Yves here. I must confess to having undue interest in this topic by virtue of having a tiny window into what was then and probably still is called \u201cthe trade,\u201d as in the New York City diamond district on 47th Street. Back in the 1980s, big and real jewelry was A Thing among female Wall Street professionals, a status marker showing you belonged in the same room as the heavyweights. For instance, a friend bought the perfect double stand of pearls Claire Booth Luce was married in. She later traded them in for bigger but slightly flawed pearls, because the Claire Booth Luce pearls were so good that they could easily be mistaken for fakes.<\/p>\n
During this time, I got to know the only goy who was accepted in the diamond trade. The then class act in the industry, Ralph Esmerian, had taken my contact under his wing. He had a remarkable eye and dealt in estate jewelry and related collectables. He understood how undervalued Cartier mystery clocks were then and easily traded a third of all of them, but lacked the capital to buy and hold on to them for their eventual, large appreciation.<\/p>\n
I was intrigued by the dealings in the trade, that dealers would lend extremely valuable inventory to each other to show to end customers, on \u201cmemo\u201d as in small pieces of paper describing the item and the price, and the party that borrowed the collateral had either to return it in a month or pay the stipulated price.<\/p>\n
Esmerian later went to prison for fraud and embezzlement. He had purchased the tony fine jewelry retailer Fred Leighton (storefront on 66th and Madison) and became overextended. He resorted among other things to the fraud of double-pledging collateral for loans. He was convicted and sent to prison.<\/a><\/p>\n To my knowledge, my contact, the Esmerian protege, never engaged in funny business in the trade, but his business also went down in flames, in part due to big flashy jewelry going out of fashion, but also to him extending his business into other fine collectables and misrepresenting his wares (for instance, selling modern copies of Art Deco Normandie arm chairs as originals).<\/p>\n By John Helmer, the longest continuously serving foreign correspondent in Russia, and the only western journalist to direct his own bureau independent of single national or commercial ties. Helmer has also been a professor of political science, and an advisor to government heads in Greece, the United States, and Asia. He is the first and only member of a US presidential administration (Jimmy Carter) to establish himself in Russia. Originally published at Dances with Bears<\/a><\/strong><\/em><\/p>\n Mazal u\u2019 Bracha<\/em>\u00a0has been the Hebrew expression for sealing transactions in the international \u00a0diamond trade for hundreds of years \u2013 in Amsterdam until World War II, and Antwerp since then.\u00a0Literally, it means \u201cluck and blessing\u201d. Sociologically, it means that if you default, the community of Jewish diamantaires will impose the sanction of religious law<\/a>,\u00a0\u00a0redline your credit, and you will be unable to take goods on approval, buy, borrow, trade, or continue in the business.<\/p>\n In the major Jewish diamond business centres \u2013 Antwerp, Ramat Gan (Tel Aviv), New York \u2013 the potency of this \u00a0blessing has been waning under pressure of falling consumer demand, rising borrowing costs, company bankruptcies, government sanctions, and sanctions-busting<\/a>. \u00a0\u00a0 And that was before the Palestine war began.<\/p>\n On March 1, after heavy lobbying by Israeli and American diamantaires<\/a> \u00a0\u2013 and despite resistance from the Belgian businesses<\/a> \u00a0\u2013 new restrictions were imposed with the aim of driving Russian diamonds \u2013 rough and polished \u2013 out of the major jewellery markets of Europe and the US. \u00a0The new scheme has a catch, however. \u00a0It is now the US Customs Service with whom diamond buyers and traders must shake hands.<\/p>\n In a rule issued on March 1<\/a>, the US Government\u00a0requires importers to sign a statement declaring: \u201cI certify that the non-industrial diamonds in this shipment were not mined, extracted, produced, or manufactured wholly or in part in the Russian Federation, notwithstanding whether such diamonds have been substantially transformed into other products outside of the Russian Federation.