DeBeers Cartel Deathwatch: Russia Set To Flood Diamond Market With Firesale Of 167,500 Carats

Tyler Durden's picture




 

Thanksgiving Day in 2014 will remain in the history books for one key event: that is the day when OPEC effective collapsed, after Saudi Arabia refused to comply with demands by other OPEC members to cut oil production, unleashing the biggest ever drop in the price of oil, ultimately surpassing even that seen after the great financial crisis in duration and severity.

Now, another historic cartel may be on its last legs: the DeBeers diamond cartel, because according to Russian daily Izvestia, as part of Russia plan to combat its creeping budget deficit, Russia’s state minerals depository, known as Gokhran, will conduct two auctions on February 29 and March 10, in which it plans to sell as much as 167,500 carats of diamonds. By comparison, Russia sold only only 8,800 carats in all of 2015, generating proceeds of $3.6 million.

This is a surprising development, because while many had expected Russia to potentially sell some of its extensive gold reserves as the Kremlin battles with low oil prices, few had anticipated that Russia would flood the diamond market. Furthermore, the proceeds from the auctions are de minimis: the budget proceeds will hardly exceed $ 15 million (1.2 billion rubles) from the diamond sales according to Izvestia.

That, however, will not stop Russia. Initially, only medium-sized stones - those weighing up to 10.8 carats - will be sold. Citing experts, Izvetsia notes that such diamonds are found in abundance on the market, and do not represents a special interest for buyers, but the Russian media adds that the oversupply may adversely affect the market as a result of the sudden surge in supply. 

According to the expert from the analytical industry agency Rough and Polished Sergey Goryainov, there is little grounds to expect a successful auction. He said that the Russian Ministry of Finance can only sell diamonds on the domestic market, and in Russia demand for diamonds in now at a very low level. The recent record ruble devaluation is partially to blame for the lack of diamond demand.

Goryanov adds that "the diamonds that will be sold are currently overly abundant in the market. Starting prices will be low as one can't expect much excitement in the auction."

While the Ministry of Finance is only expected to sell medium-sized diamonds, on previous occasions it marketed larger stones, heavier than 10.8 carats. It may have no choice but to resort to more of the same if there is no demand for the initial offered lots.

The Russian Gokhran finds itself in possession of an substantial amount of small and medium-sized diamonds. The reason is the large-scale buying diamonds by the Russian government from the state company Alrosa in the 2008-2009 period. "Alrosa" has a monopoly on diamond mining in Russia (98% of production), and its largest owners are the Federal Property Management Agency - 43.9%, and the government of Yakutia  at 25% of the stock.

Until 2008, Alrosa had no experience selling diamonds - Russian precious stones were marketed in the global market by the South African company De Beers. However, in 2007 a European Court decided that such cooperation harms competition on the world diamond market. One year later the global financial crisis broke out and demand for diamonds had fallen sharply, and as a result of this double whammy the government had to bail out Alrosa and in the period January to July 2008, when the Russian Gokhran bought diamonds worth $ 1 billion. Then in 2009 Russian purchased another $872 million worth of diamonds from Alrosa, leading to the huge diamond pile currently held by Gokhran, including diamond special sized as well as medium-sized rocks; a pile which is about to be auctioned off.

Rough diamonds from the Nyurbinskaya open-pit mine. Photo property of ALROSA.

It is unclear who the Russian dumping of diamonds on the local market will impact global prices, however it is likely that a substantial arbitrage will emerge, especially if clearing prices for Russian diamonds comes at a significant discount to global, cartel-controlled fixes.

Worse, this comes as a time when the biggest marginal buyer of diamonds in both the wholesale and retail market, the wealthy Chinese investor and speculator, has been forced off the stage. Which likely means that with diamond prices trending lower ever since peaking in mid-2011 at nearly double their post-Lehman lows, prices are about to slide to new cycle lows...

... and just as the collapse of the oil cartel has led to major shakeups in the crude market, we eagerly await to see what skeletons emerge from the closet of one of the world's most infamous and notorious cartels in history, that of the world's diamond producers who until now had maintained a firm grasp on total supply; a grasp which is about to be shaken as a result of Russia's desperate measure to balance its budget at any cost.

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Mon, 02/15/2016 - 15:44 | 7188827 Baby Bladeface
Baby Bladeface's picture

Long Antwerpian butthurt.

Mon, 02/15/2016 - 15:46 | 7188840 JoeSexPack
JoeSexPack's picture

Break the DeBeers cartel!

