Hostname: page-component-cd9895bd7-lnqnp Total loading time: 0 Render date: 2024-12-23T12:39:25.988Z Has data issue: false hasContentIssue false
  • English
  • Français

Soviet and Russian Relations with Foreign Corporations: The Case of Gold and Diamonds

Published online by Cambridge University Press:  27 January 2017

Daniel R. Kempton  and
Richard M. Levine
Daniel R. Kempton
Affiliation:
Department of Political Science, Northern Illinois University
Richard M. Levine
Affiliation:
Division of International Minerals, US Bureau of Mines
Get access Rights & Permissions [Opens in a new window]

Extract

When the Soviet Union collapsed, Russia and the other successor states lost much of their collective strategic significance for the international community. Russia's role as a new member of the nuclear club is potentially destabilizing but does not present the overriding nuclear threat once posed by the USSR. Although Russia is attempting to reestablish its traditional roles in Eurasia, the Balkans and eastern Europe, its political importance has generally decreased commensurate with the collapse of the Soviet military machine; Russia is important economically only insofar as it is a powerful magnet for western aid and investment. While this perception of gradual marginalization, apparently shared by western diplomats, academics and journalists, may be largely accurate, it is incomplete. It overlooks Russia's potential role as a source of natural resources.

Type
Articles
Information
Slavic Review , Volume 54 , Issue 1 , Spring 1995 , pp. 80 - 110
Copyright
Copyright © Association for Slavic, East European, and Eurasian Studies. 1995

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

1. William J. Broad, “Russian Says Soviet Atom Arsenal Was Larger Than West Estimated,” New York Times International (26 September 1993): 1. To compound the problem, Russia has between fifty and one hundred tons of plutonium which, if transformed into fuel for nuclear stations, would equal a twenty-year supply (Itar-Tass [8 April 1992, in Foreign Broadcast Information Service (henceforth FBIS-Sov)-92-070, 10 April 1992]: 4).

2. Stopford, John M. and Strange, Susan, Rival States, Rival Firms: Competition for World Market Shares (Cambridge: Cambridge University Press, 1991 CrossRefGoogle Scholar; and Susan, Strange, “States, firms and diplomacy,” International Affairs (London) 68, no. 1 (January 1992): 1–16.Google Scholar

3. Strange, ibid., 1.

4. Philip C., Newman, Cartel and Combine: Essays in Monopoly Problems (Ridgewood: Foreign Studies Institute, 1964 Google Scholar.

5. The author himself notes two important exceptions to this trend ( Taylor, June H. and Yokell, Michael D., Yellowcake: The International Uranium Cartel [New York : Pergamon Press, 1979], 198 Google Scholar). To these should be added, Deborah L., Spar, The Cooperative Edge: The Internal Politics of International Cartels (Ithaca: Cornell University Press, 1994 Google Scholar).

6. Data for Anglo American Corporation from Gold 1993 (London: Goldfields Minerals Service, 1992), 18.

7. Duncan, Innes, Anglo American and the Rise of the Modern South Africa (New York: Monthly Review Press, 1984), 160 Google Scholar.

8. Elizabeth Rubinfien, “Russia's Diamond Industry Debating Loosening Marketing Ties to De Beers,” Wall Street Journal (29 January 1994): A-ll.

9. On the political power of the two corporations, see Epstein, Edward Jay, The Rise and Fall of Diamonds: The Shattering of a Brilliant Illusion (New York: Simon and Schuster, 1982 Google Scholar; Duncan Innes, op. cit, ; and Pallister, David, Stewart, Sarah and Lepper, Ian, South Africa Inc.: the Oppenheimer Empire (New Haven: Yale University Press, 1988 Google Scholar.

10. Robin McGregor, McGregor's Who Owns Whom: The Investors’ Handbook, 11th ed. (Johannesburg: JUT A, 1991).

11. Drew, Fudenberg and Jean, Tirole, Dynamic Models of Oligopoly (New York: Harwood, 1985), 2 Google Scholar.

12. Joe S., Bain, Barriers to New Competition: Their Character and Consequences in Manufacturing Industries (Cambridge: Harvard University Press, 1956), 26 Google Scholar.

13. Roger, Sherman, Oligopoly: An Empirical Approach (Lexington: Lexington Books, 1972), 4 Google Scholar; and F. M., Shere, Industrial Market Structure and Economic Performance, 2nd ed. (Boston: Houghton Mifflin, 1980), 266 Google Scholar.

