It was 11th June 1952, when Colonel A. Malgin, Head of Uralalmaz, a diamond mining company subordinated to the Special Chief Administration of the USSR Interior Ministry put his signature to a lengthy document entitled "Explanatory Note to Target Figures for Underlying Operations in 1953." The document was classified "Top Secret. Special importance." This kind of label was mean in the sense that people had to stake their heads on the safety of data bearing “special importance.” In those tough times, the Soviet authorities used to apply a simple and efficient scale of responsibility: any trouble with "secret" documents involved parting with one’s shoulder marks and getting “blacklisted.” Problems with the “top secret” label were fraught with long imprisonment, and for the leak of “special importance” data people got shot. Therefore, experienced officers (and Colonel Malgin, whose entire career has been associated with the Gulag, was an experienced and cautious person) tried to avoid such documents, if it was possible. But that time he failed.
The contents of the document classified under the intimidating label appear puzzling even at a superficial glance: "As of January 1, 1952 the Uralalmaz Administration registered a total of 75,756.9 carats of diamonds in balance reserves across 25 placer deposits. During 1952, the Ministry of Geology of the USSR will additionally explore and then bring into production 9 more fields with total balance reserves reaching 43,443 carats (according to the operational data), while the Administration of Uralalmaz will put into service one field on the Koivu River, having 1,000 carats of diamond reserves. Expected balance reserves at 1st January 1953, taking into account the planned target for diamond mining output in 1952 and the reserves newly transferred by the Ministry of Geology, will reach 110,913.1 carats (on aggregate of all categories), including 72,667.5 carats in the reserves of the existing operations in 1953, which is quite sufficient to generate production of 7,000 carats under the program slated for 1953."
7,000 carats is an unprecedented record for Uralalmaz! The same document states that for the entire 1951 they produced 4,682 carats, while in the first half of 1952 as much as 2,350 carats!
The balance reserves and output at Uralalmaz were obviously insignificant. But their running costs were not at all funny. In order to get a few thousand carats the company used 2 dredges, 7 hydraulic units, 15 bulldozers, 15 excavators with one cubic meter buckets, and 10 concentrators. Add to all this several thousand convicts. But even the use of slave labor could not turn Uralalmaz profit-making. Operating costs were simply monstrous reaching 15,096 rubles per carat in 1952. (For comparison, the monthly salary of correctional officers at the Kusyinski Corrective Labor Camp, which belonged to Uralalmaz, was 648 rubles in that year.) These were the most expensive diamonds in the world in the early 1950s.
Who was in need of this strange output? Why was it necessary to put the “special importance” stamp (which in those days was used to decorate only some of the decrees regarding the Soviet nuclear project issued by the Central Committee of the CPSU and by the Council of Ministers of the USSR) on the information that could in no way affect the country’s economic or military security?
Since Soviet times to the present day the harmonized chorus of journalists, diamond industry functionaries and historians studying this perspective repeats the mantra: "The Ural diamonds were needed by the defense industry. During the Cold War, the Soviet Union surrounded by imperialist powers had a desperate shortage of rough diamonds and therefore the poor Ural deposits were squeezed dry, no matter what the cost." In fact, there is not a single open source on Ural diamonds, which in one form or another would not repeat this mantra. But you will not find specific data in any of these sources as to what kind of "defense industry" used these Ural diamonds and in what way. It’s classified, Sir! So, the “special importance” label tagged by Colonel Malgin on his documents was not in vain, it weathered long enough.
2007 was the year of the 60th anniversary of the first Soviet research organization which worked to design and introduce diamond tools into production - ORGALMAZ (its modern name is VNIIALMAZ). In the collection of works dedicated to this anniversary, it is said explicitly and ingenuously: "In 1947, the Council of Ministers of the RSFSR issued a decree to establish the All-Union Technical Assistance Office for Rational Use of Diamond Tools and Introduction of Diamond Substitutes (ORGALMAZ). This was dictated by historical necessity, for the restoration of the national economy, completely destroyed the Great Patriotic War, was unthinkable without the use of diamond processing allowing to increase productivity, improve the quality and reliability of manufactured articles, introduce difficult-to-process materials, develop precise technologies and use modern equipment. With that, this small group of ORGALMAZ employees did not possess the key subject of their research - the diamond (italics is mine – S. G.). Despite this, they studied hard diamond machining using foreign publications to establish scientifically substantiated wear-out rates of diamond tools in their operation and created the first designs of domestic diamond tools."
