Abusive nonsense: Alrosa chief’s explosive Kasane speech
Mbongeni Mguni | Monday July 18, 2022 17:03
With tensions rising in the tourist town, Alrosa head of International Relations, Petr Karakchiev, apparently delivered a hard-hitting speech riddled with words such as “idiots”, “nonsense” and sarcastic jabs at “profound experts” and “respectable moralists”.
Alrosa is the world’s largest producer of rough diamonds, followed by De Beers, which co-owns Debswana with the Government of Botswana. Botswana, as chair of the Kimberley Process (KP) for 2022, spent four hours on the first afternoon of the Kasane meeting seeking compromise between the organisation’s members on the question of Russia.
Mmegi reproduces excerpts from Karakchiev’s speech herebelow, delivered to a roomful of delegates in Kasane:
“Hearing a lot of abusive nonsense, I feel myself obliged to stand up for the diamond mining communities and the high moral ground of the diamond industry in my country.
We see continuous play of imagination about the ethical side of our diamonds. In the times like this it’s very easy, and for most of opponents in this room even convenient, to adopt a “good guys and bad guys” Hollywood mentality and draw fast emotional conclusions that have nothing to do with reality or facts. Truth is always the first casualty.
But let us go back to the facts:
For years they preached to us that the KP needs to be supported by due diligence as best practice while sourcing diamonds from miners. The OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas was positioned as the standard ensuring that diamonds are sourced ethically regardless of political disturbances, but in full compliance with objective assessment of realities on the ground within the five-step framework. And disengagement was the last resort, we were told. Only if five-step framework didn’t help. But all of a sudden our opponents decided to kick off with this last step – disengagement... Why so?
And here comes the next question – did any of respectable moralists even try to make an effort to apply the OECD Due Diligence Guidance in the current crisis? The answer is unfortunately simple – no. Some easily decided to forget what they were passionately promoting over the past years. Because the aim is predetermined. I guess many didn’t even read the Guidance to understand what was preached to all of us, diamond mining nations, over these years. What is additionally appalling and idiotic in this situation is that many of these people visited Alrosa operations and saw with their own eyes what the company stands for and what it does.
Since none of our “profound” experts bothered to do the due diligence exercise and didn’t even bother to ask the company a single question while inventing their irrational speculations, we are happy to help them do their job. It’s not rocket science and doesn’t take long to make an objective analysis based on publicly available information and impartial fact finding instead of pulp fiction story telling.
To start with, Alrosa is a globally exposed publicly-listed company with transparent ownership, strategy, business model and structure. All disclosed figures and data are annually audited. It is a company owned in an equal split by the Russian Federation, Republic of Yakutia, a vast region in Siberia, and its local communities in the mining areas, and finally international institutional and private investors coming mainly from the USA, EU and the Middle East with the largest share of ownership of 34%.
It is common knowledge in the industry that ALROSA tax payments are the backbone of community development in Yakutia. Yakutia is our home, home for around 1 million people, including indigenous communities that live in very harsh climate conditions. The budget of Yakutia receives virtually all the budget and other tax payments that are done by the company that did not only historically design and built from scratch whole cities in Yakutia, but has been investing into those communities dedicatedly for over 50 years, not merely “supporting” them for a few years of ESG hype, as some do.
Just a few numbers:
- 99% of employees are locals from Yakutia
- 11% of employees are indigenous people of the North
- 100% of employees’ income tax go to Yakutia and local communities
- 100% of mining royalty go to Yakutia
- ~90% of profit tax go to Yakutia
Moreover, ALROSA is the industry leader in the share of social expenses with more than $150 million allocated annually for:
• Construction and maintenance of social infrastructure: hospitals, rehabilitation facilities, schools, sports and cultural facilities
• Regional development programs for future generations of Yakutians
• About 500 social and charity initiatives every year
• Targeted support of indigenous people and their traditional way of life
Now to dividends. ALROSA pays dividends to all shareholders (I underline – all, including to investors from USA and EU). Dividends are based on a free cash flow model and were last paid back in 2021, not a single ruble was distributed in 2022 as the Company decided to invest more in social and environmental programs, technical renovation in new realities. Important, all dividends that the Russian federal budget gets from ownership in Alrosa are allocated back to Yakutia, with two to three times additional funding that Yakutia receives from the federal budget as federal leverage donation every year. All of this is also publicly available information that is easy to find, if you want to do your due diligence, of course.