\u201d<\/p>\n The US Customs Service doesn\u2019t speak Hebrew and it lacks Talmudic authority. Even if it did, there is increasing doubt among trade lawyers that there is anything equivalent to the traditional Jewish community sanction to support the blessing. Israel\u2019s engagement in what the International Court of Justice (ICJ) has ruled to be \u201cplausible genocide<\/a>\u201d \u00a0also\u00a0exposes the Tel Aviv-New York trade to the charge of aiding and abetting war crimes and crimes against humanity.<\/p>\n This is more than a case of the pot calling the kettle black. It\u2019s a case of the Israeli diamantaires financing the genocide of Gaza and the war against the Arabs at the same time as they attempt to drive competing diamond producers and rival diamond traders out of the market. The so-called blood diamond sanction of the Kimberley Process<\/a>, which was first intended to curtail central and west African diamond supply since 2003, \u00a0\u00a0\u00a0is now being applied to Russian diamonds by the Israelis, the Jewish communities engaged in the diamond trade, and the US Government.<\/p>\n Martin Rapaport, a Tel Aviv-New York diamond trader and publisher of an industry bible called Rapaport.com<\/a><\/em>,\u00a0\u00a0\u00a0has published a warning that the new system is not only an unenforceable mazal-bracha<\/em>\u00a0system, but it is also a devious scheme to channel diamond certification through loopholes in Antwerp, at the expense of alternative, stricter channels in Tel Aviv and New York; and also to favour the Anglo-South African De Beers diamond group over the Russian rival miner Alrosa and other diamond miners in Africa.<\/p>\n \u201cPreviously, goods \u2018substantially transformed\u2019 (i.e., manufactured) in countries such as India were technically legal in the US,\u201d Joshua Freedman of the Rapaport group reported on March 11. \u201cThe US and other member countries have released information on how enforcement will work, but many questions remain. The industry is still unsure how the ban will work in both the short and the long term. Dealers have begun sending goods to the US with self-declaration statements, but there is uncertainty about what will happen if customs authorities ask for evidence about a particular shipment and whether the US will add more complex requirements later\u2026[there are] allegations that Belgium is using the sanctions to benefit its own diamond sector\u2026Those importing diamonds into the EU [European Union] between March 1 and August 31 may choose between doing so via the Diamond Office<\/a> [DO] \u00a0in Antwerp, \u2018leading to the issuance of a G7 certificate,\u2019 or by providing documentary evidence with detailed information about the diamond and its origin. Single-origin Kimberley Process (KP) certificates \u2014 or mixed origin for De Beers DTC <\/a>[Diamond Trading Company] goods \u2014 qualify as acceptable proof of origin, according to question 12 of the EU\u2019s FAQs. However, there is an important caveat: documentary evidence is accepted only \u2018provided that goods of CN codes 7102 31 00 and 7102 10 00 with a weight equal to or above 1 carat are submitted without delay\u2019 to the Antwerp Diamond Office. These codes are for rough diamonds. In other words, all 1-carat or larger rough diamonds entering the EU must go to this Belgian entry point<\/a>.\u201d<\/p>\n In an international marketplace in which weak demand<\/a> for diamonds is already squeezing the profitability of the trade in key jewellery manufacturing centres in India and China (Hong Kong), \u00a0the Russian strategy is to bust the sanctions, defeat De Beers and the hostile Israeli-American \u00a0operations, and create alternative businesses structures, Of course, \u00a0the details are now secret.<\/p>\n There are diamantaires in the market who express confidence that Alrosa, Russia\u2019s dominant diamond miner, will be as successful as the Russian oil, gas, and coal exporters who have been under sanctions for longer. \u201cThe market will be in a state of shock for the first few months,\u201d comments a Russian diamantaire now based in Dubai<\/a>.\u00a0\u00a0\u00a0\u201cMost likely, the cost of stones may increase by 10% to 20%, but after the first shock, a correction will occur. Eventually, workarounds will be found for the export of Russian diamonds. To establish parallel imports \u2014 from Russia to the outside \u2014 will not be so difficult.