Editor’s Note
This article examines the pivotal state intervention that sustained Alrosa, the world’s largest diamond miner, during the 2009 financial crisis, highlighting its strategic importance to the Russian economy.
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In September 2009, when even prominent companies were staggering from the aftershocks of the global financial crisis, there was a company that Russian President Vladimir Putin poured all his efforts into to ensure its survival. That company was Alrosa, the world’s largest diamond mining company. To open up Alrosa’s funding lifeline, Putin instructed the state precious metals and gems repository ‘Gokhran’ under the Ministry of Finance to purchase $1 billion worth of rough diamonds. This episode symbolically shows the status Alrosa holds in Russia’s mining industry.
Diamonds were first discovered in Russia in 1954 in the Far Eastern Sakha Republic (Yakutia). Initially, the mine’s value was underestimated, but as full-scale mining began in 1957, the qualitative superiority of the diamonds was re-evaluated. Including the later discovered diamond deposit area of Arkhangelsk, it is now understood that Russia’s 24 mines across the country hold the world’s largest deposit of 650 million carats. The Russian government established Alrosa by presidential decree in 1992 to systematically mine diamonds. Alrosa now supplies 27% of the world’s rough diamonds, making it the number one company. Alrosa, which conducted an IPO in 2013, played the role of a savior for the Russian economy three years later. When the Russian economy experienced negative growth for two consecutive years due to falling oil prices and its finances were in a hole, the government sold 10.9% of its 43.9% stake in 2016, raising 52.2 billion rubles (approximately 9.3 trillion won) for the state treasury.
The U.S. Treasury Department, well aware of Alrosa’s value, announced sanctions in early April this year, ordering jewelry companies to halt all transactions with Alrosa. With sanctions imposed on Alrosa amid an already tight supply, the price of rough diamonds for wedding rings surged by about 20% compared to early March. Bloomberg News recently analyzed,
Forecasts suggest that the soaring prices will be prolonged not only for diamonds but for raw materials in general. We are paying a harsh price for the previous Moon Jae-in administration’s five-year treatment of resource diplomacy as ‘accumulated evils’. The Yoon Suk-yeol administration must focus its capabilities on quickly restoring the collapsed global resource network.