Oil of Russia

A serious shortcoming in the industry’s activity during that period was the lack of a clear, objective vision of the future. There was no substantiated response to the question of what was in store for the industry over the near term and in the future, or how to prepare for change. This key issue was adversely affected by the monopolization of petroleum science by the dominant scientific school of Academician Aleksandr Krylov, which advanced an original and semitheoretical foundation for the Party political leadership’s short-sighted plans to sharply increase oil production in the country by stimulating production, with minimal outlays.

A serious problem was created in the industry by the widening of the gap between growth of industrial reserves and oil production volume, resulting from the constant reduction in the volume of exploratory drilling. There was also a significant increase in energy consumed by the industry for its own needs, which stemmed from a need to lift larger and larger volumes of water-cut product; this also drove up industry expenses.

Maintaining oil production at the level of 640–650 million tons per year mandated in the Thirteenth Five-Year Plan (1991–1995) required allocating something on the order of 10% of the country’s capital investments to the oil production industry—i.e., some 110 billion rubles, which was 50% more than during the preceding five-year plan—but the government no longer had such resources.

Overall, the situation in the oil industry correlated with increasingly acute socialist economic crisis phenomena caused by the command-administrative system, whose role had grown out of proportion over many years, and by the domination of the CPSU in all areas of the country’s socioeconomic life.

The “restructuring and acceleration” policy brought about by methods of authoritarian modernization made economic changes irreversible in the USSR—the financial system was undermined, inflation rose rapidly, and the former national economic mechanism was thrown into disarray. Day by day, the country’s economic situation rapidly worsened, and the country was moving from commerce to simple bartering. The entire enormous expanse of the Soviet Union began to be ruled by “His Excellency Barter,” and in the general population, “financial reform” came down to exchanging large-denomination bank notes in January and watching prices increase significantly in April 1991, clearly demonstrating the inability of Gorbachëv and the Soviet leadership to rescue the economy from this crisis.

In 1991, the US temporarily unfroze its Strategic Petroleum Reserve, and Saudi Arabia quadrupled its oil production. As a result, the world price for “black gold” fell to $8 a barrel. This was a catastrophe for the USSR, as the cost of oil production had by then reached $9 a barrel in parts of Siberia.

In July 1991, Mikhail Gorbachëv sent a letter to the leaders of the G7 countries, asking that he be included as a participant in an upcoming London meeting of participants. The Western leaders invited him to the meeting, but gave no additional money. Even so, the total amount of debt assumed by the Soviet Union by that time had reached $80 billion.

Having lost the ability to purchase food or feed grain for animal husbandry from foreign countries, the USSR was very quickly seized by a food crisis, which quickly grew into a systemic collapse.

The struggle for sovereignty and independence among the union republics, disagreements in the CPSU and among the upper and regional echelons of the ruling elite, and a furious power struggle on all levels led to the end of the Soviet Union as a single state in December 1991. In its place, 15 independent sovereign states formed within the administrative borders of the former government of the Soviet Union.

Under these very difficult conditions, the entire domestic oil community was faced with finding some optimal way out of this complicated situation, so that the industry might quickly recover lost ground and make its own major contribution to the revival and subsequent development of a new Russia.

Vladimir Lenin (Ulyanov) (1870–1924), head of the Bolshevik government, devoted much time to restoring the oil industry.

Petrograd Military and Revolutionary Committee leaflet from October 25, 1917 addressed to all citizens of Russia.

Joseph Stalin (Iosif Dzhugashvili) (1879–1953), head of the Soviet party and political leadership, regarded the oil industry as a critical link in the cause of industrializing the USSR.

At the 1922 Genoa International Conference, the Soviet delegation headed by Georgy Chicherin (1872–1936) broke the “oil blockade” of Soviet Russia.

Aleksandr Serebrovsky (1884–1938), head of the oil production association Azneft, made a solid contribution to restoring the oil fields on the Absheron Peninsula in the 1920s.

Oil fields on the Absheron Peninsula in the 1920s.

One of the first shock drilling crews on the Absheron Peninsula in the 1920s.

The first oil was discovered in Perm Territory in 1929. The drillers were led by Professor Pavel Preobrazhensky (1874–1944) (fourth from the right).

The Soviet Cracking Refinery, built in 1931, was one of the industrial firstlings of the First Soviet Five-Year plan.

The People’s Commissariat for the Oil Industry, headed by Ivan Sedin (1906–1972) (front row, third from the left), insured the industry’s uninterrupted operations under the most difficult conditions during the Great Patriotic War.

A stream of petroleum products trains departed continually from Soviet refineries, bringing the long-awaited Victory Day closer.

Neftyanyye Kamni [“Oil Rocks”] Field in the Caspian Sea at the end of 1940s was the first experience developing offshore oil fields in the USSR.

In 1960, the discovery of Shaim Field in Western Siberia launched the great oil saga of creation of a new fuel and energy infrastructure for the country.

Rapid development of the enormous Volga Region oil-bearing province, nicknamed “the Second Baku.”

USSR Minister of the Oil Industry Valentin Shashin (1913–1977) was one of the most successful leaders of the industry during the Soviet era.

A view of the monument to commemorate the discovery of the Samotlor supergiant field in Western Siberia in 1965. In 1974, it reached the production level of 110,000 tons of oil per day. And in 1976, it produced 136.6 million tons of oil.