\u201d<\/p>\n There are also sources who claim Alrosa will fail. Says a diamantaire in Europe, \u201ceven before Putin\u2019s invasion, the Russian share of rough production was under 30% in value and volume. Since then of course, all production and sales figures coming out of Alrosa have been pure make-believe and are up for the next Nobel prize for fiction. It could be said there will be more incentive to prospect for future rough in Africa or Canada, or for De Beers and others to lengthen the life of some of their mines \u2013 as they are already doing at Venetia [South Africa<\/a>]. I don\u2019t see any real change in the trading and polishing centres, in the diamond jewellery-consuming countries, and in the structure of the pipeline<\/a> \u00a0generally. Just less legal Russian rough.\u201d<\/p>\n In outcome, these two diamond industry sources may be predicting the same thing. The reason is what in the Russian diamond business is called submarining<\/a>.<\/p>\n For the past thirty years, as Russian language diamond publications have come and gone, this website \u2014 and before it the diamond media of London and Johannesburg \u2014 have reported on Russian diamond mining, manufacturing, exports, \u00a0and submarining. By contrast, diamond industry reporters in the US, Belgium, UK, and Israel generally follow the Russian war line of their governments; in South Africa diamond reporters follow the De Beers line. Click to open the archive<\/a>.<\/p>\n The most recent chapter in Rapaport\u2019s attempt to mobilize the US and EU sanctions agencies against Alrosa was published last December<\/a>. But at that time the Russians made an alliance with the African miners against the Rapaport scheme for tightening US sanctions. The Indian diamantaires attempted to play both sides \u2013 \u201cneutral, waiting to see who would win\u201d.<\/p>\n In the December 6 report, the prediction for 2024 was uncertain. \u201cIf the diamond market cracks in half, as the oil market has done, the value of market price-setters like Rapaport\u2019s Rapnet<\/em>\u00a0will be erased. No one in the trade is ready to predict with confidence what the alternative diamond trade will look like, and what impact it will have on diamond pricing.\u201d<\/p>\n In charts of mine production of rough diamonds by weight in carats, and of value in US dollars, this is what the global diamond business looked like at the beginning of last year:<\/p>\n OFFICIAL DIAMOND MINE PRODUCTION BY COUNTRY, 2022 \u2013 BY WEIGHT IN CARATS, BY VALUE IN USD<\/strong><\/p>\n As visible as diamonds are in the global trade in luxury goods, and as dominant as Alrosa is at the mining and export end of that trade pipeline, the value of diamonds in Russia\u2019s commodity exports is tiny. Even if the US-Israeli sanctions were to be as effective as Rapaport hopes they will be, the reduction in exports would not have a significant impact on Russia\u2019s balance of payments \u2014 in 2022, Russian commodity exports, according to the Federal Customs Service, reached $591.5 billion; exports of diamonds by contrast fetched $4.7 billion, less than 1%<\/a>.\u00a0\u00a0\u00a0As Forbes Russia<\/em>\u00a0reported <\/a>recently, \u201cof course, this may negatively affect the financial performance of Alrosa, which produces most of the Russian diamonds, because a small part of the stones is sent to the domestic market. But everyone understands that the bankruptcy of the state-owned company is not in danger. Even on the news of the suspension of diamond sales in the fall of 2023 due to the demand situation, the company\u2019s shares sank by only 2.5%.\u201d<\/p>\n FIVE-YEAR SHARE PRICE TRAJECTORY OF ALROSA ON THE MOSCOW STOCK EXCHANGE<\/strong><\/p>\n Russia is also the only state in the diamond mining world capable of doing for the state\u2019s benefit what De Beers has traditionally done to protect and profit its own diamond-pricing cartel \u2013 buy and sell mined rough with the state stockpile, known in Russia as the Gokhran<\/a>. \u00a0For the backfile on the politics of Gokhran\u2019s diamond stockpiling, click to read.<\/a><\/p>\n Starting in 2022, the diamond exchange in Dubai, United Arab Emirates (UAE), had overtaken Antwerp as the leading import-export hub or exchange between the mines,\u00a0cutters and polishers, and the jewellery industry in the worldwide trade<\/a>. \u00a0\u00a0The rivalry between Dubai and Antwerp is, however, muted on both sides, covered by the traditional double-dealing of the business; the blood-diamond sanctions and the anti-Russia sanctions; and now the political and military vulnerability of the UAE in the war of Israel and the US against the Arabs.