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ARMENIA HOPES TO BECOME GLITTERING GATEWAY FOR RUSSIAN DIAMONDS
EurasiaNet.org
Sept 19 2014
September 19, 2014 - 12:00pm, by Nazik Armanakyan and Gayane Abrahamyan
A diamond deal that gives Armenia duty-free access to rough diamonds
from Russia could offer Alrosa, the semi-government-owned Russian
diamond company that provides roughly 27 percent of the world's
rough-diamond supplies, a dodge from potential European-Union
sanctions, Armenian diamond-industry professionals believe.
About half of Alrosa's yearly sales occur through the international
diamond market in Antwerp, Belgium, a member of the EU. Although the
company, which accounts for the bulk of Russia's diamond mining,
does not yet feature on a sanctions list for Russian actions in
Ukraine, it has stated that it has begun to work "out some options
for reducing this risk;" namely, by increasing sales to clients
"in other jurisdictions."
Enter Armenia. Once the center of the Soviet Union's diamond-refining
operations, the South-Caucasus country today counts on exports of
refined diamonds for about 10 percent of its total annual volume
of approximately $1 billion in exports. That share has slumped
dramatically over the past decade from a peak of 40 percent in the
early 2000's (diamond exports peaked at $327 million in 2003), but
Armenian refiners see the diamond agreement with Russia as a way for
the sector to regain its financial sparkle.
"This is a great opportunity," Edgar Hovhannisian, the general director
of Dimotech, an Armenian refining factory owned by Antwerp -based Rosy
Blue, one of the world's top diamond manufacturers. "We are expanding,
[and] have ordered a half a million dollars' worth of machines in
anticipation of a higher volume of production."
Under the terms of the agreement, ratified in late June, Armenian
importers would be able to purchase an unlimited amount of rough
diamonds from Russia without paying the usual 6.5-percent duty.
Armenian President Serzh Sargsyan and Russian President Vladimir Putin
signed the deal last December, before the Ukrainian crisis erupted. It
is not contingent upon Armenia finally joining Putin's trade club,
the Eurasian Union.
To encourage things along, the Armenian government has dropped its
20-percent Value Added Tax on imported diamonds.
But the agreement with Moscow is not all glitter, critics warn. It
effectively strengthens Armenia's economic dependence on Russia;
if Armenia joins the Union -- the most recent projected date is this
October - its refiners will have to pay an 18-percent duty on rough
diamonds imported from outside countries, which may sell diamonds
for lower prices.
Diamond refiners in the village of Nor Hatchn, the hub of Armenia's
diamond operations, about 60 kilometers north of the capital, Yerevan,
see no problems with the deal, however. Only 20 of the 200-some diamond
workshops that existed in Nor Hatchn during the early post-Soviet
period still function today.
With access to duty-free Russian roughs to refine, though, "[t]he
situation will shift significantly," predicted Chaminda Nugara,
Dimotech's administration manager.
Dimotech, which employs 150 diamond workers, has opened a second
factory in Armenia, and brought back ten artisans who left Armenia
after the 2008 global financial crisis, when demand for refined
diamonds slumped.
"Presently, a lot of the workshops [in Nor Hatchn] are non-functional,
but I think many foreign investors would be attracted by the Russian
rough diamonds; especially now that access to Russian raw materials
will be getting harder for European manufacturers," predicted Nugara.
A similar diamond deal with Russia coincided with the peak in Armenia's
diamond sector in the late 1990's and early 2000's, when Antwerp-based
Tache and Israeli diamond magnate Lev Levaev came to invest, and the
country churned out annually between 200,000 to 370,000 carats of
refined diamonds, according to official data.
Alrosa, though, has termed the discussion of possible EU sanctions
"purely speculative." Nonetheless, as the Weekly Rapaport Report,
a diamond-industry publication, has noted, it has begun to seek
"alternative methods and markets for selling its diamonds;" most
recently, by expanding exports to India, the company's second largest
market after Antwerp.
But not all experts share the optimism that Armenia will enjoy
a diamond comeback as a result of its access to duty-free Alrosa
diamonds.
For one, there's the competition. Armenia does not rank among the top
markets for Alrosa roughs. Drawing on Armenia's traditional expertise
in working with jewelry, the country's hand-cut, refined diamonds
have received industry certifications of excellence, but Dimotech's
Hovhannisian concedes that "Indians and the Chinese are...
technologically more advanced."
Concerns also exist about the fact that Russia does not allow Armenia
to re-export the small, rough diamonds which can be included in a
purchased batch and which are not considered cost-effective to refine.
Armen Yeganian, head of the Ministry of Economy's industrial-policy
department, told EurasiaNet.org, however, that the government is now
negotiating with Moscow "to have the ban lifted."
Kamo Dallakian, the director of Agates Company, a 10-person,
Armenian-owned operation, reported no restrictions on a recent shopping
trip to Moscow, however. "We were granted the opportunity of a large
selection," Dallakian told EurasiaNet.org. The company already has
exported its first batch of polished stones from the purchased rough
Russian diamonds.
Like other interviewed companies, Agates is planning to expand in
anticipation of outside demand for refined Russian diamonds.
Yerevan State University of Economics' economist Ashot Yeghiazarian
cautions, however, that "it cannot be ruled out that cooperation with
[Alrosa] poses a serious risk."
For now, though, it appears to be a risk that Armenia is willing
to take.