 

Mon, 02/15/2016 - 15:48 | 7188849 manofthenorth
manofthenorth's picture

AWESOME !!!

FUCK YOU TOO DE BEERS !!!!!

Mon, 02/15/2016 - 15:53 | 7188871 remain calm
remain calm's picture

25th aniversey coming next year, hopefully the defation in diamonds is as good as the oil market.

Mon, 02/15/2016 - 15:55 | 7188889 remain calm
remain calm's picture

Funny thing is they can't dump the phyical gold market because their is no physical to dump, only paper. But it's amazing the resiliency of these crooks, that is, convincing Canada to sell half their reserves.

Mon, 02/15/2016 - 16:02 | 7188924 nuubee
nuubee's picture

At market prices, this amounts to approximately $500 million to $4 billion depending on various factors in the valuation of the diamonds. I think DeBeers will be fine... not that I want them to be.

Mon, 02/15/2016 - 16:14 | 7188987 tmosley
tmosley's picture

Why would selling 19 times as many diamonds only net five times the cash? Are they expecting to crash the market by 75% with this sale?

Mon, 02/15/2016 - 16:20 | 7188996 Pinto Currency
Pinto Currency's picture

 

 

deBeers = Oppenheimer family

Is Russia putting the boots to this London family?

There are enough diamonds held back from the market that dumping can reduce the price by 90%.

The kicker is not so much assets that are for sale but the value of "treasures" held to preserve wealth (supported by a fake market).

Mon, 02/15/2016 - 16:22 | 7189026 zeronetwork
zeronetwork's picture

Now you know. No one can fire sale Gold.

Mon, 02/15/2016 - 16:35 | 7189104 Pinto Currency
Pinto Currency's picture

 

 

They've been fire saling gold for decades by setting the price with paper gold.

That rig is blowing-up too.

Mon, 02/15/2016 - 16:41 | 7189132 JoeSexPack
JoeSexPack's picture

"Russia putting boots to Oppenheimer fam"

 

Yes, sure looks like it.

 

That fam & 12 others are thought to be the owners of the City of London Corp, that owns the 1-square mile independent city-state of London, that is not part of the surrounding city (aka London), England or the UK.

 

http://www.cityoflondon.gov.uk/Pages/default.aspx

 

https://www.youtube.com/watch?v=pEydmE57Vew

London part starts at 3:40.

Mon, 02/15/2016 - 18:34 | 7189635 peddling-fiction
peddling-fiction's picture

Payback is a bitch...

I lived in Antwerp for a couple of months and always did go for a coffee right on the diamond vault street.

Pretty safe, no riff raff there.

The best coffee, newspapers and good service.

Mon, 02/15/2016 - 19:27 | 7189883 zeronetwork
zeronetwork's picture

I went there just to pee.

Mon, 02/15/2016 - 16:04 | 7188931 manofthenorth
manofthenorth's picture

Canada is already screwed over by the chosenites.

Back in the 1960s, Canada held more than 1,000 tonnes of gold. But it began steadily selling off its hoard, and by 2003, the country had just 3.4 tonnes.

Now, Canada has less than one tonne.

Why is it so hard for so many to see where this is headed.

But ..but gold manipulation is conspiracy bullshit.. right !?

NO. Actually it is called history.

Suck it up peasants !!!!!

Mon, 02/15/2016 - 18:01 | 7189485 Kirk2NCC1701
Kirk2NCC1701's picture

Canada let the Bronfmans become billionaires, by providing Safe Haven for their business (Seagrams) of Prohibition Alcohol, which was smuggled from Quebec into Vermont.

As someone said:  Show me a great fortune, and I'll show you a great crime.

To which I say: There is no money more respectable than dirty money, that has been laundered and aged properly.  Preferable 2 or more generations, during which time it has made all sorts of contributions to political campaigns, charities and the arts.

Mon, 02/15/2016 - 19:50 | 7189976 zeronetwork
zeronetwork's picture

I think Russian know how to make perfect diamonds in the lab. They will sell it by the kilos.

Mon, 02/15/2016 - 16:05 | 7188937 Richard Chesler
Richard Chesler's picture

Because nothing says I love you like...

 

Mon, 02/15/2016 - 16:25 | 7189042 Tall Tom
Tall Tom's picture

...a gemstone as common as amethyst whose price has been controlled by a cartel.

 

Now the price may collapse to the same as Amethyst...$2/Carat.

 

"Yeah. Here you go my love. Have this cheap sparkly rock."