14. Plott, Charles R., “An Updated Review of Industrial Organization: Application of Experimental Methods,” in Schimatensee, R. and Willig, R.D., eds., Handbook of Industrial Organization, II (New York: Elsevier Science Publisher, 1989 Google Scholar; and; Grether, D. M. and Plott, Charles R., “The Effects of Market Practices in Oligopolistic Markets: An Experimental Examination of the Ethyl Case,” Economic Inquiry 22 (1984): 479–507.CrossRefGoogle Scholar

15. Sherman, op. cit., 5.

16. Spar, op. cit.

17. Ibid., 14.

18. Ibid., 219-24.

19. Ibid., 138.

20. Epstein, op. cit., 253-55; Edward, Jessup, Ernest Oppenheimer: A Study in Power (London: Rex Collings, 1979), 118, 129 Google Scholar.

21. Epstein, 88.

22. Theodore, Gregory, Ernest Oppenheimer and the Economic Development of Southern Africa (New York: Oxford University Press, 1962), 324 Google Scholar.

23. Diamonds are commonly mined in two forms. First, they may be found in formations known as “pipes.” These are cylindrical shaped tubes of kimberlite rock created by an underground volcanic flow. Secondly, they may be found in the soil deposits from ancient pipes that have been eroded over millions of years. These socalled “alluvial” diamonds—often carried by rivers—can be found in gravel beds sometimes up to hundreds of miles from their original pipe.

24. Epstein, 103; Kurt M., Campbell, Soviet Policy Towards South Africa (New York: St. Martin's Press, 1986), 100–10Google Scholar; Carlyle Murphy, Washington Post (4 August 1981): 6; and G. Guseinov (interview with Valery Rudakov), Izvestiia (12 October 1990): 6.

25. Interview with Valery Rudakov, special consultant, Almazy Rossii-Sakha, Moscow, 25 May 1994.

26. The irony of all this makes fruitful ground for conspiracy theorists. To meet Soviet needs for hard currency, a South African corporation persuaded American men to buy their wives a luxury good with no practical value.

27. This often told story is most fully developed in David Pallister, et al., 147.

28. Gordon T., Austin, Gem Stones: Annual Report (Washington : US Department of the Interior, Bureau of Mines, 1990), 2 Google Scholar.

29. Cited in International Diamond Annual (London, 1971), 82.

30. E.g., Epstein, op. cit.

31. Ibid., 192-93.

32. Campbell, 103.

33. David E., Koskoff, The Diamond World (New York: Harper & Row, 1981), 98 Google Scholar.

34. Pallister et al., 146-48.

35. Minerals Bureau Bulletin (South Africa) 2, no. 8 (1989): 4-5; Austin, 19.

36. Timothy, Green, The New World of Gold: The Inside Story of the Mines, the Markets, the Politics, the Investors (New York : Walker & Co., 1984), 63–64 Google Scholar.

37. On the Kolyma fields, see Robert, Conquest, The Great Terror: Stalin's Purge of the Thirties (New York: Collier Books, 1973), 472–80Google Scholar; and Sergey, Paliy, “Will You Get Rich Sitting on Gold,” Rossiiskaia gazeta (22 September 1992): 3.Google Scholar

38. Cited in Green, 64.

39. Although both the popular western press and even Soviet analysts (e.g. Argumenty i fakty, no. 13 [March 1991]: 4-5) frequently associate periods of increased gold sales with Soviet grain purchases, Nel has demonstrated the more general correlation of increased sales with the need to service foreign debt accrued for a variety of reasons ( Philip, Nel, “Factors Influencing Soviet Gold Sales and Reserves, 1965-1990,” Soviet Revue VII, no. 1 [1991]: 9–19 Google Scholar).

40. Spar, 167-68.

41. Argumenty i fakty, no. 13 (March 1991): 4-5.

42. Levine, Richard M., “Glasnost, Perestroika & Soviet Gold,” Minerals Today (Washington: US Department of Interior, Bureau of Mines, March 1990), 8 Google Scholar.

43. Pravda (9 March 1990): 7; Argumenty i fakty, no. 13 (March 1991): 4-5.

44. Minerals Bureau Bulletin (South Africa) 2, no. 9 (1990): 1; Minerals Bureau Bulletin 3, no. 1, (1990): 1; and Minerals Bureau Bulletin 4, no. 2 (1991): 2.

45. Rossiiskaia gazeta (26 November 1991): 2.

46. Minerals Bureau Bulletin (South Africa) 2, no. 7 (1991): 7; V/Shelkov, Pravda (18 September 1991): 5.

47. Reg Rumney, “CSO Sews up Soviet Diamonds,” The Weekly Mail (27-29 July 1990): 10.

48. See, Daniel, R. Kempton, “The Soviet Union and South Africa,” Journal of Modern African Studies 28, no. 4 (1990): 545–72Google Scholar; and Daniel R., Kempton, Soviet Strategy Toward Southern Africa (New York: Praeger, 1989), 197–215 Google Scholar.

