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On gathering precious and semi-precious stones for mineral collections in Russia

14 january 2019

During the USSR period, trading and dealing in precious stones - both in their rough (natural) and processed (cut and polished) forms – was forbidden for the country’s citizens. They were only allowed to possess cut and polished precious stones inserted in jewellery items.

In modern Russia, private market players dealing with precious stones were yet non-existent when the country started to establish gems-and-jewelry industry legislation (having adopted the Federal Law on Precious Metals and Precious Stones on March 12, 1998), except for those that used to mine and cut diamonds in the Soviet period (mined by ALROSA, cut and polished by the Smolensk Kristall factory, and some others).

Negative outcome in the efforts made by the ‘Emerald mines in the Urals’ to attract investors in early 90s and continue operation of the Soviet mines to recover beryls and emeralds resulted in the situation where the failed colour gem industry got on the radar of the law-enforcement authorities.

At that, due to lack of initiative exercised by any other state bodies involved, the law-enforcement authorities (the Federal Security Service and the Ministry of Internal Affairs) turned out to be the only source in Russia of any information about the colour gem market (diamonds are an absolutely separate subject) to be provided up the ladder and the only initiator to adopt any new laws in this sphere.

Without any significant financial potential, this market seemed to be of no interest to the Ministry of Finance of the RF supervising the field of precious stones and actually it was not subject to the authority of the Ministry of Natural Resources and Environment of the RF and the Ministry of Industry and Trade of the RF (as the regulation of the trade in precious stone was within the competence of the Ministry of Finance).

Due to the tasks that are natural for the law enforcement agencies - to prevent law violation and struggle against the offence of law - the Federal Security Service and the Ministry of Internal Affairs lobbied through the development of the new industry legislation in Russia totally similar to the Soviet one that prohibited any trade in precious stones for the citizens of the country - both rough (natural) and processed (cut and polished) ones - with the sole exception of the certified precious stones, the civil transaction in which was allowed for the citizens.

Such a situation in the statutory regulation of the precious stone market is opposite to the world practice and fails to support the development of the colour precious stone market, especially the domestic one. The matter is that the people do not have a natural need to own precious stones, this need should be fueled by massive generic advertising in order to develop the market.

One of the most important advertising tools for the development of the colour precious stone industry in the world is the popularization of collecting them, mainly in their natural form – in crystals and rock chip samples. In spite of the fact that the markets for the mineral collectors and the colour gem studded jewellery users are different ones with their own target audience, the influence of the collection sample market development on the market of colour gem studded jewellery is great and recognized globally.

In Russia, there is no any legal opportunity for the people to make any transactions in rough precious stones for the purpose of collecting them or just keeping them in personal private collections – it’s a criminal offence (Article No.191, the Criminal Code of the Russian Federation). Moreover, physical persons-collectors have no any legal opportunity to act internationally (exchange collection samples of precious stones, or sell and buy them), which is quite common for the citizens of all developed countries in the world.

I'll tell you more. A steady trend has been seen in recent years to increase the list of minerals and nature-made objects, the trade in which is qualified or is treated as transactions in precious stones, with the prohibitions arising from this. So, the trade in so called semi-precious stones - amber, nephrite, jadeite, beryl, including its varieties, aquamarine and heliodor - is essentially limited (the international gemological agencies do not recommend any use of the term ‘semi-precious stone‘ as it is confusing).  

In this situation, the danger of shifting of the increasing number of minerals to the list of stones prohibited for transactions and, consequently, for collecting them, becomes the most important social problem. Meanwhile, according to expert estimates, there are about 1 million people in Russia, who own collections of minerals to some extent. Up to 98% of such collections are the minerals, the gem-quality samples of which are placed into the category of semi-precious stones in the Eurasian Economic Community.

In other words, in case of increasing the list of the minerals, the civil transactions in which are restricted or prohibited for the citizens, about one million of law-abiding citizens in Russia unwillingly might become lawbreakers according to the Administrative Offences Code of the RF and even criminal offenders according to the Criminal Code of the RF. It is worth mentioning that in 1990 to 1998, when the Russian legislative base underwent many changes and everybody was confident of the forthcoming liberalization of the laws in the trade in precious stones, the Russian people purchased huge amounts of collection precious stones (mainly, emeralds) at many fairs and exhibitions without any restrictions. Now, when expected market liberalization did not take place, these gems - illegally – are kept in the private collections of many thousands of Russians.

