Production of polished diamonds in the Russian Federation may be divided into three groups, from the point of view of its competitiveness and regional factors:
1. Smolensk-based Kristall, the oldest and leading Russian diamond-cutting enterprise, which manufactures and sells more than half of the country’s diamonds and whose products are competitive at the world level.
2. The diamond-cutting factory established by ALROSA in Moscow which has direct access to rough and whose products are competitive at the national level.
3. The diamond-cutting enterprises in the Republic of Sakha (Yakutia), which are competitive mainly at the regional level.
Table 1 illustrates world production of polished diamonds and contains polished production data for Russia arranged according to the above mentioned groups of manufacturers and their performance in 2002-2009.
Table 1
Polished output by the Republic of Sakha (Yakutia), ALROSA, Kristall, Russia and the world in 2002-2009, $M.
As it had been anticipated by leading analysts of the diamond industry, the world economic crisis had its worst impact on the diamond cutting branch, which plummeted to its lowest level in Russia and especially in the Republic of Sakha (Yakutia) in 2009. If at a world scale the crisis started to affect diamond cutting from 2009, in Russia the recession emerged in 2008, while Yakutia’s diamond cutting industry began to suffer a system crisis as far back as 2006. The impact of the global crisis resulted in a threefold decrease in output. ALROSA’s diamond cutting business dropped simultaneously with global polished production, but appeared deeper (being slashed 2.5 times). Smolensk-based Kristall reduced its output about 1.5 times which was identical to the degree the world polished output and sales slumped.
These figures confirm that it is correct to divide Russian manufacturers according to the level of their competitiveness. Last year, Russia’s polished output obviously reached its bottom mark and in 2010 Russian diamond cutting companies will gradually ramp up both production and sales due to recovered demand.
Yakutia’s recovery from the prolonged crisis in the local diamond cutting industry will probably also begin from this year, but for this purpose it is necessary:
1. To increase competitiveness of Yakut diamond-cutting enterprises by way of their modernization and organizational and technical innovations, as well as pursuing a cluster approach to developing Yakutia’s rough and polished diamond industry.
2. To reach the national level of competitiveness in diamond cutting and increase the republic’s share in diamond jewelry sales.
Yuri Danilov, Senior Research Fellow, Department of Rough and Polished Diamonds Complex Economy, Institute for Regional Economics of the North (Federal State Scientific Entity)
