The word Naftalan, can be traced to the Greek word "naphtha", meaning pertaining to oil, and the Azerbaijani suffix "-alan", which is of the verb "to take" (and literally meaning "oil buyer"). It is the center of a unique petroleum industry, with a grade of oil referred to as "Naftalan". While Naftalan crude oil is too heavy for normal export uses (unlike Azerbaijan's plentiful Caspian Sea oil), it contains about 50 percent naphthalene, a hydrocarbon that is the active ingredient in coal tar soaps, which are used to treat psoriasis. As such, it is only used for medicinal purposes. People using the oil generally sit in a bath and are covered in oil up to their necks.
Marco Polo wrote of a magical oil which made an excellent 'unguent for the cure of cutaneous distempers' - ie it helped skin diseases
Though he never visited Azerbaijan the oil he was referring to was most probably from today's Naftalan, whose name means 'to take the oils'. Apocryphally the source was discovered when a medieval herder decided to leave behind a particularly sick, mangy camel. The beast rolled over into an oily pool and was left for dead. But when the herder returned some weeks later, he found the camel miraculously cured. Remarkably he chose to credit the oil rather than divine intervention.
With the liberalizing of the imperial Russian economy in 1874, a German chemist by the name of Jager developed Naftalan oil into a major export product. By the turn of the 20th century, jars of Naftalan ointment were so common that even the Japanese soldiers attacking Russia in the 1904-5 war were found to be carrying jars of the stuff. Enemy soldiers being protected by a Russian product was yet another embarrassing irony for the Tsar facing military defeat, revolution and the chagrin of his wife's improprieties with Rasputin.
Attractively planted with hundreds of pine trees, Naftalan village was developed as one of the USSR's most snobby sanatorium towns attracting visitors from across the Union. Oil from these spas is claimed to be an effective treatment against psoriasis, arthritis and rheumatism. At the height of their Soviet-era popularity, the spas in Naftalan had 75,000 visitors a year. The combination of violent ethnic conflict in nearby Nagorno-Karabakh and the end of Soviet-sponsored free trips brought the industry to its knees in the late-1980s. All but one of the older spas were converted into refugee housing. The naphthalene in the oil gives it therapeutic properties, however it is not clear whether it may also be a carcinogen. The remaining spa, the Naftalan Therapeutic Center, had 1,000-beds. New spas are planned to attract tourists.
Curiously there's a sister sanatorium in Croatia (www naftalan hr).