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Yakutia’s and Russia’s diamond manufacturing industries against the background of global diamond business

10 september 2018

Diamond and jewelry cluster of Yakutia

The performance figures of Yakutia’s diamond manufacturing and jewelry industries for 2017 are not encouraging, despite the cheerful words of the acting head of Yakutia, Aisen Nikolayev, when he made a decision to reformat the Diamond Council of this republic on August 23, 2018. Compared to 2011, the decline in the diamond manufacturing industry was 63% and in the jewelry industry it reached 30.5% in US dollar terms. This indicates that this processing segment continues to be in a downturn since 2011. The production and sale of loose diamonds is only a mid-stream part of the diamond pipeline, whereas its downstream product is diamond jewelry. The table below reflects the performance of the diamond manufacturing and jewelry industries of Yakutia in US dollar and Russian ruble terms.

Table 1

Performance of diamond manufacturing and jewelry industries in the Republic of Sakha (Yakutia) in 2011-2017


In 2017, there were only four diamond manufacturing companies operating on the territory of the Republic of Sakha (Yakutia). Of these, two companies - Kristall-99 and Tunalgy - went bankrupt, while EPL Diamond moved to Moscow in 2014 and was re-registered there.

Thus, despite the availability of unique raw materials, the diamond manufacturing and jewelry industries of Yakutia are unable to realize this potential to its full extent, which is due to a number of objective and subjective reasons.

Diamond manufacturing in the Russian Federation

Despite the fact that ALROSA, registered in Yakutia, has its diamond manufacturing operations located in other areas of Russia, their operating results should be considered together with the results produced by the diamond manufacturing companies of Yakutia.

However, in 2013, ALROSA abandoned the idea of ​​vertical integration and is using the Group's diamond cutting companies to monitor rough diamond prices in the market. At the same time, ALROSA’s sales of polished diamonds in money terms already exceeds the similar indicators of all large enterprises in this industry (Table 2).

Table 2

Production of major diamond manufacturers in the Russian Federation in 2011-2017


The data show that all major diamond manufacturers in Russia have been decreasing their performance since 2011. Even such an acknowledged industry leader as Smolensk-based Kristall experienced a significant drop in performance in 2017.

Global diamond manufacturing industry

If we consider the diamond and jewelry manufacturing industry of the Russian Federation (including Yakutia) on a global background, we can see significant opportunities for its development, since the share of Russia was less than 2% of the world’s polished production in 2014-2016, while its production of diamond jewelry was about 1% of the global total (Table 3).

Table 3

Rough and polished diamond production in Russia and Yakutia against global background in 2014-2016


Cutting diamonds and making jewelry belong to the production of luxury goods, rather than essential goods, and therefore depend on the purchasing power of consumers and consequently on the standard of living of the population in a country.

Causes of the downturn

The main causes of the downturn in the diamond manufacturing industry of Russia in general and in Yakutia in particular are the following:

In the first place, there is a sharp decline in the purchasing power of Russian buyers due to the inability of the population to pay on loans received at high interest rates and partly due to the economic sanctions of Western countries.

Secondly, the legislative framework governing the activities of enterprises and organizations related to diamond and jewelry manufacturing and sales does not contribute to their effective development due to an increase in VAT to 20%.

Thirdly, there is still no clear strategy and policy for the development of the diamond manufacturing and jewelry industries in the Republic of Sakha (Yakutia), and despite their obvious interconnection, they continue to develop in isolation from each other, without taking advantage of the cooperation in the diamond jewelry market.

Brief conclusions

1. Sales and management remain to be the weak part of the diamond manufacturing businesses in Yakutia.

2. The production of Yakutia’s diamond manufacturers is not competitive in international markets because of its tiny size and due to a sharp decline in demand in the domestic market.

3. The diamond manufacturing businesses are exposed to a deep downturn and this can be reversed only with the support from the state.

Yury Danilov, Research Fellow at Yakut Scientific Center of the Siberian Branch of the Russian Academy of Sciences and Director of “Expert” Information and Analysis Center at Ammosov North-Eastern Federal University