49. E. Guseinov (interview with Valery Rudakov of Glavalmazzoloto), Izvestiia (12 October 1990): 6.

50. De Beers Centenary AG & De Beers Consolidated Mines Ltd., De Beers: Chairman's Statement and 1990 Review (1990).

51. The better reports on the deal include: John Battersby, “Soviet-South Africa Ties Sparkle,” Christian Science Monitor (17 August 1990): 9; John Cavill and Andrew McNulty, “The bit between the teeth,” Financial Mail (3 August 1990): 30; E. Guseinov, “New Buyer for Soviet Diamonds,” Izvestiia (27 July 1990): 4; Diana B. Henriques, “Soviets to sell Diamond Stockpile through a Subsidiary of De Beers,” New York Times (26 July 1990): Al, C20; Reg Rumney, “CSO Sews up Soviet Diamonds,” The Weekly Mail (27-29 July 1990): 10; Deborah Stead, “Talking Deals: Moscow's Call to De Beers,” New York Times (2 August 1990): 21; and Cotten Timberlake, “De Beers Signs Diamond Pact with Soviets,” Chicago Tribune (26 July 1990): 17.

52. Spar, 85.

53. E. Guseinov (interview with Pavel Kovylin, deputy director general of Almazyuvelireksport), Izvestiya (16 September 1991): 5.

54. Engineering News (Johannesburg) (22 March 1991): 34.

55. Cape Times (25 June 1991): 1.

56. Interview with Professor Appolan Davidson, president of the Soviet-South African Friendship Society, Grahamstown, South Africa, 23 July 1991.

57. Data for 1991 are from Goskomstat, Free Europe/Radio Liberty, Daily Report 81 (21 April 1993): 9. The 1992 and 1993 data are Komdragmet figures from Evgenii Bichkov, chairman of Komdragmet in Izvestiia (11 December 1993): 2. Komdragmet claims the 1992 figure should be at least 146 tons and may be higher if all artel produced gold is fully counted. Goskomstat figures for the same years are lower.

58. Richard M., Levine, Mineral Industries of Central Eurasia—1992 (Moscow: US Department of Interior, Bureau of Mines, 1994), 9 Google Scholar.

59. For example, Izvestiia (Economic Supplement) (5-11 November 1993): 1; and Nezavisimaya Gazeta (8 June 1993): 3.

60. Richard M. Levine (1993), 416; Bond, Andrew R., Levine, Richard M. and Austin, Gordon T., “Russian Diamond Industry in State of Flux,” Post-Soviet Geography 33, no. 10 (1992): 642.Google Scholar

61. Austin, Gordon T., “Gemstones,” Minerals Yearbook 1, Metals and Minerals, 1991 (Washington: US Department of Interior, Bureau of Mines, 1993), 632 Google Scholar.

62. Richard M., Levine, The Mineral Industry of the USSR, 1988 International Review (Washington: US Department of the Interior, Bureau of Mines, 1990)Google Scholar; and Richard M. Levine, “Glasnost, Perestroika and Soviet Gold,” Minerals Today (March 1990): 8-14.

63. Vladivostok Domestic Service (21 August 1991) in FBISSO¥-91-162, 77.

64. Anastasiya Naryshkina, “Gold Miners Have Become Victims of the Speculators in London,” Segodnya, no. 61 (5 October 1993): 14, in FBIS-USR-93136, 21 October 1993, 73-75.

65. Rossiiskaia gazeta (25 February 1993): 3, in FBISUSR-025, 5 March 1993: 26.

66. Bond, Levine and Austin, 642.

67. Levine, (1990), 412.

68. Interview with Raymond A. Clark, managing director, and Alan Campbell, deputy general manager, De Beers Centenary (Russia), Moscow, 25 May 1994.

69. Izvestiia (12 October 1990); Soyuz, no. 33 (August 1990): 13, in FBISSOV-90- 173, 6 September 1990: 91; Lev Aksenov, TASS (9 August 1990) in FBIS-SOV-90-155, 10 August 1990: 58; and Andrey Orlov, TASS (11 August 1990, in FBIS-SOV-90156, 13 August 1990: 85.

70. E. Guseinov, Izvestiia (4 October 1991): 7.

71. In this particular paragraph, the term “republics” refers to the fifteen successor states to the Soviet Union, then known as Union Republics. Elsewhere, the term refers to republics of the Russian Federation.

72. Ann Sheehy, “Revised Draft of the Union Treaty,” Report on the USSR, Radio Free Europe/ Radio Liberty Research Institute 1, no. 12 (1991).

