The political tactics of the natural diamond industry
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Sergey Goryainov recently wrote an interesting article analyzing the reasons why the West insists on imposing sanctions on Russian diamonds from a political perspective. After repeated reading, we have decided to interpret and share this sensitive article (part of) as a reference for our industry partners.
At the same time, we need to solemnly declare that Diamond Watch does not participate in political discussions, and this article only shares the views of industry professionals.
The following content is derived from Grianov.
Firstly, the article mentions a viewpoint at the beginning:
Throughout the entire existence of the diamond market, from the 19th century until now, politics has been a part of the so-called "market mechanism" in this industry.
It's actually quite easy to find evidence for this, just think about two cases:
1) Why did Nazi Germany still receive a supply of rough diamonds during World War II?
2) How did the former Soviet Union, which was in the midst of the Cold War from 1951 to 1953, bypass the control of CoCom (Multilateral Export Control Coordination Committee) to export rough diamonds?
In that era (including now), natural diamond blanks were a strategic material that could be applied to the military industry. So, why can diamonds still circulate between seemingly hostile countries?
This involves a concept: Controlled Adversary.
The core of this concept is to prevent opponents from being "locked", but to achieve "controlled progress". In this way, our country will attach great importance to certain fields and continuously develop them.
To put it bluntly, it means making the "mouse" fat and strong, so that the "cat" can stay alert, actively exercise, and become stronger. If the mouse is always weak, the cat will not be strong either.
In international politics, it is sometimes difficult to say who is a cat and who is a mouse. But "control" is something that both parties are striving to achieve.
Grianov believes that Western countries are now fully imposing sanctions on Russian diamonds, and even the G7 has stated that they will come up with a "twelfth plan" this week, and will prevent Russian diamonds from entering the G7 countries' markets starting from January 2024. Behind this is the need for "control".
If G7 effectively implements this plan, it means that starting from January 2024, about 60% of global diamond consumers will be unable to access (or access) diamonds produced in Russia through normal channels. (Note: The United States is the world's largest consumer of diamonds, accounting for approximately 52%)
In this way, the supply of natural diamonds will become even more limited in the minds of at least 60% of consumers. Under the influence of market supply and demand, the value of natural diamonds will be increased, and prices will be supported.
Although everyone knows that this is an artificial and political operation, and everyone understands that Russian diamonds will still enter the Western market through the black market, at least from the face of the industry, the value of natural diamonds has been effectively maintained.
This is a way of "controlling opponents and strengthening oneself" that requires comprehensive cooperation from a political camp. And precisely in the natural diamond industry, there has never been a lack of political intervention.
However, Grianov also said that if the (natural) diamond industry were truly divided into two so-called "factions" of "democracy" and "totalitarianism" (from a Western perspective, Russia certainly represents the latter), it would "create interesting opportunities for competition between different marketing models".
In this way, the image of natural diamonds seems to have become more suitable for conflict periods, offsetting the slow and futile marketing efforts that NDC had previously undertaken.
"De Beers is now working hard to return to the marketing model of the 1950s (i.e. the Cold War era) and regain the banner of 'diamonds last forever'. Perhaps they have already foreseen this process in advance."