Editor's Note: Gayane Abrahamyan is a freelance reporter and editor
in Yerevan. Nazik Armanakyan is a freelance photojournalist based
in Yerevan.
http://www.eurasianet.org/node/70061
From: A. Papazian
EurasiaNet.org
Sept 19 2014
September 19, 2014 - 12:00pm, by Nazik Armanakyan and Gayane Abrahamyan
A diamond deal that gives Armenia duty-free access to rough diamonds
from Russia could offer Alrosa, the semi-government-owned Russian
diamond company that provides roughly 27 percent of the world's
rough-diamond supplies, a dodge from potential European-Union
sanctions, Armenian diamond-industry professionals believe.
About half of Alrosa's yearly sales occur through the international
diamond market in Antwerp, Belgium, a member of the EU. Although the
company, which accounts for the bulk of Russia's diamond mining,
does not yet feature on a sanctions list for Russian actions in
Ukraine, it has stated that it has begun to work "out some options
for reducing this risk;" namely, by increasing sales to clients
"in other jurisdictions."
Enter Armenia. Once the center of the Soviet Union's diamond-refining
operations, the South-Caucasus country today counts on exports of
refined diamonds for about 10 percent of its total annual volume
of approximately $1 billion in exports. That share has slumped
dramatically over the past decade from a peak of 40 percent in the
early 2000's (diamond exports peaked at $327 million in 2003), but
Armenian refiners see the diamond agreement with Russia as a way for
the sector to regain its financial sparkle.
"This is a great opportunity," Edgar Hovhannisian, the general director
of Dimotech, an Armenian refining factory owned by Antwerp -based Rosy
Blue, one of the world's top diamond manufacturers. "We are expanding,
[and] have ordered a half a million dollars' worth of machines in
anticipation of a higher volume of production."
Under the terms of the agreement, ratified in late June, Armenian
importers would be able to purchase an unlimited amount of rough
diamonds from Russia without paying the usual 6.5-percent duty.
Armenian President Serzh Sargsyan and Russian President Vladimir Putin
signed the deal last December, before the Ukrainian crisis erupted. It
is not contingent upon Armenia finally joining Putin's trade club,
the Eurasian Union.
To encourage things along, the Armenian government has dropped its
20-percent Value Added Tax on imported diamonds.
But the agreement with Moscow is not all glitter, critics warn. It
effectively strengthens Armenia's economic dependence on Russia;
if Armenia joins the Union -- the most recent projected date is this
October - its refiners will have to pay an 18-percent duty on rough
diamonds imported from outside countries, which may sell diamonds
for lower prices.
Diamond refiners in the village of Nor Hatchn, the hub of Armenia's
diamond operations, about 60 kilometers north of the capital, Yerevan,
see no problems with the deal, however. Only 20 of the 200-some diamond
workshops that existed in Nor Hatchn during the early post-Soviet
period still function today.
With access to duty-free Russian roughs to refine, though, "[t]he
situation will shift significantly," predicted Chaminda Nugara,
Dimotech's administration manager.
Dimotech, which employs 150 diamond workers, has opened a second
factory in Armenia, and brought back ten artisans who left Armenia
after the 2008 global financial crisis, when demand for refined
diamonds slumped.
"Presently, a lot of the workshops [in Nor Hatchn] are non-functional,
but I think many foreign investors would be attracted by the Russian
rough diamonds; especially now that access to Russian raw materials
will be getting harder for European manufacturers," predicted Nugara.
A similar diamond deal with Russia coincided with the peak in Armenia's
diamond sector in the late 1990's and early 2000's, when Antwerp-based
Tache and Israeli diamond magnate Lev Levaev came to invest, and the
country churned out annually between 200,000 to 370,000 carats of
refined diamonds, according to official data.
Alrosa, though, has termed the discussion of possible EU sanctions
"purely speculative." Nonetheless, as the Weekly Rapaport Report,
a diamond-industry publication, has noted, it has begun to seek
"alternative methods and markets for selling its diamonds;" most
recently, by expanding exports to India, the company's second largest
market after Antwerp.
But not all experts share the optimism that Armenia will enjoy
a diamond comeback as a result of its access to duty-free Alrosa
diamonds.
For one, there's the competition. Armenia does not rank among the top
markets for Alrosa roughs. Drawing on Armenia's traditional expertise
in working with jewelry, the country's hand-cut, refined diamonds
have received industry certifications of excellence, but Dimotech's
Hovhannisian concedes that "Indians and the Chinese are...
technologically more advanced."
Concerns also exist about the fact that Russia does not allow Armenia
to re-export the small, rough diamonds which can be included in a
purchased batch and which are not considered cost-effective to refine.
Armen Yeganian, head of the Ministry of Economy's industrial-policy
department, told EurasiaNet.org, however, that the government is now
negotiating with Moscow "to have the ban lifted."
Kamo Dallakian, the director of Agates Company, a 10-person,
Armenian-owned operation, reported no restrictions on a recent shopping
trip to Moscow, however. "We were granted the opportunity of a large
selection," Dallakian told EurasiaNet.org. The company already has
exported its first batch of polished stones from the purchased rough
Russian diamonds.
Like other interviewed companies, Agates is planning to expand in
anticipation of outside demand for refined Russian diamonds.
Yerevan State University of Economics' economist Ashot Yeghiazarian
cautions, however, that "it cannot be ruled out that cooperation with
[Alrosa] poses a serious risk."
For now, though, it appears to be a risk that Armenia is willing
to take.
Editor's Note: Gayane Abrahamyan is a freelance reporter and editor
in Yerevan. Nazik Armanakyan is a freelance photojournalist based
in Yerevan.
http://www.eurasianet.org/node/70061
From: A. Papazian