a telegram to Sverdlovsk stating that hand bailing of oil from the well had determined it could indeed be used commercially.

On May 14, 1929, the Presidium of the Verkhnechusovskiye Gorodki District Executive Committee passed a special resolution stating: “The discovery of oil in the Urals near our district is of great state importance. All industries in the Urals will undergo a radical change, and the discovery of oil is of significant economic importance for our district as well.” Two days later, on May 16, Zvezda published another article under the huge headline “Such Oil Has Never Been Seen Before in the USSR.” The article, datelined Verkhnechusovskiye Gorodki (May 15), read: “Comrade Ukhtin, head of the technical division of the USSR Geologic Committee, told our correspondent that the Urals oil is different from the Grozny and Baku oil in terms of color and smell. The Urals oil is of higher quality than the Grozny oil and it burns very well. Urals oil will apparently not be suitable for motors without first being refined, but it is so viscous that asphalt can be manufactured from it. Such oil has yet to be seen in either Baku or Grozny.”

Academician Ivan Gubkin praised the reports from Perm and said: “We could be dealing with oil reserves whose significance for industry is difficult to imagine. One thing is for certain—we have oil on the slopes of the Ural Mountains. Moreover, according to preliminary data, it is available in quantities that are of commercial significance.” The opinion of this respected oil scholar played a decisive role in the passage of VSNKh Decree 731 of May 18, 1929, on the creation of an organization within the Main Mining and Fuel Administration [Glavgortop], to be named the Uralneft Special Bureau, which was to manage all work related to exploration for oil and gas fields in the Urals.

News of the discovery of Perm crude spread quickly throughout the country. A telegram sent in May 1929 by the North Caucasus territorial committee of miners to the Urals regional committee stated: “The newly discovered oil region is of paramount importance to the Soviet Union, and as we wish to develop the region quickly, we will assume a leadership role in this area along with Grozneft. We are sending equipment and 49 skilled workers. Please telegraph what is needed most urgently. We will provide all possible assistance.”

A government commission led by Iosif Kosior (1893–1937), deputy chairman of the VSNKh Presidium, arrived in Perm on May 21, 1929. The next day, the delegation traveled to Verkhnechusovskiye Gorodki along with Professor Preobrazhensky aboard the steamship MOPR. A rally was held on the pier as soon as the ship had docked. The tone of the speakers and the mood of the many people who had gathered to meet the ship were best reflected by a giant banner that read “We Shall Wake the Sleeping Resources!” It did not take much time for the commission members to inspect the drill site and listen to Preobrazhensky’s convincing report. The results were obvious—there was every indication to confirm the presence of “big” oil in the Kama Valley. The first test of Well 20 was conducted after the government commission had left in early June, and the flow rate was 44 tons per day. Pravda, the Party’s central newspaper, reported the well was producing oil on June 11, 1929.

The visit of Kosior’s commission and the successful test of the well resulted in the implementation of new organizational measures. On June 12, 1929, the VSNKh issued Decree 827, which informed Party leaders of the statute the VSNKh Presidium had approved on June 6 concerning the Uralneft bureau within Glavgortop. On the same day, the council issued Decree 830, appointing Roman Buchatsky director of the Uralneft bureau, with Ya. Pelevin and P. Yermolayev as his deputies. On August 15, the Upper Chusovaya oil well was put into commercial production and assigned number 101. Approximately 8,800 tons of oil was produced from this first well over its 11 years of operation (until October 1940).

Before long, an even higher government agency was studying the issue of the Perm oil. On September 6, 1929, the Labor and Defense Council passed a resolution instructing “the USSR VSNKh and the USSR State Planning Committee to support 1929–30 target figures for a Uralneft rate of development that would enable at least 50 wells to be drilled with the assured use of the most advanced drilling methods and of methods most suitable for the soil.” On September 30, the VSNKh passed a terse resolution, “On the Plan for Uralneft Operations in 1929–1930,” which read: “In accordance with the Labor and Defense Council’s resolution of September 6, 1929, the drilling program presented by Uralneft is approved.”