<\/p>\n For the official Dubai exchange statement on competition with Antwerp, read this<\/a>.<\/p>\n Last week the Dubai Diamond Exchange (DDE) announced that in 2023 it had broken its\u00a0\u00a0records for rough and polished diamond trading, as it continues\u00a0its year-on-year revenue growth averaging 11% over the past five years. A total of $21.3 billion-worth of rough diamonds were traded by the DDE\u00a0in 2023, the exchange reports<\/a>; \u00a0carat volume was up, \u00a0offsetting\u00a0the 13% decrease of rough price over the year. The value of polished goods\u00a0traded in Dubai surged by 32% year-on-year, reaching $16.9 billion in 2023. Total value of diamonds traded through the exchange in 2023 came to $38.3 billion. Laboratory grown diamonds (LGD) are also being traded through Dubai; the value of LGDs traded in 2023 rose 10% year-on-year, reaching $1.6 billion.<\/p>\n According to Ahmed Bin Sulayem, Executive Chairman and CEO of the diamond exchange\u2019s parent company \u00a0Dubai Multi Commodities Centre (DMCC)<\/a>: \u00a0\u201cAt $38.3 billion in rough and polished trade last year, these figures are further proof of Dubai\u2019s meteoric rise as a global diamond trade hub. Our appeal to diamond industry segments across the world is exemplified by our ability to maintain strong trade volumes in rough whilst rapidly advancing polished and lab-grown diamonds. The polished segment now represents almost half of our diamond trade, consolidating our status as the world\u2019s number one hub for rough and polished and, with major industry players continuing to be drawn to Dubai away from the old hubs of yesterday, DMCC will continue to set the benchmark for the services and value that diamond traders need to grow and prosper.\u201d<\/p>\n That\u2019s putting it politely. The more Alrosa rough which is submarined into Dubai and then traded out of DDE as polished, the more effectively the Israel-American sanctions will be defeated, and the traditional prosperity of the Belgians and the Jewish diamantaires of Antwerp will go down with them.<\/p>\n Russian sources confirm the trend toward price discounting, as has already occurred in Russia\u2019s oil and coal exports. \u00a0According to Alexei Kalachev, an analyst at Finam in Moscow, the geography of supplies in the diamond pipeline will shift to less profitable markets, where the prices for stones are lower and discounts are higher, such as in India. \u201cA direct ban on the import of diamonds cut from Russian diamonds will be difficult to implement, if at all possible.\u201d He also acknowledges that Russian diamonds will remain on the US and European markets, but only in a \u201claundered\u201d form. He cites Germany as an example, which refuses Russian oil, but does not give up Indian fuel made from it. At the same time, the markets of Asia, Africa and Latin America will remain open for Russian diamonds, Kalachev adds. The margin of profit for diamond trade intermediaries, particularly the Indians based in Dubai, is jumping.<\/p>\n Roman Semenikhin, CEO of Ingosstrakh Investments Management Company,\u00a0\u00a0declines to answer questions from foreign reporters, but told Forbes Russia<\/a><\/em>\u00a0last October: \u201cIn the event of a significant and prolonged decline in demand in foreign markets, we are likely to see significant purchases of diamonds from Alrosa by Gokhran as one of the measures to support the company and the industry as a whole.\u201d \u00a0Other Moscow industry analysts following Alrosa agree that the reorientation of Russian diamond exports to the UAE, India, and China will limit the impact of the new sanctions on Russia. They warn that in the short term, by reducing supply to the market there will be an increase in diamond prices, and that in turn will stimulate growth in the production and sale of artificial stones \u2013 the LGDs.<\/p>\n Boris Krasnozhenov, head of the Securities Markets Analytics Department at Alfa Bank, says that in 2023 the value of jewelry-quality diamonds on the world market was in the range of $155-$160 per carat. He is forecasting \u201ca significant increase in prices\u201d this year.