Russia’s state stockpile agency Gokhran has this week released details of next year’s state funding for rough diamond purchases from Alrosa, revealing for the first time the average price per carat that will be paid.
According to a direct Gokran source and to an Interfax briefing by another Gokhran official, Gokhran says the 2010 budget allocates the rouble equivalent of $1 billion for purchase of about 14 million carats. This is an unprecedented public disclosure of the dollar and carat totals, allowing the first-ever calculation that Gokhran is paying, or plans to pay Alrosa, an average of just over $71 per carat. (more…)
Archangel Diamond Corporation (ADC) has re-emerged from a bankruptcy proceeding initiated earlier this year by De Beers, to launch new charges in the Colorado state court against Russian oil company LUKoil, and well-known Russian oligarchs, Vagit Alekperov (lead bearer) and Alisher Usmanov (2nd bearer).
ADC is now being directed by a group of minority stakeholders, led by US attorney Bruce Marks; former board director, Clive Hartz; and the Firebird Global Master Fund of New York, with a stake of about 18%. De Beers owns 56% of ADC’s shares. (more…)
Interview with Maxim Shkadov by Vladimir Kulakov and John Helmer
The 36-year old Kristall Production Corporation is one of the world’s leading producers of polished diamonds, and Russia’s biggest. It remains 100% state owned under the supervision of the federal Ministry of Finance, and is headquartered at Smolensk, where it cuts and polishes diamonds, before distributing them for sale across the world. The sales network for Kristall’s stones covers the major diamond markets – Antwerp, Hong Kong, New York, and Dubai. Maxim Shkadov is the chief executive. On a visit to Smolensk after an interval of fifteen years –the first visit was in 1994, when Alexander Skhadov, Maxim’s father, was the CEO – this interview is the most detailed public assessment of how the Russian diamond industry has fared during the global collapse of demand. (more…)
A flurry of sales and revenue claims posted on the Alrosa website have yet to be substantiated by the chief executive, Fyodor Andreyev, or his spokesman, Andrei Polyakov. Their silence four months into Andreyev’s term in office recalls the claims, issued in June and July by the former chief executive, Sergei Vybornov, that he had fixed from 6 to 15 sales contracts for a total value of $900 million. The pricing formula, according to Vybornov, was “the price-list of the Ministry of Finance plus 17 %”. Each contract, according to Vybornov, had been for not less than $200 million, and for terms of 3 to 5 years. The buyers, Vybornov claimed, included Tiffany of the US; Dali Diamonds and Diarough of Belgium; and some unidentified Israeli companies. “We have begun with [the Belgian companies],” Vybornov said publicly, “for the simple reason that the Belgian government declared the granting of guarantees to the diamond banks for a total of $1 billion A bit later, this initiative got the [additional] support of the Flemish authorities, declaring guarantees for $250 million.” (more…)
Alrosa’s new management, headed by Fyodor Andreyev (right picture), has announced this month that, despite one of the worst years on record for global diamond demand, the Russian company expects to sell roughly the same dollar value of diamonds this year as last, and to earn a bottom-line profit as well.
The announcements of the projected financial results have been posted by dead-drop on wire services or internet sites. Andreyev has yet to answer direct questions from the industry media since he took over the company in July. His spokesman, Andrei Polyakov, does not respond to calls. (more…)
Alrosa appears to be selling all of its rough diamond production this year to the state stockpile agency, Gokhran, exceeding earlier estimates of the state budget funds previously allocated to sustain the state-owned company’s mining operations. Both Alrosa and Gokhran are under the control of Russia’s Finance Minister, Alexei Kudrin (pictured right).
According to a report by Interfax, in September Alrosa has sold Gokhran rough worth an estimated Rb20.4 billion ($669 million). For the 9-month period just ending, Interfax reports that Alrosa has sold a total of Rb32.5 billion ($1.1 billion) worth of diamonds to the state repository. Alrosa’s chief executive, Fyodor Andreyev (pictured left), and his spokesman, Alexei Polyakov, were unavailable to confirm the numbers, but a Gokhran source has confirmed their accuracy. Alrosa is not clarifying either its production target for the year, or its sales target. (more…)
No sooner had De Beers and Archangel Diamond Corporation (ADC) revived last Friday, September 4, their US litigation plan of attack against LUKoil and its senior management, headed by Vagit Alekperov, than Alekperov issued an unprecedented statement saying he is thinking of selling out of diamonds altogether.
Until now,Alekperov has insisted, both privately and publicly, that he would never sell the mining rights to the deposit at Verkhotina, in the Russian northwestern region of Arkhangelsk. According to US court documents, Alekperov, together with his one-time friend and business partner, Alisher Usmanov, was responsible for the takeover of the mining licence in 1998, two years after its discovery, through Arkhangelskgeoldobycha (AGD), a regional state geology organization, which was privatized and ultimately taken over by LUKoil. (more…)
De Beers has accepted a new plan which makes litigation in a Denver, Colorado, courtroom against LUKoil the centrepiece of the diamond-miner’s survival strategy; and the prospect of multi-million dollar compensation the Toronto-listed company’s most valuable asset.