This is no joke - ORGALMAZ established a year later than Uralalmaz did not ever received diamonds from the Urals. The only attempt to overcome this mishap was made in 1951, when the Ministry of Interior prepared the "Proposals to the Draft Resolution of the Council of Ministers of the USSR" (secret, of course), where Paragraph 9 read: "Allow the Ministry of Interior of the USSR to transfer 50 carats of diamonds from the production of Uralalmaz to research organizations for diamond research." For reasons to be discussed below, these "Proposals..." were never implemented.
Virtually, this failed attempt exhausted the relationship between Uralalmaz and the "defense" (and any other) industry. And then, why should the industry need unsorted rough diamonds? It needed diamond tools - diamond-charged wheels, dies, pencils, honing stones, etc. And to make such a tool one will need a specialized plant. The first such plant in the USSR was the Tomilinsky Diamond Tools Plant put into operation in 1959, which had not the slightest relation to the Ural diamonds as it is stated on its official website: "The industrial group started mass production of diamond tools due to the discovery and commercial development of natural diamonds in Yakutia. In 1959, based on these developments the Group launched commercial production of cutting, dressing, gage and grinding tools made of natural diamonds."
Could it be that Ural diamonds were cut to be sold to the population? This guess sounds pretty cynical - in the late 1940s and early 1950s, the Soviet people had other things to worry about and diamonds were not on their wish lists - their purchasing power was, to put it mildly, low, and the first Soviet diamond cutting factory (Kristall based in Smolensk) was launched only in 1963.
Then maybe, the Ural diamonds were just shipped to the state depository and stocked at Gokhran? This assumption is worth some time to consider.
"In June 1949, Amtorg sold a parcel of diamonds imported in 1948 and weighing 1,246 carats for $ 85,000 to be paid in British pounds. The price for this parcel was lower than that which could be obtained in the end of 1948, when the market was better and firms offered for it $90,000-$93,000. In mid-1949, Medaiski & Neim purchased a large parcel of diamonds right from the Group. According to the company, it was able to make good money reselling the above parcel in the U.S. market in late 1949, when the market situation improved." This is a quote from the secret report of Amtorg dated 02.13.1950. Another secret report from the Ministry of Foreign Trade released on December 14, 1949 mentions a parcel of polished diamonds weighing 8,546 carats, also sold in the United States. There is evidence and that the world diamond market in those years attracted keen interest of Soyuzpromexport.
In order to get 8,546 carats of high quality diamonds (any other would not sell in the United States) you had to cut at least 20,000 carats of excellent rough diamonds. It is obvious, that Uralalmaz had nothing to do with this shipment – this company failed to produce even one third of that amount by 1949. These diamonds traced back to the gems confiscated by the Bolsheviks from the population in the 1920s to be later taken from the stock of Gokhran. But there was something else, which boggled the mind even further: starting from 1946, Uralalmaz exerted incredible efforts to mine a measly 4,000-5,000 carats of diamonds a year getting along with dreadful classified labels and production costs, which staggered imagination, while Gokhran generously poured several times more diamonds to the "damned imperialists" selling them off at prices below the market! And what about the darling defense industry literally moaning from lack of diamonds?!
Of course, sometimes it happened that one branch of the bureaucratic framework in the Soviet Union had a vague idea of what was going on in its other branches. But in this case this thesis is not applicable: both Gokhran and Uralalmaz were the units of the Interior Ministry of the USSR in the period under consideration. And the fable about "diamond hunger" in the defense industry and heroic Uralalmaz trying to satisfy it is nothing but a professionally made industry legend.
The need for such a legend was due to two factors. First, you had somehow to explain to the intelligibly poor, half-starved population, why the country needs production from Uralalmaz. Working in hellish conditions with their teeth clenched, people would still agree to strengthen the defense of their motherland. But they would never consent to work in this way for the showcase of a Tiffany boutique. It is hard to imagine that the Communist daily Pravda would have run in print something like this: "The heroic workers of Uralalmaz, including convicts, all of whom unanimously took the path of labor correction, are succeeding in cost reduction at their company. Their heroic labor feat, daily committed in the harsh environment of the Urals, is hailed by workers around the world! Soon, even the most unclaimed Hollywood actors will be able to afford diamond cufflinks! Glory to the All-Union Communist Party (Bolsheviks)!" And secondly, the legend was to cover - thoroughly and for a long time - the true distribution channel for Ural diamonds and for information passed through this channel.
