Kimberlite deposits in Yakutia — an autonomous republic that
spans about half of Russia’s far east — supply nearly 98% of Russia’s total
rough output, which makes up about 29% of global diamond production.
However, the pipeline’s midstream and upstream segments are
not faring well. The most recent report by the republic’s Ministry of Economy,
summing up the results for 2016 (the report for 2017 is still pending),
revealed that its polished production had declined 27.4% to an all-time low of
$66.7 million. Jewelry production in Yakutia fell 23.8% in 2016 to $21.5
million, the area’s lowest output since 2011.
Cutting crisis
The republic has a total of about 10 cutting and polishing
businesses — including small-scale artisanal ones — as well as 38 registered
jewelry manufacturers, according to Vasily Vlasov, president of the Yakutian
Guild of Manufacturers of Diamonds and Jewelry. Three of Yakutia’s major
polishing factories — Yakutian Diamond Company (YDC), the Nyurba polishing and
jewelry factory, and the Pokrovsk polishing factory — closed in 2014 and 2015,
essentially leaving only one large all-Yakutian polisher and jewelry maker, EPL
Diamond. The other large cutting and polishing businesses remaining in the
republic are, notably, of Indian origin. They include KGK Group’s Russian
operations SD Diamonds and DDK — both long-term Alrosa customers — and Choron
Diamond, a Russian branch of Choron Diamonds Group, which has been active in
Yakutia since 1996.
Since 2014, Yakutia has been affected by the same country-wide
economic crisis that has seen the luxury-goods consumer market shrink
dramatically. It also suffers from excessive taxation and administrative
barriers that impede the industry workflow, like in the rest of Russia, Vlasov
stated. However, he noted that the problem seemed to be deeper here.
“Yakutia produces most of the diamonds in the country, yet
Kristall Smolensk polishes on average twice as many as the entire republic
annually. Yakutia is also the country’s major producer of mined gold, yet it is
Kostroma, located in central Russia, that is the leader in gold-jewelry
manufacturing,” he said. “We need to change the law. Yakutia is the only hub in
the Russian east that has the entire diamond pipeline in place, but it needs to
be supported and developed.”
Vladivostok steals the show
Yakutia had high hopes the federal government would
designate a special economic zone there, boosting its polishing and
jewelry-manufacturing industry.
“We even had a space allocated for the project in our
innovations park Olonkho Land,” said Vladimir Chlenov, president of the
Yakutian Chamber of Commerce and Industry. “But then the government decided to
launch a diamond-bourse project in Vladivostok. As a result, India’s KGK is
already setting up a polishing factory there, in the Eurasian Diamond Centre
[EDC], leaving our polishers in dire straits.”
Vlasov said he didn’t know why the government had decided to
develop a diamond center in Vladivostok rather than in Yakutia. But he believes
the republic’s industry could benefit from finding a way to join the
Vladivostok venture.
“In the current situation, cooperation and
integration are the only ways forward,” he contended. “If we miss yet another
chance, [small-scale] artisanal production is the only future Yakutia will have.
Given the achievements and level of excellence we have to offer — for example,
EPL Diamond is known for its hearts-and-arrows brand of diamonds, Firing Ice,
while the republic’s jewelry-manufacturing tradition, with its one-of-a-kind
signature designs, goes back centuries — this would be a shame.”
Article from the Rapaport Magazine - April 2018. To subscribe click here.