Interview at De Tijd website (Dutch)
'Every important moment in life needs to be celebrated with a diamond'
Sergey Ivanov, CEO of the Russian state-owned ALROSA, is one of the most important people in the diamond industry. During his visit to Antwerp, he spoke to the foreign press for the first time.
“In the region of Yakutia, in the east of Russia, it is minus 56 degrees Celsius in winter. It feels like you're opening the door of an airplane in full flight,” smiles Sergey Ivanov, CEO of ALROSA. "It really seems like another planet there."
In those circumstances thousands of Sergey Ivanov’s workers descend every day to wide open-pits and mines of the company, deep under the permafrost, to bring out diamonds. With success: ALROSA has been the largest producer of rough diamonds for several years running. Together with the diamond giant De Beers (Anglo American), it accounts for more than half of the diamonds produced worldwide.
Despite this status, the name of ALROSA is not well known to people. This is because the Russian giant focuses on mining and to a lesser extent brings polished diamonds directly to consumers. And recently ALROSA traditionally preferred the shadow over the spotlight.
Times change. A few years ago, the Russian government sold a part of its shares in ALROSA to clear up the rising budget deficit. Although a further privatization is not on the agenda for the time being, analysts take it into account for the coming years. That new reality is accompanied with a new openness. Ivanov, only 37 and after a blitz career in the banking industry, was appointed CEO last year and must embody that new wind. And so, when he visits the diamond capital of Antwerp, he agrees to give an interview to the foreign press.
We kept in mind that Ivanov would view the conversation as a pure PR moment. On paper, the young CEO appears to be the prototype of an “apparatchik”: someone who has landed in an important position through his political connections, in order to safeguard everything important to the Kremlin. Ivanov's father - Sergey senior - is former Russian Minister of Defense and after years was the Chief of Staff of the President Vladimir Putin.
But Sergey Ivanov did not come to hide behind meaningless answers. Even when we asked if he owes his blitz career to his name, he kept his cool. “That is the image that sticks to me since I started my career at the age of 22,” he smiles delicately. “But I have had to prove myself as hard as anyone else, perhaps even harder. I can only refer to the figures. Wherever I have taken responsibility, turnover has tripled. For the sake of clarity: I will not be able to repeat that at ALROSA. The demand for diamonds will increase in the coming years, but this is much more a predictable long-term business than, for example, the financial world.”
It is no accident that Ivanov gives his interview to the Belgian press. Antwerp is and remains a key element in the chain of the world diamond trade. Whether that position is not under pressure, with the emergence of new diamond centers such as India and Dubai? “India's gaining importance is undeniable,” says Ivanov. “Around 90 percent of global diamond production is polished there. But those diamonds pass through Antwerp first. And even before polished diamonds are shipped to the US - the largest market for diamond jewelry - they often pass through Antwerp. Antwerp is and remains the most important diamond hub in the world. We do business for $ 2 billion a year here. 22 of 56 ALROSA sightholders (diamond jargon for long-term customers, ed.) are Belgium-based companies.”
The key to success in Antwerp seems to be something that other sectors sometimes lack: stability. “Because of the long history of diamond trade, you can find infrastructure, logistics and safety here. You can sell diamonds correctly and safely in a comfortable environment. Belgium is ticking like a Swiss watch.”
The Belgian government is also doing everything to monitor this status, underlines Ivanov. “I feel that the Belgian government is trying to keep the Antwerp diamond sector progressive and competitive. A few weeks ago, we had a meeting in Davos with the Minister of Economy and Employment Kris Peeters. Shortly thereafter, the Prime Minister Charles Michel was in Moscow for the meeting with the Prime Minister Dmitry Medvedev and the President Vladimir Putin. And this week, Foreign Minister Didier Reynders met in Moscow with his Russian counterpart, Sergey Lavrov. During these discussions, the need for stability in the diamond sector was always discussed. Both parties have said that they are satisfied with the state of affairs. The Belgian government has also made the right decision with the introduction of the carat tax. This gives fiscal stability, which is often lacking in Dubai and India.”
Stability is also something that Ivanov hopes for in his own company in the coming years. Over the past few years, ALROSA saw its turnover under pressure due to falling prices for rough diamonds. At the same time, wage, transport and energy costs continued to rise, and the company must continue to invest in technology to enable diamonds to be excavated at difficult locations and to transport them more efficiently. Ivanov: “We are experimenting with, among other things, drones and robots, or have developed special trucks that can transport 80 tons of ore at the same time.”
High costs and a turnover under pressure, it is an annoying cocktail that forced Ivanov to tighten the belt at his appointment. The young CEO also immediately lowered his own salary by 20 percent, as a signal to the entire organization that there would be no taboos. Last year, a total of $150 million was saved, the beginning of more.
The fact that the government counts on the dividend flow from the mines of Yakutia is not surprising, Ivanov admits. “After all, Russian government owns the majority share in the company, and we are the cash machine for the budget. Last year we paid out significant dividends, and it should stay that way. The company plays a huge role for the country and the region. I find a lost ruble at ALROSA a greater tragedy than if I would lose money myself.”
The diamond sector does not only want to save, demand also needs a new stimulus. Since 2015, ALROSA has been a member of the Diamond Producers Association (DPA), the international sector organization. There, new ways of selling diamonds are being considered. One of the avenues is to disconnect diamond from the ancient entanglement with romance. In times of less people getting married, broader marketing is needed, says Ivanov. “We must try to respond more to emotions in general. With the underlying idea: “Every important moment in life needs to be celebrated with a diamond, as rare as the moment”.
This rarity is another point of attention in the sector. Last year the DPA launched a large-scale marketing campaign under the slogan 'Real is Rare'. With this campaign, the sector is taking flight in the fight against another potential threat: the emergence of synthetic diamonds. Those stones that have been created in a lab environment have long been used in industrial applications, but are now also on the consumer market thanks to improving technology to manufacture them.
Even though Ivanov is not too concerned about this new form of competition. “The only thing I see a danger is when those lab stones are mixed with natural diamonds. We must absolutely ensure that this does not happen and think about systems to avoid it. Because if the consumer feels that he is being deceived, that is harmful. But I see little problems with disclosed synthetic diamonds. That market can perfectly coexist with that of natural stones. Even more, it keeps us sharp. If synthetic diamonds did not exist, someone would have to invent them.” (laughs)