It should be noted that the trade in the collection minerals in general and precious stones in particular, has also one more social feature – all over the world, their mining and processing is the domain of small and micro businesses. This is of special importance for providing jobs in the remote areas of Russia where it is often impossible to find any other work to earn one's living.

In the wording of the normative legal base, collection samples are called as ‘mineralogical collection samples’, and their mining is under the Ministry of Natural Resources and Environment of the RF.

In general, a mineralogical collection sample is not a lump of rough (uncut) stone. A mineralogical collection sample is an item manually made by the preparation of a source raw rock.

The task of the preparation – that is, cleaning of the mineral occurrence from excessive host rocks – is critical, as the main value of a mineralogical collection sample is not due to the value of the raw materials per se but just due to the aesthetics of a sample and revealed crystallographic features of the essential mineral. It is thanks to the skillful preparation that a mineralogical collection sample could cost several times or ten times or even hundreds of times more than the mineral raw material it contains. We can draw such an analogy: canvas and paints used by an artist while painting also cost some money, but it is the art of a painter that makes a painting very valuable. On the contrary, the painting by a talentless artist can spoil the canvas and paints rather than increase the value of the raw materials used.

So, when evaluating mineralogical collection samples, it is not reasonable to consider them from the point of view of the value of the mineral raw material they contain, but the prepared sample can cost more than the host rock only in case of highly professional and - necessarily - manual processing of the source material, to put it in other words, its preparation. The main thing is that the sample should be as much intact as possible. Only undamaged (or slightly damaged) precious stone crystals cost more in the global market than the raw material they contain.

According to the above, mining of mineralogical collection samples should radically differ from mining of just mineral raw materials. The above is also true of any gems, both precious and semi-precious stones. The maximum intactness of the mineral crystals during mining is mandatory and most important for their use as mineralogical collection samples. It is obvious, that in commercial mining – especially with the use of explosion methods – the yield of the raw material suitable for use as mineralogical collection samples is minimal.

This is a key factor for the statement that mining or collecting the minerals for later use as mineralogical collection samples is the sphere of small and micro businesses and requires no use of industrial technologies. Nevertheless, it is very difficult for small and micro businesses to get the licenses for collecting the collection material in Russia. The Russian normative legal base does not provide for mining any mineralogical collection samples.

The situation with noncommercial mining (collecting) of the mineralogical collection samples of precious stones is more frustrating – this is merely prohibited by the Russian legislation.

According to the provisions of Federal Law FZ-41 dated 12.03.1998 ‘On the precious metals and precious stones’, the characteristics of precious stones are determined in the process of sorting the precious stones, their primary classification and primary evaluation. The precious stones miners that have no opportunity to carry out - on their own - the process of sorting, primary classification and primary evaluation of the uncut precious stones mined, send them against an agreement to the State Precious Metals and Gems Repository (Gokhran) to undergo sorting, primary classification and primary evaluation. That said, it is not allowed making transactions in precious stones having no classification characteristics determined.

But the procedure of determining the precious stones characteristics requires their preliminary cleaning from the host rock, in other words, turning any potential mineralogical collection sample of a precious stone just into raw material with the loss of the potential value of the mined stone arising from this. This, certainly, affects the implementation of the economic efficiency potential of the commercial production of precious stones. This factor is of great importance in relation to mining the fragile minerals - beryls and chrysoberyls (emeralds and alexandrites are their precious varieties).

Without a radical change in the approaches used in the industry legislation in the sphere of mining and trading in precious stones, the domestic market of precious stones – as well as those used in jewellery – will be gradually fading, and the colour precious stone miners will not get their possible profits from selling the stones mined.

Well, as for criminal situation in the Russian market of collection stones, it will remain dismal, too. To improve the ominous legal environment in the regulation of the collectors' movement in the mineralogical sample market, the government needs to take urgent action to bring the Russian normative legal base in compliance with the best world practice (of the developed countries).

The following issues are to be solved in the updated normative legal base to form a civilized market of the collection-type mineralogical samples:

1. Form a normative legal base to create the conditions in the Russian Federation for mining (collecting) mineralogical collection samples, including the collection samples of semi-precious and precious stones, their specific preparation and evaluation.

2. Form a normative legal base to create a civilized domestic market of mineralogical collection samples in the Russian Federation, including the market of the collection samples of semi-precious and precious stones.

3. Form a normative legal base to create the conditions in the Russian Federation for the organization of foreign trade in mineralogical collection samples, including the foreign trade in the collection samples of semi-precious and precious stones.

Vladimir Zboikov, Executive Director, ‘Business Russia’ Committee on Precious Metals and Stones, Jewellery Art and Handicraft Industry