In 1948, Lieutenant General Ivan Nikishov, Chief of the Far North Construction Administration (Dalstroy), come forward with an initiative to disestablish the Yakut Autonomous Soviet Socialist Republic (YASSR) as quite a decorative entity being a bureaucratic obstacle to functioning of the mining industry established under the USSR Ministry of the Interior. It is noteworthy that Ivan Nikishov had a very serious potential as a hierarchy bureaucrat: he was Candidate Member of the CPSU Central Committee, deputy of the Supreme Soviet and Hero of Socialist Labor. For almost ten years he ran numerous camps pertaining to the Dalstroy empire, and even earned distinction in this field having been awarded the Order of Kutuzov of the First Degree used to be given for generalship. A sudden end to the young Yakut statehood was quite real, but as a result of intrigues at the Interior Ministry Ivan Nikishov resigned, and his "Yakut initiative" was never developed.
Nevertheless, almost the entire mining industry in the YASSR had indeed its roots in the Gulag. On the territory of this autonomous republic there were dozens of prison camps within Aldanlag, Dzhugzhurlag, Yanlag and other outfits, the inhabitants of which were used to mine gold, mica, coal, tin, tungsten, and for various construction works. Since the diamond industry in the USSR was also incepted in the Gulag (Kusinlag), it would be logical to expect that after the discovery of diamonds in Yakutia, its development will occur within this system. And indeed, such a plan was outlined. In 1950 and 1951 in the middle course of the Markha River there were discovered several placers, where diamond content was 3 times higher than in the Urals. Once this assessment has been made the Vilyui diamondiferous district was visited by a commission of the USSR Interior Ministry to prepare proposals for the development of these deposits by its chief administration, which included Uralalmaz and Kusinlag. In 1952, the ministry developed a fairly detailed plan of commercial diamond mining in Yakutia, which formed the basis of the draft decree of the USSR Council of Ministers "On measures to increase diamond production and extend geological exploration for diamonds." There is no doubt that if this decree were adopted the Vilyui diamondiferous area would be turned into a Vilyuilag prison camp and the Yakut deposits would have been mined in a quite traditional way for that time.
But almost immediately after the death of Stalin the Interior Ministry was relieved of production functions: fifteen chief production administrations within the Interior Ministry were disbanded by the closed resolutions of the Council of Ministers of the USSR issued on March 18 and 28, 1953. Their production facilities were transferred to relevant ministries, while the camps passed under the control of the Justice Ministry. As a result of mass amnesties and revision of "political" cases the number of prisoners was sharply decreased: if in 1953 there were 2,650,747 persons, in 1954 there were 1,482,297 persons left. At a first glance it may seem that here they were, the fruits of Khrushchev's "de-stalinization," that an era came which was incompatible with the use of slave labor in the name of mythical "communist future." However, it was an illusion, since the Gulag did not disappear – neither as a concept, nor as an establishment. Already in 1954 the system survived a renaissance - it was decided to return the camps to the Interior Ministry once again and to restore the labor camp industrial complexes. There were restored chief production administrations under the Interior Ministry for the atomic project and timber industry, as well as the Dalstroy camp component was revived. Moreover, the development of virgin lands - the symbol of the “Khrushchev Thaw” was not left without establishing new labor camps in Kazakhstan in 1955 to erect the infrastructure for new state farms.
From the late 1920s and before the collapse of the USSR the Gulag was a tool making possible quick concentration of extremely cheap labor force in the right direction. This mechanism was used to its maximum capacity to create the mining industry in the USSR - nickel and platinum mined in Norilsk, coal extracted in Vorkuta, gold recovered in Kolyma and Yakutia and many dozens of other production facilities were mastered by the Gulag; the Soviet Union possessed an immense experience of such mining operations. The Soviet management staff in relevant ministries was forged precisely through this experience – take, for instance the business biography of the above Peter Lomako, the "boss" of the Soviet diamond industry, which was inextricably linked to the Gulag.
Initially, it was clear that development of the diamond deposits in Yakutia was a big project, from the category of those which at that time were still "raised" only with the help of the Gulag. The severe climate and complete absence of any infrastructure in the diamondiferous areas meant above all that people attracted to the project on a voluntary basis would have to be encouraged in a good way – no one was going to sell their labor cheap under such circumstances. Workforce promised to be very expensive. In addition, there were no guarantees that it could be mobilized at all in the right quantity and there was no experience in developing such deposits with the hands of a "free" contingent either. At the other end of the scale there lay a draft project prepared by the Interior Ministry in 1952 which could permit to minimize expenses by way of establishing a Vilyuylag penal labor camp. By 1957, the camps housed 966 260 prisoners, and there was almost no problem to choose 20 or 30 thousand slaves, including those of required construction specialties. The example with the development of virgin lands - a project not inferior in scale - showed that the Khrushchev leadership when faced with options was not at all guided by humanist ideals.