 

I hate dealing with fuckin' Diamonds.

Mon, 02/15/2016 - 16:58 | 7189214 Yung Saver
Yung Saver's picture

+1 I gave my lady what she really wanted this Vday weekend. Time and affection. And my fight club bod.

Mon, 02/15/2016 - 19:00 | 7189788 COSMOS
COSMOS's picture

Will be interesting to see a body sculpted by a Ramen noodle diet.

Mon, 02/15/2016 - 23:55 | 7190802 StychoKiller
StychoKiller's picture

Umm, thin and stringy?? :>D

Mon, 02/15/2016 - 19:05 | 7189815 NotApplicable
NotApplicable's picture

I cleaned our kegerator and worked on a hopefully "super-duper" goat pen. Keeping the goats out of the flower beds is high on M'lady's list (as is keeping the beer tasty).

Mon, 02/15/2016 - 17:37 | 7189384 Id fight Gandhi
Id fight Gandhi's picture

Amen brah. Diamonds perfect example of false scarcity market. Wherelese can  you buy something so precious and timeless and certified and insured and walk down the street to trade or sell it and get only 20% what you paid, that very day. If you must burn money on a diamond make sure you have good insurance. Things get "lost" all the time.

Mon, 02/15/2016 - 15:59 | 7188908 y3maxx
y3maxx's picture

Two year old world currency war....one year old oil war...now a diamond war.

What's next?

Mon, 02/15/2016 - 16:06 | 7188942 manofthenorth
manofthenorth's picture

Mushroom clouds I am affraid to say.

Mon, 02/15/2016 - 17:34 | 7189337 jcdenton
jcdenton's picture

Low yield just as effective ..

 

 

http://www.veteranstoday.com/2016/02/13/the-b-61-the-more-usable-nuke/

 

Furthermore, to understand the Battle of Baghdad ..

http://www.veteranstoday.com/2016/02/14/greetings-to-saudi-arabia-kalibr...

Nuclear war has been going on for some time. Well, well past Aug. 6 to 9, 1945 ..

Mon, 02/15/2016 - 16:06 | 7188944 flyingcaveman
flyingcaveman's picture

I think this is an extention of that.  Or do you think the Russians are just going to accept any old currency that's printed up so a private company can keep its monopoly?  They're probably asking for gold.

Mon, 02/15/2016 - 17:10 | 7189264 Urban Redneck
Urban Redneck's picture

The aims here are PRECISELY political, not financial.

$15M is a fraction of a single cargo load of crude oil, even at the currently low, low (sub USD 35) prices.

All wars are bankster wars.

So who do we know who Vlad wants to fuck, and could do so by devaluing their diamond holdings?

One name springs to mind...

Mon, 02/15/2016 - 17:04 | 7189239 Calmyourself
Calmyourself's picture

Diamonds are common, their only value is their artificially contrived cartel value and yes I have the chops to say this authoritatively.

Mon, 02/15/2016 - 17:22 | 7189324 Mr. Universe
Mr. Universe's picture

Another way to convince the muppets to part with a month's salary for some future ex's engorgement ring.

On another note, boy the was the cartel fuming when Botswana hit their strike, talk about poor timing.

Mon, 02/15/2016 - 18:05 | 7189509 Kirk2NCC1701
Kirk2NCC1701's picture

No problem.  De Beers simply has to buy it all at the low prices, and store it away.  

Thus controlling the market price.

And for those sub-100 IQ simpletons, who think that Russia can simply dump more, let me remind you that the Tribe can create fiat out of thin air a lot faster than the Russian can mine diamonds.  There is only ONE winner in this war of Diamond Attrition:  TPTB.

Sorry to take the shine off this diamond tale, but let's worship Reality, not Fantasy.  Nor live in Hopelandia.

Mon, 02/15/2016 - 22:39 | 7190569 East Indian
East Indian's picture

That may be difficult. The sum to be raised is paltry, by Chinese standards; China may yet allow its rich people to pick these stones, as a special favour to Russia. Or even its own government may buy it with yuans / gold. And the Indians are always there to pick a cheap bargain, with the blessings of their government. Putin will ensure that this lot does not end up with de Beers cartel, that too at low prices.

