In 2024, Russia’s diamond industry celebrates two milestone anniversaries in its history - 70 years since the discovery of the first kimberlite pipe, Zarnitsa (Summer Lightning), and 75 years from the discovery of the first placer Kosa Sokolinaya (Falcon Spit) in the Vilyui diamond province. Of course, the media did not ignore these anniversaries. And once again, readers were ‘inundated’ with a stream of fictitious - and sometimes deliberately false - facts given by authors with a very peculiar understanding of the word ‘patriotism’. Of course, there is no point in paying attention to such articles in ‘social and political’ publications and even more so to the ‘creativity’ of all kinds of bloggers writing on a topic of the diamond industry. These sources are not a serious reference base by definition and they have practically no influence on shaping an adequate vision of the diamond industry. But information platforms, claiming to be qualified experts due to their affiliation and thematic focus and aimed at people interested in industry issues as professionals, are in a whole different category.
For example, it’s worth digging into the quotes from four articles published in this ‘anniversary’ year and giving short comments (highlighted in italics).
1. YASIA (‘ЯСИА’ in Russian - the information agency belonging to the government of the Republic of Sakha (Yakutia) that is a shareholder of ALROSA) published an article titled “History of Diamond Geology: 70 Years since the Discovery of the First Kimberlite Pipe in the History of the Country” that stated “These works were conducted by Leningrad geologist Natalya Sarsadskikh, who developed a method for searching for diamond deposits using pyropes - garnet group’s minerals accompanying diamonds in kimberlites. Earlier, geologists did not consider pyropes as diamond (kimberlite) indicator minerals.” Comment: The pyrope survey method has been developed and successfully used in South Africa since the early 20th century, the first open publication was in 1914.
2. FORBES (one of the most famous financial and economic journals in the world) published an article titled “How Two Lady-Scientists Found a Diamond Deposit but their Discovery was Appropriated by Other People” which reads the following: “The fact is that Larisa Popugayeva was a member of the Central Leningrad Expedition. And in the area where she discovered diamonds, the Amakinskaya Expedition had been working for many years (unfortunately, unsuccessfully). The leaders of the Amakinskaya Expedition did not want to give the glory [of discovering the deposit] to outsiders, especially taking into account that such a discovery was worth a solid - Stalin’s or Lenin’s - Prize.” Comment: In 1949-1950, the Amakinskaya Expedition discovered over 10 alluvial diamond placers in the basins of the Vilyuy and Markha rivers; it was more than strange to consider such work ‘unsuccessful’. Popugayeva’s discovery made on August 21, 1954 could not in any way be considered sufficient for awarding the Stalin’s or the Lenin’s Prize. The deadline for submitting applications for the Stalin Prize was expected to expire on October 15, 1954; it was obviously impossible to calculate and approve Zarnitsa’s reserves by this date. The Stalin’s Prize was abolished in 1955, and applications for it were no longer accepted, so, the last Stalin’s Prizes were awarded in 1955 according to the applications submitted in 1954. In 1954-1955, the Lenin’s Prize did not exist at all.
3. ROSMINING (positioned as the largest specialized information resource dedicated to the mining industry in Russia) published an article titled “The First Kimberlite”. In it, we come across the following: “Until 1938, the USSR imported rough diamonds from abroad worth over 2 mn rubles, which satisfied only 50 percent of the Soviet industry’s needs. During the Second World War, the USSR purchased rough diamonds from England, but with the beginning of the ‘cold war’, they were declared a strategic raw material and their sale to our country ceased. The USSR had no choice but to declare the search for rough diamonds a priority.” Comment: In 1951-1953, the USSR purchased industrial diamonds in England in a volume an order of magnitude greater than the Lend-Lease supplies, and later on, annual regular purchases - twice as large as the pre-war ones - continued until the end of 1957.
4. MINING JOURNAL (positioned as the oldest Russian monthly journal on scientific, technical and production topics reflecting all aspects of the development of mineral deposits) published an article titled “History of the Discovery of Primary Diamond Deposits in the USSR”, stating: “In the 1930s, all developed countries began to widely use diamonds in technology, the demand for them was rapidly growing. The USSR industry, especially the defense one, struggled from lack of rough diamonds (actually ‘suffocated’) when the industrialization began, and they had to be purchased abroad. Before World War 2, the USSR used an average of 23 thousand carats (4.6 kg) of rough diamonds per year and bought these minerals for over 2 mn rubles (in gold) ... Due to the ‘Iron Curtain’ of the ‘cold’ war, the supplies of rough diamonds to the USSR stopped. Meanwhile, the development of the space industry and the construction of the ‘nuclear shield’ greatly exacerbated the rough diamond problem. The need for rough diamonds was so great that diplomats were involved in the smuggling of industrial diamonds. Diplomatic mail suitcases were filled with rough diamonds that Lebanese mafia ‘laundered’ in Beirut, buying them illegally in Africa.” Comment: Before WW2 (in 1937-1940), the average annual consumption of industrial diamonds in the USSR was 213 thousand carats (not 23 thousand carats). The smuggling of industrial diamonds from Africa, allegedly organized by the USSR, is a fake not confirmed by documents.