However, finally the most expensive way which was only possible was chosen to create and develop the Yakutalmaz Trust: no camps, no rotational teams, but high wages, high regional wage rate and allowances, construction of new towns and villages with a modern infrastructure for that time, supply rates corresponding to those enjoyed by the Soviet capital, fantastically expensive northern deliveries, construction of hydropower electric stations noted for energy-superfluous performance, etc. Such a scheme for years to come provided a negative profit margin of the Soviet diamond project.
The loss-making diamond mining in Yakutia was an automatic guarantee of fundamental impossibility of a price war with De Beers. Tempting as it may be for Nikita Khrushchev "to occupy a dominant position in the foreign exchange (read - diamond) market,” selling rough at a loss could not be much helpful for “dominating.” Was the super-cost-plus strategy for developing the Yakut deposits imposed on the Soviet leadership, or was it an independent choice - one can only guess, but objectively this factor more than any other helped to strengthen the position of De Beers as a world diamond market supervisor.
This is often successfully disguised by a very ingenious thesis that the main purpose of developing the Yakut deposits was not rough diamond exports, but the procurement of technical diamonds badly needed by the Soviet industry and especially by its military industrial complex. And therefore, the considerations of economy gave way to security requirements. Of course, this argument deserves the closest attention.
The assumption that after the Second World War the supply of diamonds and diamond tools to the USSR was embargoed is quite widespread. And it is shared not only by the authors of popular publications, but also by the people who were directly engaged in the Russian diamond industry. Thus, A. Kirillin (ALROSA’s president in 1993-1995) noted: "Yes, indeed, in the years of Soviet system and Iron Curtain after World War II this country was virtually embargoed from diamond sales, which prompted task-oriented exploration for diamonds at first in the Urals and then in Kazakhstan and Eastern Siberia (the Science and Technology in Yakutia Magazine). N. Timofeev (Deputy Director General of the United Selling Organization of ALROSA in 1996-2005): "During the Cold War, diamonds were illegally supplied to the USSR under the cover of the KGB and GRU intelligence services" (the Diamonds and Gold Magazine).
Thus, it is said that the Ural deposits were not able to meet the needs of the Soviet military industrial complex, while the imperialist countries imposed an embargo on diamond supplies to the USSR, and before the Yakut diamond deposits were set to work diamonds were imported via illegal channels through the efforts of intelligence agencies. Alas, this consistent picture is however spoiled by one more detail: On August 28, 1947, USSR machine tool industry minister Alexander Efimov ordered to establish a new structural unit within his ministry, the All-Union Technical Assistance Office for Expedient Use of Diamond Tools and Introduction of Diamond Substitutes (ORGALMAZ). The functions of this new division were identified quite clearly: "Control over the distribution and use of diamonds and diamond tools purchased abroad." The Cold War was already in full swing – the Fulton speech of Winston Churchill had been delivered six months before the appearance of this prosaic document which incidentally did not contain even the slightest hint of involvement of any special services in the process of diamond purchases. If the newly baked organization was designed to control the use of military-industrial complex materials obtained illegally in violation of the international embargo, its activities would be reflected in documents of a different level and another departmental affiliation.
It is also noteworthy that it was in the late 1950s and early 1960s when technological parity between the USSR and the United States was reached in the production of most advanced weapons. What’s more, in some fields the USSR even outstripped its rival: in 1956, it launched the first ever missile armed with nuclear warheads (R-5M); in 1957 it launched the world's first intercontinental ballistic missile (R-7); and in 1961 for the first time it carried out a successful test of an anti-missile system (the A System). It is obvious that it would have been impossible to achieve technological parity in such sophisticated fields as the production of modern armaments without an equal or at least comparable access to strategic materials being essential to these technologies.
As far as the Ural diamonds are concerned their use for the USSR defense industry raises reasonable doubts as it is well known that experimental domestic production of diamond tools started at VNILALMAZ only in 1956 and it ought to be noted it was based on Yakut diamonds. The Tomilinsky Diamond Tools Plant, the first in the USSR, was launched only in 1958, whereas diamonds were commercially mined in the Urals since 1946 - who and where made diamond tools using these raw materials during ten years then?
So, the real picture is directly opposite to the original thesis: there was no diamond embargo and diamond tools were supplied to the USSR in a quite civilized manner in numbers sufficient to achieve parity with the West in defense technology. The Ural diamonds, by contrast, had not the slightest relation to the needs of defense industry and were exported to the De Beers Corporation (or its affiliated companies) this time indeed using the channels of intelligence services.
(to be continued)