Mon, 02/15/2016 - 16:20 | 7189014 rickowens
rickowens's picture

In November 2011, the Oppenheimer family announced its intention to sell the entirety of its 40% stake in De Beers to Anglo American plc thereby increasing Anglo American's ownership of the company to 85%

Short Anglo American (LSE: AAL)

Mon, 02/15/2016 - 21:35 | 7190358 limpinalien69
limpinalien69's picture

Don't worry. JewBeers will be just fine. They'll go in and mop up all those rocks.

Tue, 02/16/2016 - 04:20 | 7191150 what's that smell
what's that smell's picture

print $7,000,000,000,000,000 fiat;

purchase russian rocks;

ship to warehouse no. 1313 south bronx ave tel aviv is;

lose paperwork;

run nlp brainwashing programming Diamonds Are Forever;

repeat: rock = poo tang;

gouge the heathen;

done.

 

Mon, 02/15/2016 - 15:46 | 7188829 WillyGroper
WillyGroper's picture

hahahahahah

wonder what antwerp has to say...

hahahahah

edit: brainfart

Mon, 02/15/2016 - 19:53 | 7189993 flapdoodle
flapdoodle's picture

Antwerp, hell. Try Tel Aviv - that's probably as big in the diamond cutting world. This is a thumb in the eye for the tribe...

Mon, 02/15/2016 - 15:47 | 7188841 ThroxxOfVron
ThroxxOfVron's picture

<--- Diamonds are forever.

<--- Uncontested Divorce $400.

Mon, 02/15/2016 - 16:07 | 7188948 New World Chaos
New World Chaos's picture

Big diamonds are probably MORE likely to cause a breakup in the long run.  They smell like beta.

Diamonds are a girl's biggest shit test.

http://captaincapitalism.blogspot.co.nz/2013/06/diamonds-are-girls-bigge...

She would rather have a meth-dealing biker than a diamond.

Diamonds aren't even all that rare.  Just De Beers capping supply, plus a whole lot of middlemen, plus advertising brainwashing everyone into doing this shit test.

Mon, 02/15/2016 - 16:20 | 7189015 Pickleton
Pickleton's picture

You say, "I'm not getting you some big ass diamond, and matter of fact, we're not pissing away precious funds on a bullshit wedding."

 

Lol!

 

 

Mon, 02/15/2016 - 16:45 | 7189121 daveO
daveO's picture

"Diamonds are a girl's biggest shit test."

Cuke test. Today, with NoFaults, it's a down payment on years of financial misery.

Mon, 02/15/2016 - 17:05 | 7189246 centerline
centerline's picture

Financial pressure on the masses - particularly the younger generations - is creating an awareness of scams.  The proof here is the peak.  What is passing us right now.  Massive weddings and other financial disasters which somehow symbolize the start of healthy relationship wherein the #1 reason for divorce is finance.  ha ha ha.  What a fucking joke.  Lots of younger kids opting out of the BS these days.  About time. 

Mon, 02/15/2016 - 18:52 | 7189753 STP
STP's picture

I told both of my young 20-something daughters, 'don't even expect a $25K wedding!'.   And they're not going to either.  One is a nurse, the other is working on her Master's degree.  To spend that kind of money on an afternoon of frivolity, is total bullshit.  Where did they get the idea, that you had to buy a $4K wedding dress and have maids of honor, dressed up in custom costumes?  How stupid is that?   Then they'd go back to bagging groceries or bartending the next day.

Mon, 02/15/2016 - 17:13 | 7189277 More Ammo
More Ammo's picture

Offer the woman a 24ct gold ring and if that is not enough, ditch the bitch.

Mon, 02/15/2016 - 16:17 | 7188998 RacerX
RacerX's picture

fwiw the "Uncontested Divorce" should be the upvote.

Just sayin

Mon, 02/15/2016 - 16:25 | 7189040 ThroxxOfVron
ThroxxOfVron's picture

<--- Down is the new up.

<--- Man is a dog's best friend.

Mon, 02/15/2016 - 16:29 | 7189073 ThroxxOfVron
ThroxxOfVron's picture

<--- Press 1 for english.

<--- Que quieres patatas fritas con eso es?

 

Mon, 02/15/2016 - 16:32 | 7189089 ThroxxOfVron
ThroxxOfVron's picture

<--- Am I tourettes?

<--- Dyslexic cocksucking shit meh!

Mon, 02/15/2016 - 16:41 | 7189135 Tall Tom
Tall Tom's picture

LOL

 

That is a good one.

Mon, 02/15/2016 - 17:57 | 7189468 ThroxxOfVron
ThroxxOfVron's picture

<--- I failed basic algebra twice.

<--- The Lord works in mysterious ways.

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