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An “ideal storm” swept over the whole world, but Russia’s jewelers were hit harder than others as the country’s ruble lost more than other currencies. And this came on the backdrop of already falling incomes of the population. It is clear that the state will not be able to help everyone losing their jobs due to the closure of businesses for the period of pandemic, and it is all the more clear that people who have lost their jobs will definitely take their minds off jewelry for a long time...

Of course, jewelers always tend to look for government support in difficult times. And they are looking for it now. First of all, to survive Russian jewelers would like to receive from the state not the money, but some relaxation of administrative oppression. The more so that this may give some benefit to the state itself, because a smaller amount of control requires a smaller amount of state resources, i.e., controllers, etc.

1. What we achieved for now

The results of 2019 can be called comforting to the least extent. The fall of the jewelry market in Russia has virtually completed and jewelry production stabilized at an approximately average level from the peak values ​​of 2007-2008 (see Charts 1 and 2).

Chart 1. Production of gold jewelry in Russia, tons (see source)


Chart 2. Production of silver jewelry in Russia, tons (see source


Russia’s jewelry import has also more or less stabilized at about half the level of 2007-2008 (see Charts 3 and 4).

Chart 3. Import of gold jewelry to Russia, tons (see source


Chart 4. Import of silver jewelry to Russia, tons (see source


With all that, the jewelry business in Russia is declining in terms of its participants. Over the three-year period from May 2017 to March 2020, the number of small and medium-sized enterprises (SME) in the country’s jewelry production decreased by 21%. Meanwhile silver jewelry production during this period fell by only 15%, while gold jewelry production even grew a little (by 2.8%). The number of SME in the jewelry trade decreased even more - by 25% (see Chart 5).

Chart 5. Change in the number of SME in Russia’s jewelry sector from May 2017 to March 2020 (according to the Federal Tax Service)


Larger jewelry businesses in Russia are still there, but their number does not exceed fifty. The “health” of the jewelry industry in Russia is significantly worse than that of the country’s economy as a whole. At least, the rate of decline in the number of SME in the local economy as a whole is lower than in the jewelry sector - the number of SME in all sectors decreased by 1.2% from December 2018 to March 2020, while their number in the jewelry industry went down by 8.2% (see Graph 6).

And if in April 2017 the number of SME in the jewelry sector amounted to 0.44% of all registered, in March 2020 the number was only 0.23%, which gives reason to say that small jewelry business in Russia lives worse than "the national average."

Chart 6. Comparison of changes in the number of SME in Russia’s jewelry sector and across all the branches of the country’s economy in general


But in monetary terms, the changes in the Russian jewelry market look as shown in Chart 7.

Chart 7. Retail sales of jewelry in Russia, USD M.


Since retail transactions in Russia are carried out in rubles, and the Federal State Statistic Service (Rosstat) provides annual data in rubles, to estimate the value of the Russian jewelry market in US dollars (and to compare it with the value of imports given by the Federal Customs Service in US dollars) we have converted rubles into US dollars at the average exchange rate for each year (based on the data provided by the Central Bank of Russia) taking the retail trade markup on imported goods as 100% (see Table 1).

Table 1. Value of Russia’s retail jewelry market in 2014-2019


2. What awaits Russia’s jewelry market

On the one hand, real incomes of the Russian population continue to decline, albeit more slowly, which, of course, affects its purchasing power. Still it is not only people’s ability to buy, but also their desire will be too weak to make jewelry purchases – amid the pandemic, people will certainly not think about jewelry in the first place. All of this should have at least to deter retail trade from putting higher price tags on jewelry, not to mention discounts.

However, jewelers cannot ignore the devaluation of the ruble for obvious reasons, as the price of precious metals is determined in US dollars.


In addition, the dollar appreciation in rubles overlaps the appreciation of gold and silver in dollar terms. Thus, gold prices in rubles went up by about 35% from mid-November 2019 to mid-March 2020. And now part of the jewelry on the shelves of Russian stores is worth, if not at the price of scrap, but nevertheless approaching this price.