73. Hedrick Smith, The New Russians, rev. ed. (New York: Random House, 1992), 265.

74. TASS (5 February 1992) in FBISSOV-025, 6 February 1992: 56; INTERFAX (2 February 1992) in FBIS-SOV-92-022, 3 February 1992: 7.

75. INTERFAX (26 February 1992) in FBIS-SOV-92-039, 1992: 52.

76. Rossiiskaia gazeta (19 February 1992) in FBIS-SOV-92-038, 26 February 1992: 45; and TASS (21 February 1992) in FBIS-SOV-920S7, 25 February 1992: 50.

77. Rossiiskaia gazeta (22 December 1992): 5, in FBIS-USR-93-003, 8 January 1993: 30-31.

78. Bond, Levine and Austin, 635-37.

79. Interview with Sergei Aramovich Oulin, director, Almazy Rossii-Sakha, Moscow, 23 May 1994.

80. INTERFAX (14 July 1992) in FBIS-SOV-92-138, 17 July 1992: 46; and Bond, Levine and Austin, 637-38.

81. INTERFAX MINING REPORT (4-11 September 1992): 2-3; SWBSUIW0247 (11 September 1992): A16; INTERFAX MINING REPORT (23-30 October 1992): 6; Kommersant (14 July 1992): A6, all cited in Bond, Levine and Austin, 639.

82. Kommersant, no. 29 (13-20 July 1992): 4, in FBIS-USR-92-100, 7 August 1992: 46-48.

83. Rossiiskaia gazeta (6 November 1992): 4, in FBIS-USR-92-153, 30 November 1992: 34-37.

84. INTERFAX (27 January 1993) in FBIS-SOV-93-017, 18 January 1993: 29; and Kommersant (16 July 1993): 2, in FBIS-SOV-93135, 16 July 1993: 33.

85. Nezavisimaia gazeta (18 February 1993): 1, 3, in FBIS-SOV-93-031, 18 February, 1993, 45-46; Segodnya, no. 31: (6 July 1993): 1, in FBIS-SOV-9S128, 7 July 1993: 41; and Daily Report, Radio Free Europe/ Radio Liberty, no. 142, 28 July 1993.

86. Daniel Sneider, “Russian Troops Seal off Parliament as Regions Urge a Compromise,” Christian Science Monitor (29 September 1993): 2; and Serge Schmemann, “Yeltsin Issues a Formal Warning to Deputies Who Refuse to Yield,” New York Times (30 September 1993): 1.

87. Levine (1993), 423.

88. Richard M. Levine, “Hard-Rock Gold Mining to be developed in Soviet Far East,” Minerals Today (November 1990): 36; Komsomol'skaia pravda (9 December 1990): 1; TASS International Service (14 November 1991) in FBIS-SOV-91-220, 14 November 1991: 28-29.

89. Gordon T., Austin, Gemstones: Annual Report, 1990 (Washington: US Department of Interior, Bureau of Mines, September 1991), 19 Google Scholar.

90. Moscow Television First Programs and Orbita Network (3 June 1991) in JPRSUEA-91-029, 28 June 1991: 45-46; and “Moscow,” Daily Dispatch (South Africa) (25 June 1991): 9.

91. INTERFAX in English (5 March 1992) in FBIS-SOV-92-045, 6 March 1992: 41.

92. Moscow Television First Programs and Orbita Network, op. cit.; and “Moscow,” Daily Dispatch (South Africa), op. cit.

93. Interview with Evgeny Matveevich Bichkov, chairman, Komdragmet, and Yuri A. Kotliar, first deputy chairman, Komdragmet, Moscow, 27 May 1994.

94. Bond, Levine and Austin, 637.

95. ITAR-TASS (28 May 1993) in FBIS-SOV-93-\02, 28 May 1993: 45.

96. The story originally appeared in the Guardian (11 September 1991) as reported by Izvestiia (13 September 1991): 1. On other metals, see The Daily Telegraph (16 November 1991) as cited in Pravda (18 November 1991): 1.

97. Sel'skaia zhizn (19 September 1991): 3; Rabochaia tribuna (21 September 1991): 3; Izvestiia (16 November 1991): 1; Izvestiia (18 November 1991): 1; and Komsomolskaia pravda (19 November 1991): 1. Rumors of missing diamonds are reported in Igor Oleynik, “Where's all the Soviet Gold,” The Plain Dealer (Cleveland) (11 December 1992): 12; and Igor Oleynik, “Where's all that Soviet Gold?” The Washington Times (31 March 1992): 16. The most concrete evidence involves an unofficial trip taken on the eve of the coup to Lausanne, Switzerland by then Soviet Finance Minister Orlov that coincided with the opening of several hundred coded accounts (Moscow Radio Rossii Network [7 October 1991] cited in FBISSOV-91-196, 9 October 1991: 36-37).