Producing industry cover legends is not an easy process, so failures happened. The administration of Uralalmaz held a meeting of party and labor activists on March 20, 1950 attended by an inspector from Moscow, Lieutenant Colonel Shemyakin, Deputy Head of the Special Chief Administration of the USSR Interior Ministry. For the provincial division of Gulag the visit of such an official was an important event, and the officer was certainly given a top-level treat. As it happened, the big shot went amuck either after a sleepless night or maybe feeling not so well after the feast on the previous day, which was registered and preserved by an appropriate report (No. 2-20/03/50), according to which Shemyakin said: "Your production costs are unacceptably high! The transfer of the gold ruble to a more solid base and its progress to the international arena requires strengthening of the Soviet currency and reducing production costs." The legend was destroyed by the colonel right before the eyes of party activists. In what way was Uralalmaz related to the strengthening of Soviet currency, if all of its production was consumed inside the country - by the "defense industry"? Fortunately, such reports were not meant for prying eyes.
So, Uralalmaz was strengthening the Soviet currency, or simply put, worked for export. Of course, this kind of export was never mentioned in any document on Soviet foreign trade. Although it would seem, that just a few thousand carats had no chance to yield any serious income and did not produce any impact on the market. However, the main thing was not the amount, but the channel itself and relationships installed and fixed through that channel. And it should be said that this was not a trivial channel.
"Recovered diamonds were dispatched to Moscow to the name of Molotov, and the first parcel consisted of 42 crystals." There was no classified label on a thin collection of local history articles. This was recorded from the words of a person who saw these parcels, sealed on each side with wax. What was the position held by Vyacheslav Molotov in those years, when Uralalmaz was part of the Gulag? In May 1947, the Soviet Union established the Committee of Information reporting to the USSR Council of Ministers - a secret service entrusted with the function of foreign intelligence. This special service was headed by Molotov. The new secret service was closely integrated with the Interior Ministry of the USSR (which at that time also comprised Gokhran and Uralalmaz). To say “closely” would be an understatement. The “minister of Stalin's construction projects," Sergei Kruglov, who headed the Interior Ministry, had a deputy – Lieutenant General Vasili Ryasnoy. He was (simultaneously!) Molotov's deputy in the Committee of Information. So there should have been no problems with coordinating diamond exports between these agencies. The most effective spy station of the Committee of Information was in London.
Several thousand carats of rough diamonds had not the least impact on the market. But the information of "special importance" attached to these shipments as a kind of bonus was worth its weight in gold. It allowed the recipient to keep abreast of the Soviet diamond project and formulate decisions determining the course of its development.
After the discovery of the first alluvial diamond fields in Yakutia (Kosa Sokolinaya), the Soviet leadership initially had no doubt that these diamonds would be mined by the Gulag. Here is a quote from the above-mentioned "Proposals... ":
"3. The USSR Ministry of Geology will transfer all the materials regarding the exploration on the Kosa Sokolinaya Field to the Interior Ministry of the USSR by July 1, 1951, and the Interior Ministry of the USSR will draw up a project assignment for the development of this field and submit proposals for the development of this area by April 1, 1952. The Special Chief Administration of the Interior Ministry of the USSR will dispatch a team of specialists no later than July 1951 to carry out survey works in the Kosa Sokolinaya Field required to compile the project.
4. The Geological Exploration Department of the Special Chief Administration of the Interior Ministry /Comrade Rozhkov/ will carry out all the necessary preparatory work during 1951 for a detailed exploration of the Kosa Sokolinaya Deposit in 1952.”
The Ural placers had an average diamond rate of 1 carat per 251 cubic meters of sand. Those newly discovered in Yakutia had an average diamond grade 3 to 10 times higher. Convicts across the country were equally cheap. "Development of this area" by the Interior Ministry forces meant rapid and large-scale construction of the Vilyuylag labor camps. In the future, it promised a fantastic return on investment. It was 1951 and the mustachioed Leader of all peoples was still quite vigorous and any possible "thaw" was out of the question. At that time the USSR had no economic vehicle more powerful than the Gulag, no administrators more efficient than Sergei Kruglov and his curator Lavrenti Beria. But to the great surprise of their authors the "Proposals..." were not accepted and not a single camp was ever built on the new fields. Cost-effectiveness of the Soviet diamond project and therefore a threat of a price war were not in the plans of De Beers.
It’s a pity the townspeople of Mirny erected a monument to Stalin. They ought to have fixed one up to Philip Oppenheimer. Or better to a group including Vyacheslav Molotov, Philip Oppenheimer and Boris Rodin (Head of the London spy station run by the Committee of Information). These persons made a decisive contribution... to the absence of Gulag in the diamond province of Yakutia.
Sergei Goryainov, Rough&Polished
P.S. The author would like to expresses his sincere gratitude to the management and staff working at the State Archives of the Perm Territory for promptly organized access to the archive materials.