Given the importance of the work and the large amount of drilling that needed to be completed, the VSNKh passed a decision creating the Uralneft Trust on October 27. The Sterlitamak office of exploratory drilling led by Konstantin Kholdyrev and Kirill Prits was soon set up within the organization. Veteran oil expert Dmitry Shashin managed the drilling operations, while the respected geologists Aleksey Blokhin and Varvara Nosal were in charge of the geologic service. In a report on operating activities for fiscal 1929–30 signed by Roman Buchatsky, the Uralneft Trust indicated that it employed 650 blue- and white-collar workers as of December 1929. By the winter of 1929–1930, a total of 29 wells had been started near Verkhnechusovskiye Gorodki, plus two more near Kizel-Gubakha and one each at Cherdyn, Usolye, Shumkovo, and Ust-Kishert.

On June 1, 1930, Uralsky rabochy published an article titled “36 Derricks at Uralneft Fields,” in which it stated: “Well 1 was put into operation on May 24 with a daily production rate of 55 tons. Drilling continued at Wells 2, 3, 4, 6, 8, 11, and 14 on May 21–25. Over this period, 132.3 meters [434 feet] of hole were drilled (935.7 meters [3,070 feet] were drilled in early May). The foundation and steam boilers are being modified at Well 12, the boiler room and frame are being built at Well 13, the foundation is being laid under the steam engine at Well 15, the foundation is being fortified at Wells 18 and 25, the boiler room and bridge deck over the river are being assembled at Well 25, and circular saws are being installed at Well 27. Wells 101 and 1 have produced 364 tons over 25 days. At present, Uralneft has 36 wells that are being operated, drilled or are in the process of being built.”

The ambitious program for the development of the Chusovaya oil region required the creation of a special construction organization. On January 27, 1930, the All-Union Oil and Gas Industry Association issued Decree 18, in which it proposed that the Neftestroy Trust “urgently set up a separate office in Perm called Uralneftegazstroy [‘Ural Oil and Gas Industry Construction and Erection Trust’].” A. Gollender, aformer deputy head of Azneftestroy, was appointed director of the new company.

Senior Soviet Party leadership attached particular importance to Perm oil at the time owing to the realization of rather ambitious plans in the Urals region as part of the USSR’s industrialization. On February 19, 1930, the VSNKh confirmed as much when it issued Decree 868 “On the Renaming of Uralneft’s Verkhnechusovskiye Gorodki Oil Fields as the Comrade Stalin Oil Fields,” a reflection of how the oil industry’s role was perceived in the industrialization process. As part of plans to fortify the infrastructure and logistics of the exploration being carried out in the Urals, in May 1930 Azerbaijan sent 104 rail cars to the region carrying equipment and instruments (including 17 drilling rigs and a power station).

Even though record milestones had been prescribed for the oil industry, the bar was set even higher by a Central Committee report presented by Stalin at the 16th Congress of the All-Union Communist Party on June 26, 1930. In that report, Stalin noted: “Under the Five-Year Plan, the oil industry was to produce 977 million rubles worth of products by 1932–33. But, in 1929–30, it is already producing 809 million rubles in products, that is, 83% of the amount projected in the Five-Year Plan for 1932–33. That means we are fulfilling the Five-Year Plan for the oil industry in some two-and-a-half years.”⁴³

Expressing his support for the Party line at the Congress, Valerian Kuybyshev (1888–1935), the chairman of the VSNKh Presidium, stated: “No mission is more important for the geologic agencies than to firmly establish our ore reserves and fuel resources which can be used to further develop metallurgy.” A resolution passed by the 16th Congress on July 12 states: “The country’s industrialization can no longer be based solely on one southern metallurgical foundation. A vital condition for the country’s rapid industrialization is the creation of a second core coal and metallurgical center for the USSR in the East using the coal and ore fields of the Urals and Siberia.”

Following a Party forum in Perm in July 1930, a conference was held at the Uralneft office that included academicians Ivan Gubkin and Aleksandr Arkhangelsky, as well as Ural Regional Executive Committee Deputy Director V. Andronnikov, Uralneft Director K. Rumyantsev, and other prominent workers. The conference resulted in the creation of a broad program to perform a geological survey of the oil-bearing capacity of the Kama Valley.

