It's not just Blood Diamonds, it's World War Diamonds
March 24, 22
OPINION by Erez Jacob Rivlin, a diamond market analyst and diamond mining consultant. Served as an advisor for the Russian government, (Minister Bychkov), on diamond issues, and for the Angolan President Jose Eduardo dos Santos
For the first time since the Second World War, the diamond industry must choose sides and act immediately to find a way to save itself during these historical times. Putin has never had such a decisive Western opposition in any of his previous military adventures. Yuval Noah Harari, the influential Israeli historian said: "This is much, much bigger than just another regional conflict ... I was amazed by how quick, how strong, and how unanimous the European reaction was." (Ted Talk 3/3/2022).
We are experiencing the First Business World War. Let us pray of course, that it will not become the prelude to the Third World War. In the past two decades, market value of leading giant public companies grew to the size of an economy of a large, developed country. As such, the powerful business community did not hesitate to initiate and impose economic sanctions on an enemy that threatens the democratic foundations of its existence.
While governments are still busy confiscating yachts and billions of oligarchs' assets, and have disconnected Russian banks from the SWIFT system, the new world powers, the giant public companies did not wait for any orders from any politicians. Within days of the invasion, hundreds of public companies announced an immediate cut from the Russian economy. British Petroleum abandoned a $25bn investment, and 850 McDonald's restaurants have been closed together with 124 Louis Vuitton shops. In this new global power distribution, the world sees the diamond industry as just another public company, and with the global value of diamond sales, it is not even a giant one. Therefore, if the diamond industry avoids taking any actions, it could cause catastrophic damage to its precious global 'diamond' brand.
Everything is different this time. Accordingly, the Kimberley Process, which was set up to block 'blood diamonds' from African countries, will not be enough. The Western World expects some real and painful actions that would cover both, rough and polished diamonds. The survival anxiety instinct of the democratic countries was ignited, so everything is 'bloody' now, no matter what the reaction to previous illegitimate military conflicts was. It would have been 'Blood Big Macs' of McDonald's, 'Blood Jordans' of Nike, and 'Blood Louis Vuitton Bags'. But hundreds of boards of directors of public companies active in Russia, reacted smartly and swiftly, and saved their brands from the disastrous 'Ukrainian Blood' annexation. So, how long will it take for the diamond industry to wake-up and save its own brand?
Gina Drosos, the CEO of the public company Signet, just followed what its colleagues CEOs of most major public companies did. On her Bloomberg interview last Monday, she said: "We believe that we are, in fact, leading self-regulation in the industry. Customers want to know that the diamond they're buying didn't fund this war, because we're all appalled at what's going on." But Signet is not alone. Industry sources inform that all major brands have already notified their suppliers to commit in writing that they are not going to supply them with any polished Russian diamonds. So, this is an explosive and dangerous new reality in the making. Public companies and the elite brands like Tiffany and Cartier would become free of Russian Blood Diamonds, while the layman jewelry shops would continue to support the bloody war.
But, with all due respect to sanctions taken by governments and the powerful public companies, the diamond industry must focus on the main, mightier player. The consumer. Without strong actions that would distance the polished diamonds in American jewelry shops, from the bloody Ukrainian conflict, consumers' reaction could be devastating to the global diamond sales. The social media is already warming up and the world media, the main factor to shape consumers' opinion, is not waiting for the bewildered diamond industry to wake up. The title of The Guardian's article on 19/3/22 says it all. "Jewellery industry accused of silence over Russian diamonds".
Tragically enough, several diamond companies have already unknowingly contributed to the financial effort of the Russian invasion to Ukraine. During the February 2022 diamond sales, before the invasion to Ukraine, Alrosa's managers have 'innocently' offered their clients to buy up to three months ahead, and for the same price, following a year in which the rough market experienced increasing prices every month, several companies were more than happy to accept the unprecedented generous offer.
We are not talking about Blood Diamonds, but about World War Diamonds, thus penalties and consequences would be accordingly. The Kimberley Inefficient Process, that only dealt with African rebel groups, is not relevant anymore. Compared with the World War Diamonds, Blood Diamonds was a game of amateurs with Leonardo DiCaprio and some human rights activists. This time the diamond industry is one of the main dishes served on the table of the US President, the European Union, Putin, and Xi Jinping. Therefore, a new system must urgently be created by the leaders of the diamond industry within the coming days, covering rough and polished Russian diamonds. Just like Western governments and public companies, the diamond leaders must take clear and decisive actions, and choose the right side of history.