‘Anniversary’ texts similar to the abovementioned can also be found in 2024 in many Russian and foreign journals and media having a serious business and scientific reputation. They are a typical example of how the bizarre distortion of both minor and major events, filling the ‘gaps’ with fictitious information and characters, as well as uncritical use of old industry legends, which is quite typical for professional research in this area, result in serious errors in building cause-and-effect relationships and determining the motives of industry players. Attention is focused on spectacular but less important details, the industry history is transformed from an analytical tool into a kind of ‘information accompaniment’ that has nothing to do with corporate decision-making and is used, at best, for exotic designs of the most primitive marketing ploys. The situation is aggravated by the fact that over the past decade, many key positions in the diamond industry have been held by people with professional background unrelated to the diamond business, who had no working experience in the diamond market during the period of its logically consistent existence as a single-channel system. The new generation of management has a superficial and sometimes erroneous understanding of the diamond industry’s history, which makes them unable to analyze new challenges and correlate them with the historical context.
This thesis is well illustrated by current efforts to give polish diamonds the properties of an investment asset once again. Indeed, from the early 1970s to the early 2000s, at least 15 large-scale attempts of this kind were made. These projects involved global financial institutions and over 300 companies specializing in dealer operations with rough and polished diamonds. All possible schemes were used - from the development of standardized ‘polished diamond baskets’ to the creation of derivative financial instruments, and even the issuance of cryptocurrencies based on polished diamonds. All the projects, without exception, failed for objective reasons that were carefully analyzed and described in available sources. But the history of these experiments and all the evidences - based on specific experimental data regarding the impossible successful implementation of such undertakings were completely ignored by the ‘newly converted’ management, who resumed their attempts to give an investment potential to polished diamonds in the 2010s. Of course, the latest attempt made with using polished ‘diamond baskets’ and ‘diamond ETFs” turned out to be a failure, which was easy to predict based on a half-century history of such attempts. But the matter is not only and not so much in another unprofitable failed ‘investment’ experiment, but in the fact that the image of diamonds, their ‘information shell’, was spoiled once again (received another ‘scar’), undermining consumer confidence in this product, which is especially dangerous in today’s environment.
Another striking example of neglecting the historical context is the fatal underestimation of synthetic diamonds’ ability to cannibalize a significant share of the natural polished diamond market. When the flow of synthetic gem-quality diamonds began to increase sharply as a result of the improved CVD and HPHT technologies and decline in their cost, the prevailing opinion expressed by leading natural diamond producers and dealers was that synthetic diamonds did not pose a serious threat and that the markets would quickly separate into natural ‘fine jewelry’ and the synthetic ‘fashion jewelry’ ones, much like it happened to the natural and synthetic corundum markets. To a large extent, this dangerous misconception remains relevant today. This happens because those who still has this misconception do not know (or do not want to take into account) the historical context, in which the synthetic corundum industry was created and developed.
The fact is that when the technologies for corundum synthesis were developed and brought to industrial application (from late 19th century to first quarter of the 20th century), the industry’s demand for such new materials in developed countries was already significant and demonstrated exponential growth. The demand for synthetic abrasives, thrust bearings (‘watch stones’), etc. was initially high, and new synthetic stone manufacturers could increase their production without any sales problems and without making any additional marketing efforts. History does not know a single attempt to conduct a counter-marketing campaign organized by synthetic corundum manufacturers to ‘take very large bites’ of the market share from natural gem-quality corundum stones, since such attempts were not worth the efforts - the costs of cannibalizing a significant share in the relatively small markets of gem-quality colored stones obviously exceeded the size of this share. And over time, this trend became more distinct - the scope of industrial application of synthetic corundum was constantly and rapidly expanding from abrasives to laser technology, and today, the market of these synthetic gemstones exceeds the market of natural gem-quality corundum by ten folds. In the huge (compared to the markets of colored gemstones) polished diamond market, the trend was exactly the opposite - the market of polished diamonds was always many times larger (by value) than the market of synthetic diamonds, and cannibalization of even 20 percent promised a large sum of money significantly exceeding the costs of counter-marketing efforts. Therefore, the development of synthesis technologies and the reduction in the cost of synthetic diamonds inevitably led to a trade war.
The absence of the main argument in the first half of the 20th century that is used today by manufacturers of gem-quality synthetic diamonds in marketing against natural diamond producers should not be ignored. At that time, ecology was a refined academic discipline and was on the periphery of the media’s attention and, accordingly, the mass consumer of jewelry studded with precious stones. Calls for environmental protection by refusing the use of luxury goods obtained as a result of ecosystem-destroying mining were useless as a counter-marketing tool at the time, since consumers at that time did not have (or almost didn’t have) such motives. For today’s generations Y and Z, environmental motives are one of the basic principles determining the consumer behavior. Extremely effective counter-marketing attacks were directed at this target and they have already helped synthetic diamond manufacturers cannibalize a significant part of the polished diamond market.
Thus, the analogy with the corundum market is erroneous, despite being obvious and convincing. Its widespread use by proponents of natural rough diamonds just shows the lack of understanding of the historical context, in which the markets of natural and synthetic colored gemstones separated. Such misconceptions are extremely dangerous because they provoke hopes for an ‘automatic’ division of markets and thereby paralyze the development of effective marketing models capable of resisting the cannibalization of the natural polished diamond market by synthetic counterparts.
These two simple examples can illustrate the need to perceive and study the diamond industry history first and foremost as an analytical tool that helps in optimizing the strategic decisions, and only then as a fascinating study aimed at understanding who, how, and from whom ‘stole’ the orders and prizes awarded for epoch-making discoveries.
Sergey Goryainov for Rough&Polished