The arrival of 725 skilled specialists from Azneft and Grozneft in the Ural region in October 1930 provided a new impetus for further oilfield exploration and development. In December 1930, a larger trust called Vostokneft was established on the core of the Uralneft trust to search for petroleum in the Kama Valley, Bashkortostan, Syzran, the Trans-Baikal region, and other eastern regions of the country.

The first All-Union Congress of Geologists and Petroleum Experts was held in Moscow in January 1931. The Congress discussed in detail the geologic structure of the western range of the Urals Mountains and the oil fields and drew up a new, broader plan for exploration near Verkhnechusovskiye Gorodki. The plan was approved by Soyuzneft executive committee resolutions of January 25 and February 5, which set forth plans for exploration and production wells around Verkhnechusovskiye Gorodki.

At the October 27, 1931 meeting of the oil branch of the VSNKh Main Administration for Fuel, Vostokneft presented a program for the following year that noted a need to complete exploration in “the following Urals regions—Verkhnechusovskiye Gorodki, Krasnousolye, and Yurezan.”

Implementation of such a large-scale program, however, ran into serious obstacles owing to a lack of financing and a low level of logistics support. Ural Region officials were becoming more and more pessimistic because no new free-flowing wells were being discovered and they had been unable to report new “victories of labor” to Moscow on a regular basis. This also caused concern among local Party officials. On June 4, 1932, the secretary of the Verkhnechusovskiye Gorodki District Committee sent a memo to Ivan Kabakov, the first secretary of the Ural regional committee of the All-Union Communist Party, describing the current situation at the Verkhnechusovskiye Gorodki oil field in detail: “From the time that oil was discovered in 1929 until today, more than 50 wells have been drilled, amounting to 24,771.06 linear meters [81,270 linear feet]. Of that number, five wells were found to contain commercial quantities of oil, with flow rates of up to 1,100 tons per month, and most of the drilled wells showed signs of oil-bearing capacity.... I believe, Comrade Kabakov, that after spending tens of millions of rubles on exploration and not yet obtaining a conclusive result concerning Ural oil, it would be highly premature to leave Verkhnechusovskiye Gorodki since exploration is far from finished and considerably fewer funds are needed now than the previous millions. As much as individual employees of the company have tried to prove otherwise, the fact remains that Wells 1, 1a, and 48 have been producing oil for three years—oil that is extremely rich in terms of its chemical properties and of commercial significance.”⁴⁴

The geologic exploration carried out over the following two years did not produce any major results, but the Kama Valley oil business was aided by a lucky break. On June 16, 1934, while drilling an artesian well at the construction site of the Krasnokamsk Pulp and Paper Plant, drilling specialist Ivan Pichugin encountered water with a strong hydrogen sulfide odor and a thick oily layer at a depth of 525 feet. M. Eliashberg, the former head of the paper plant, recalled: “A well was being drilled near the building to provide the acid workshop with cold artesian water. I was extremely concerned that water had yet to surface despite the considerable depth of the well. Finally, when the well was at a depth of 180 meters [591 feet], drilling specialist Ivan Mikhaylovich Pichugin joyfully shouted ‘water!’ Water had indeed surfaced, but it smelled strongly of hydrogen sulfide. We could not even think of using it for production. The drill specialist and I dejectedly poured the water into a bottle and a film formed on the surface at that moment.... It became clear: this was oil! This occurred on June 16, 1934.”⁴⁵

The People’s Commissariat for Heavy Industry noted in a report: “By early 1935, the Sverdlovsk region and the western slope of the Urals had been enriched with another oil field, at Krasnokamsk. By late February 1935, after six months of exploration, a field was discovered with 8.5 square miles of oil-bearing deposits and indisputable total oil reserves of 66–88 million tons. Field research over the next three to four months should determine the best method for organizing the industrial production of Krasnokamsk oil.”⁴⁶

Several more new discoveries later took place on Perm lands, along with many remarkable events that are now considered milestones in the storied annals of the Russian oil industry.