<\/a><\/p>\n Deputy Finance Minister Alexei Moiseyev, who supervises the state stake in Alrosa and the diamond stockpile in the Gokhran, says that in the international market it will be impossible to compensate for the artificial restriction of the supply of Russian diamonds from other sources. So there will be a combination effect \u2013 sharp decrease in supply, sharp rise in the price of natural diamonds, and sharp increase in \u201caffordable synthetics<\/a>\u201d.<\/p>\n Moiseyev has held one of the fifteen seats on the Alrosa board which is carefully balancing the revenue requirements for the Sakha republic and the regional districts which depend on preserving mine production, employment, tax and social funding levels; stock levels at both Alrosa and Gokhran; and the pricing of exports. In effect, this means reversing twenty years of the privatization scheming of Russian oligarchs, promoted<\/a> at the Finance Ministry and on the Alrosa board by the ex-finance minister now in exile, Alexei Kudrin. \u00a0\u00a0\u00a0Re-nationalization of Russian diamonds is another of the results of the Israeli-American sanctions.<\/p>\n In the present circumstances no Russian source will discuss these details.<\/p>\n![\"\"](\"https:\/\/www.nakedcapitalism.com\/wp-content\/uploads\/2024\/03\/00-diamond-.jpeg\")
<\/p>\n![\"\"](\"https:\/\/www.nakedcapitalism.com\/wp-content\/uploads\/2024\/03\/00-diamond-2.png\")
<\/p>\nClick to read: https:\/\/johnhelmer.net\/<\/u><\/a><\/code><\/p>\n![\"\"](\"https:\/\/www.nakedcapitalism.com\/wp-content\/uploads\/2024\/03\/00-diamond-3.png\")
![\"\"](\"https:\/\/www.nakedcapitalism.com\/wp-content\/uploads\/2024\/03\/00-diamond-4.png\")
<\/p>\nSource: https:\/\/www.visualcapitalist.com\/<\/u><\/a>
On these official figures, the Alrosa share of world output by weight was 35%; 21.8% in value. The corresponding De Beers totals \u2013 counting De Beers mines in Botswana, South Africa, and roughly half of the Canadian figures \u2013 are 35.3% and 46.2%. Alrosa\u2019s 41% share in Angola\u2019s diamond mining output has not been counted in this comparison; Alrosa\u2019s stake in the Angolan mine at Catoca is in negotiation for a form of divestment<\/a>. \u00a0<\/code><\/p>\n![\"\"](\"https:\/\/www.nakedcapitalism.com\/wp-content\/uploads\/2024\/03\/00-diamond-5.png\")
<\/p>\nThe federal government shareholding of Alrosa amounts to 33%; the Sakha region and local district shareholding is\u00a033%; the\u00a0free float, 34%. Nominal market capitalization at the current share price is Rb551.4 billion; the share price of Rb74.70 is 25% above the wartime low of Rb59.88 set in March 2023. Source: \u00a0https:\/\/markets.ft.com\/<\/u><\/a><\/code><\/p>\n![\"\"](\"https:\/\/www.nakedcapitalism.com\/wp-content\/uploads\/2024\/03\/00-diamond-6.png\")
<\/p>\nSource: https:\/\/rapaport.com\/<\/u><\/a>
There is rancour in the diamond business to the attempted profiteering from the March 1 sanctions by the Antwerp diamantaires; especially hostile are the\u00a0African miners and the Indian manufacturers. Their opposition is reflected<\/a> in this industry-wide letter sent to \u00a0the G7 member states last month. \u00a0\u201cWe stand united against forcing all participants who wish to sell their polished diamonds in the G7 markets, to send their rough to Belgium first. As diamond experts, we know that this would add no value to the objectives of the G7 member states and would result in a major restriction for all non-Russian diamonds, with terrible impacts on the industry. It would also force, a functioning trans-global trade into one centralised point that would create bottlenecks in supply and give unwarranted power and advantage to one participant at the detriment of all others\u2026 The process detailed by the EU, as it stands, undermines Sovereign African Governments to send their diamonds directly to the market of their choosing. It also undermines legitimate local industry beneficiation and could encourage smuggling, which would be counterproductive.\u201d \u00a0<\/code><\/p>\n![\"\"](\"https:\/\/www.nakedcapitalism.com\/wp-content\/uploads\/2024\/03\/00-diamond-7.png\")
<\/p>\nSource: https:\/\/www.statista.com\/<\/u><\/a><\/code><\/p>\n![\"\"](\"https:\/\/www.nakedcapitalism.com\/wp-content\/uploads\/2024\/03\/00-diamond-8.png\")
<\/p>\nAhmed Bin Sulayem of the DDE and DMCC, meeting Deputy Finance Minister Alexei Moiseyev in Dubai on January 12, 2024<\/a>. Sulayem will return the visit to meet Moiseyev in Moscow later this year. <\/code><\/p>\n
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