POSSIBLE SOVIET INTEREST IN INCREASING EXPORTS OF DIAMONDS TO THE US (RR CB 63-

Created: 4/25/1963

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POSSIBLE SOVIET INTEREST IN INCREASING EXPORTS OK DIAMONDS TO THE US

R53

CENTRAL INTELLIGENCE AGENCY Office of Research and Reports

SOVIET INTEREST IN INCREASING EXPORTS OF DIAMONDS TO THE US

Soviet trade representatives recently indicated that the USSR may be interested in selling annually USillionillion ofof gem and industrial grade to dealers in the US. U The USSR has been exporting increasing quantities of diamonds lo the Free Worldut sales have been almost exclusively to the DeBeerssyndicate, which markets about nine-tenths of the world output of gem diamonds. The explanation for the Soviet interest at this time in sales to US dealers may be that the current contract between the USSR and DeBeers reportedly expires in Septembernd that the USSR may be exploring other marketing channels for its diamonds.

Exports

Soviet sales of diamonds to the Free World have increased sharplyhen the USSR reported that itarats of gem stones valued at aboutillion to the UKpresumably to the DeBeers syndicate, with whom the USSR concluded its first salesin. oviet sales to the DeBeers syndicate were reported to have totaledillion. 5/ The value of Soviet sales of diamonds2 has not been announced, but the contractthe USSR and DeBeers23 reportedly allows for Soviet sales of gem stones up toillion annually. 6/

In addition to sales to DeBeers, the USSR sold very small quantities directly to the US in1 The diamonds sold to the US were cut diamonds, as opposed to the rough or uncut stones thatare sold to DeBeers exclusively. Annual sales Io the US were less thann each year. 11

Diamond Supply

Production of diamonds in the USSR has been increasinghen the first diamonds were recoveredommercial scale from the

supply. With the lifting of the embargo, the USSR began to buydiamonds from diamond dealers in the Free World, and Soviet purchases have increased each year,arats9aratsU/

These purchases of industrial diamonds are believed to havelargely or entirely of higher quality industrial stones rather than low-grade material classified as bort, splints, and powder. Low-grade material may now be in surplus supply in the USSR, for the Soviet trade representatives have indicated that bort as well as gem stones would be offered for sale in the US. The apparent surplus may be due to abottleneck in the diamond tool industry or perhaps may reflect Soviet progress in production of synthetic diamonds.

The USSR recently announced that it succeeded in manufacturing its first synthetic diamonds1 and that synthetic stones wouldaccount for an important share of the consumption of industrial diamonds. Synthetic diamonds have been manufactured in the US for some time, but their use has been limited by their relatively high cost. In the USSR, however, because of the very high cost of mining natural diamonds in Yakutsk, production of synthetic diamondswould not appear so disadvantageous. It therefore seemsto expect that the USSR will expand its synthetic productionalthough at present it must continue to rely on its Yakutskor on imports for large-size industrial stones, which as yet cannot be produced synthetically.

3. Prospects

Plans for production of diamonds5 calleveloimes thathis goal is believed toillion carats, of whichillionillion caratsrobable value of fromillion toillion) would be of gem quality and presumably available for export. Even if this goal is not reached, it appears likely that5 Soviet exports of gem stones will continue to increase above present levels. Sales of industrial diamonds, particularly of bort, may add appreciably to the total.

Soviet plans for production5 are not known- Planning could be influenced significantly by expansion of production ofdiamonds, especially if the USSR is able toethod for Synthesizing larger stones at reasonable cost. The effecthift to the greater use of synthetic diamonds might be to slow down the expansion of the natural diamond fields. In this event, output of surplus gem stones might not increase appreciably beyond the level expected

.Analyst:

Coord

Sou rces

i.

2. Ibid-

i. USSR. Vncshnyaya lorgovlya SSSK0 god (Foreign Trade

ol the USSRMoscow,. The Diamond Nuws and South African Jeweller,.

State. an6l. U.

5.

6- Ibid-

I. Interior, Bureau of Mines. Minerals Yearbook.ol I. U. Commerce. Bureau ol the Census. US Imports of Merchandise for Consumption. Commodity iiy Country of Origin.

Diamond News and South African Jeweller, Jan 6J,

U.

Economic Item. Moscow, eb58. OFFC. V. "The Developmentew Branch of Industry

inavcstiya Akadcmh Nauk SSSR. no.. iamondd South Alrican Jeweller, IL

to.

? I. Mnd.

Summary.. U.

If. Voprosy ekpnomiki. no 8. p. U.

Original document.

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