98. Daniel Sneider, “Russia Goes After Party Gold,” Christian Science Monitor (6-12 March 1992): 2.

99. The two basic schemes have been to repay the federal debt to the regions in gold, INTERFAX (3 June 1992) in FBIS-SOV-92-108, 4 June 1992: 4; INTERFAX (15 June 1992) in FBIS-SOV-92U6, 4 June 1992: 29-30; and INTERFAX (25 June 1992) in FBISSOV-92-123, 25June 1992: 38; Nezavisimaiagazeta (5 May 1993): 4, in FBIS-SOV-93, 6 May 1993: 34-35); and to diminish the debt by selling gold certificates to Russian consumers (Rossiiskiie vesti [29 September 1993]: 2, in FB/S-£/Sfl-93-133, 14 October 1993: 19; and Daily Report, Radio Free Europe/ Radio Liberty, no. 179 [17 September 1993]).

100. “Diamonds Lose Some of their Sparkle,” Daily Dispatch (29 April 1992): 12.

101. “This Kind of Ice Is Iakutia's Best Friend,” Christian Science Monitor (24 February 1993): 11; Vladimir Kvint, “Sorry Mr. Oppenheimer,” Forbes (15 February 1993): 42-43.

102. INTERFAX Mining Report (6-9 October 1992): 9, cited in Bond, Levine and Austin, 638.

103. John Battersby, “South Africa's Diamond-Selling Cartel Faces Toughest Test,” Christian Science Monitor (13 October 1992): 6; and Scott Macleod, “Diamonds Aren't Forever,” Time (12 October 1992): 73.

104. INTERFAX Mining Report (4-11 September 1992): 4, cited in Bond, Levine and Austin, 639.

105. Moscow Russian Television Network (5 June 1992) in FBIS-SOV-92-114, 12 June 1992: 55.

106. “Can De Beers Hold on to Its Hammerlock?” Business Week (21 September 1992): 45.

107. “Diamond Sales Defended,” New York Times (25 December 1993): 2.

108. Because the definition of industrial diamond grades was set back in the 1950s, many better-grade industrial diamonds can be sold as cheap gem diamonds today) interview with Roger van Eeghen, De Beers/ Centenary, Group Corporate Communications, London, 31 May 1994).

109. “Russian Diamonds: Disputes are Forever,” The Economist (17 September 1994): 73-74.

110. Izvestiia (9 September 1992): 6.

111. Interview with Leonid Borisovich Gurevich, deputy chairman, Komdragmet, Moscow, 19 May 1994; and interview with Evgeny Matveevich Bichkov, chairman, Komdragmet, and Yuri A. Kotliar, first deputy chairman, Komdragmet, Moscow, 27 May 1994.

112. Interview with Sergei Aramovich Oulin, director, Almazy Rossii-Sakha, Moscow, 23 May 1994.

113. Conversely, a member of the Russian negotiating team found the proposal more interesting (interview with Anatoly Ivanovich Golovati, deputy minister, the Russian Federation Ministry of Finance, Moscow, 19 May 1994).

114. “20/20,” ABC Television (10 September 1993).

115. The May 1994 negotiations were led by Finance Minister Dubinin and Deputy Minister Golovati, with no representation from Komdragmet. During the second round of talks, held in early September, Russia failed to include Dubinin in its delegation. In response, De Beers’ deputy chairman, Nicholas Oppenheimer stayed behind in London ( “Russian Diamonds: Disputes are Forever,” The Economist [17 September 1994]: 73-74). However, Bichkov, chairman of Komdragmet, did participate.

116. Interview with Sergei Aramovich Oulin, director, Almazy Rossii-Sakha, Moscow, 23 May 1994; and interview with Evgeny Matveevich Bichkov, chairman, Komdragmet, and Yuri A. Kotliar, first deputy chairman, Komdragmet, Moscow, 27 May 1994.

117. Spar, 128.

118. As of 30 June 1994, De Beers’ long-term debt rose to $1.09 billion, compared to $861 million in June 1993. Over the same period, the value of its diamond stockpile rose from $3.28 billion to $4.03 billion. By the end of 1994 the stockpile may reach $5 billion, more than total annual CSO sales (Matthew Curtin, “De Beers Faces Challenge to Its Power: Dominance in Diamonds Threatened by Russia, Canada,” Wall Street Journal [22 August 1994]: A5B).