Apart from this funding from the Federal Government, Yakutia as well as eight stakeholder local communities in the areas of operations receive Alrosa dividends directly on their shareholdings. This is one of important sources, or for some local communities – the only source, of funding to repair roads and utilities, schools, hospitals, etc. All these are remote northern communities located some 4,000 kilometers away from the country’s capital, with necessities to be shipped there by river or plane. With almost 40% of the regional budget being supported by diamond mining, the livelihoods of 1 million people of Yakutia fully depends on the stability of the company and its work.
Bottom line – for the past 10 years since the Initial Public Offer, the only Alrosa payments that were not allocated to Yakutian regional development are dividends paid to private investors outside of Russia, at the largest scale residing in the USA and EU. We will be happy to receive them back and reinvest in Yakutia if all of the sudden our opponents think that these funds, as our Israeli friends say, are not kosher anymore.
In Africa our company is one of the few that has always been on the continent to help and assist, not plunder. Name to me another company that started its operations in Africa from clearing the mine fields that were laid in Angolan provinces by UNITA combatants backed by the apartheid regime in South Africa?
In Zimbabwe we rendered our full support to help the industry revive and set prospects for the future, not even listening to the moralists who groundlessly questioned the nation’s ability to build a successful diamond mining sector. As a result, in 2020 Alrosa (Zimbabwe) Limited became the first ever Zimbabwean company to be RJC certified.
As for the industry regulation in support of the KP – almost every initiative promoted and widely accepted over the past 10 years in our industry was proposed, supported and driven by Alrosa.
We had a simple and honest aim: to safeguard and strengthen the fragile balance between the needs and concerns of all sides of the diamond pipeline – the miners, the manufacturers and the retailers. It was not an easy story, but it helped all of us find compromises and preserve the stability of the whole industry. Unilateral and unjustified actions against the Russian industry that we have seen over the past months destroyed this balance, and the industry regulation with hard-earned mutual respect and trust is today by fact completely demolished.
Now, having done this simple due diligence and fact-finding exercise, what is the obvious conclusion any normal and sane person should make? An obvious and politically inconvenient conclusion is that you are to continue sourcing Russian diamonds as they are one of the most responsibly mined diamonds in the world that support the local communities dependent on them. No smell of any form of conflict even on the horizon.
To try to stigmatize diamonds from Yakutia out of narrow hit-and-run political interests is to brand all natural diamonds as “conflict”. It’s an outright immoral act to distort facts that has nothing to do with responsible diamond mining practices and communities’ wellbeing in the region that has not seen any conflict in centuries, where huge societal commitments of Alrosa were, are and will remain and continue despite any external turbulence. Or maybe this attack is a commercial decision to restrict global supply and competition in someone’s interest? Why don’t we ask this question of so-called morality?
Therefore, any sanctions imposed on Russian diamonds can only achieve one purpose – hurt the local communities, undermine the socio-economic stability in the region, disturb and ruin international free trade and supply chain for all industry players. The aim is to set a precedent of punishment with no justification and under false pretense. These are sanctions against common people, sanctions on households, kindergartens, schools, hospitals, churches, roads, airports, reindeer herds. At the end of the day this will be a suicidal attack on the natural diamond consumer market. Synthetics takeover and automated cutting and polishing coup is looming.
Dear KP fellow participants representing diamond mining, trading and emerging consumer countries, I want to address you directly. This attack is a grave warning to all of us – in no time you can be the next target in this wave of neo-colonialism. More pressure will come on the natural diamond industry, making local communities not only in Yakutia and Arkhangelsk, but also here in Botswana, Zimbabwe, Angola, DRC, Sierra Leone, CAR, and even Canada more vulnerable and exposed to unilateral self-serving practices. This also hits the manufacturing communities in Surat and other polishing centers further down the supply chain, undermines domestic jewelry markets development in India, China, South-East Asia and the Middle East.
Fellow diamond miners, traders and manufactures, history has shown us that only together the industry can overcome the challenges we are facing to ensure our invaluable contribution to the socio-economic development of whole regions and even nations.
We are the ones who care about this industry and its future, the future of our communities. Think about it. The current rift clearly showed the true value of promises made and standards set for the industry when they are developed and forced through without due respect to those who are most exposed to them – us, miners and manufacturers.
Fellow KP Participants, the future of the KP is in ours hands, and it is up to us to shape it together, if we stay together. For together we stand, divided we fall.”