If price tags are to remain unchanged, then jewelers will soon have to buy this precious metal at the price of finished goods to manufacture new products. It is obvious that in the near future almost all jewelry on the shelves of Russian stores will be subject to revaluation. This will lead to an even greater decline in sales. The “ideal storm” is almost inevitable - today, depending on the country’s region, the decline in jewelry sales is approaching to 50 ... 79 percent year-on-year.

Can the state do anything to support the jewelry industry during the worst crisis period? Of course, granting jewelry companies tax deferrals could have the greatest support effect. However, it is clear that possible measures of financial support for economic sectors are limited by the budget, and moreover, the role of the jewelry industry in principle is not of primary importance for the state. Especially now, when you need to think first of all about saving lives. But, at the same time it should be kept in mind that tens of thousands of people work in the jewelry industry. And with the loss of their jobs due to the expected massive bankruptcies of jewelry companies, the state will have additional problems. And this means additional expenses to the state (unemployment benefits), even if we neglect the moral feelings of people...

But the jewelry industry differs from all other sectors of the Russian economy by its extremely high level of state regulation. Therefore, the jewelry industry can receive state support even without budgetary expenditures - by urgently taking a number of administrative measures regarding state regulation and control (supervision), the implementation of which is very costly both for business and for the state itself.

In fact, we can speak separately about both measures to reduce the regulatory functions of the state in relation to jewelers, and about measures to reduce the level of control and supervision in the industry.

Measures to reduce the regulatory functions of the state should be aimed at reducing business costs for administering the regulatory requirements in the jewelry sector. First of all, the turnover of silver jewelry can be urgently exempt from the requirements of Federal Law No. 115-ФЗ “On Counteracting the Legalization (Laundering) of Criminally Obtained Incomes and the Financing of Terrorism” of 07.08.2001. It is the more so reasonable that the relevant Russian legislation significantly exceeds the FATF international requirements in terms of rigidity.

Further, it would be extremely useful to take measures to support the export of jewelry by abandoning state control over jewelry parcels mailed to private individuals (B-to-C Internet trade) and by abandoning state control over jewelry exports to legal entities.

Finally, it is extremely important to introduce a moratorium for the period of pandemic on enacting any legislative and regulatory innovations introducing additional expenses for jewelry market stakeholders.

Measures to reduce the level of control and oversight activities should be aimed at reducing business costs by decreasing the distraction of personnel from core activities, as well as at reducing critical financial risks for businesses from possible fines for non-compliance with the requirements for the circulation of precious metals and precious stones. Among such measures, the jewelry business would like to see the introduction of a moratorium for the period of pandemic on conducting scheduled and unscheduled inspections of businesses and the postponement of payments of fines already imposed for the period of pandemic.

3. New reality

Of course, even full provision of all the mentioned assistance by the state to the Russian jewelry business cannot guarantee the survival of all jewelry market stakeholders. Long gone are the days when people in the USSR bought up any jewelry pieces in stores, seeing in them perhaps the only financial protection in the event of difficult times. These difficult times have just come. But it is unlikely that pawnshops will justify the financial expectations of people who are forced to bring there their jewelry.

The times when jewelry carried a high investment component for the Russians will not return. Maybe only some very exclusive jewelry pieces can today bring profit after a certain period of possession. Most of jewelry items if they are brought to a pawnshop will be sold at the price of precious scrap, not higher, and often even without taking into account the cost of precious stones set in such jewelry. Yes, today jewelry is increasingly becoming just simple household items, however, having a non-zero residual value, but certainly without added value! So, in the near future it may well happen that the number of jewelry sales by the population through pawnshops will exceed the number of jewelry sales to the population through jewelry stores. Of course, it’s not the best thing to want it to happen... Although, perhaps this is excessive pessimism.

The Russian jewelry market after the pandemic will probably have little resemblance of what we have today in terms of both supply and demand. The Russians, and the whole world, have not yet encountered such events, which changed the economic landscape beyond recognition in non-war time. Well, let us all wait and see what happens.

Vladimir Zboikov for Rough & Polished