The Diamond Cartel — The Sequel?

A while back, I wrote about the International Diamond Board,
and reported how some in Alrosa were not so interested in a new generic marketing
effort, but have talked about something that would almost be a “new cartel.” To me
this casts aside the best part of the old single channel system (its promotional
smarts) while embracing the worst (its quasi-legal nature.) 

But in the interest of fairness and equal time, in his
latest (subscription only) DIB
, Chaim Even-Zohar seems to have talked
extensively to Alrosa officials and has the following insights into their
thinking, which he kindly gave me permission to excerpt: 

De Beers, Rio Tinto and BHP Billiton
want an organizational structure with laws, bylaws, a CEO, etc. while the Russians
feel the actual need of the industry has to be studied and defined. Just because
De Beers is dropping generic advertising doesn’t mean that others have to pick
it up. …

[The Russians] want to figure out
how to optimize their margins out of their diamond resources. When looking ahead,
the Russians see an expanding role for governments in the diamond sectors. They
think that if there is something like a worldwide promotional body, governments and the producers countries should be directly involved or provide the stewardship.
But it goes beyond that. The Russians don’t have the preoccupation that De Beers
has with anti-trust concerns, monopolies, etc.; they believe in a regulated
market.

Alrosa doesn’t see “anything wrong”
with having a government stockpile its rough diamonds when there is lower
demand, as long as, ultimately, the highest price for the goods can be secured.
The financial return Alrosa received from stockpiling during the crisis has been
estimated as being in the one or two digits in terms of the money involved,
which is not something it would have ever received out of generic advertising.

.. [W]ithin a few years we may see
an African/Russian/Chinese coalition controlling not only the lion’s share of
world production, but also a willingness to take the necessary action to regulate
the supplies to increase prices …

JCK News Director