A new document, filed this week in the US Bankrupty Court in Denver (case number 09-22621-HRT), sets out the terms of the agreement to revive the court case against Russians charged with contract violations and fraudulently withholding the mining licence rights for the Grib pipe in northwestern Russia of Archangel Diamond Corporation (ticker: AAD:V). De Beers owns 56% of ADC’s shares. In legal jargon, the new plan converts an involuntary bankruptcy scheme under Sect 7 of the US bankruptcy code into a section 11 voluntary arrangement. The first scheme had been proposed in July by ADC’s principal lawyer, Bruce Marks (pictured right), and two minority investors, Firebird Global Master Fund, a US investor, and Clive Hartz, an Australian. They acted after De Beers had threatened ADC with foreclosure on a loan of almost $10 million, and the abandonment of the two legal claims ADC has been waging — in the Coloroado District Court, and in the Stockholm international arbitration tribunal. (more…)
Pressure on the new head of Alrosa, Fyodor Andreyev, to boost rough diamond sales by discounting the price made a prompt appearance in the Russian press — within hours of Andreyev taking his seat on July 15. “The new president of Alrosa has decided to increase sales using discounts”, claimed an anonymous source “close to Alrosa’s supervisory board”, and reported by a Moscow newspaper last week. “A change of marketing policy is being discussed”, the newspaper reported an unnamed representative of the Ministry of Finance as saying — without giving details. Another Russian press agency has claimed that Alrosa plans to reopen its selling window, closed since December, with a $50 million contract, and with a target of $2 billion worth of sales for the full year.
This is premature and wishful thinking, according to Alrosa’s spokesman, Andrei Polyakov, and diamond manufacturers in Moscow. “We cannot speak about discounts while the orders aren’t yet formed”, Polyakov told PolishedPrices.com. “But we have plans for the future”. He said it is “too early to speak of changes in the company’s pricing and marketing policy if we connect these changes with Mr Andreyev’s arrival, because he’s been in his post for two weeks only.” Moreover, he noted, “the pricing policy changes when the situation in the market changes, not the company’s president.” (more…)
Sergei Stepashin, the head of the Accounting Chamber, Russia’s state auditor, has issued a press leak, claiming he was responsible for the firing of Alrosa chief executive, Sergei Vybornov, after a Chamber audit of Alrosa earlier this year had identified multiple problems, and what Stepashin is publicly quoted as calling “numerous infringements in company activity”. According to reports by news agency Interfax and a Moscow daily business paper, Stepashin, a former Russian prime minister, has claimed that the results of the audit led to the firing. “For this reason,” Stepashin is quoted, “we recommended the replacement of the president of Alrosa.”
Among the “infringements” triggering Stepashin’s call to remove Vybornov, it is now being reported that Alrosa sold rough diamonds to the state stockpile agency Gokhran at a price alleged to have been greater than the export price of the stones.
According to independent testimony by one of the auditors who took part, Angelica Zadorozhnaya, the Accounting Chamber investigated Alrosa’s books early this year. She told PolishedPrices.com that the completed audit report had then gone to the collegium, as the Accounting Chamber’s highest body is known, in April. She also said that this session decided to impose a state secrecy classification on the report. (more…)
Responding to a request from PolishedPrices.com for clarification of the June 20 election of a new Alrosa board of directors, without chief executive Sergei Vybornov, Alrosa spokesman, Yelena Nikiforova, has provided the following company statement. “The largest shareholder of the company in the name of the government of the Russian Federation does not consider necessary the presence of representatives of executive management as a part of the Supervisory Board of Alrosa… According to the government decision, the structure of boards of directors of state companies should include professional counselors, Alrosa says, and so representatives of the Russian Federation voted for inclusion in the structure of the Supervisory Board of the company of independent directors. The President of Alrosa [the chief executive] in any case participates in the Council work as the head of an executive office of the company. As to the election in the structure of the Supervisory Board of Alrosa vice-president Ivan Demyanov, this [was the] decision of the second-largest shareholder, the Government of the Republic of Sakha.”
Nikiforova also said that Vybornov is a member of the presidential delegation, led by President Dmitry Medvedev, which leaves Moscow today for a tour of Africa, with stops in Egypt, Nigeria, Namibia, and Angola.
Sergei Vybornov, chief executive of Alrosa, has been omitted from the new board of directors, known as the Supervisory Board, according to a company announcement posted after the annual general shareholders meeting on June 20: http://www.alrosa.ru/press/releases/detail.php?ID=4338
Other changes in board membership have also been disclosed in the new board listing; these suggest the impact of the financial crisis on Alrosa’s operations, and of problems reportedly uncovered by the Accounting Chamber, the independent Russian state auditor. A member of the Chamber audit team said the check of Alrosa took place at the beginning of this year, and the results were reviewed by the Chamber Collegium in April. She said the results were reported to the government iun a report stamped confidential.
The new 15-member board has 5 representatives of the Sakha republic, including the Sakha President Vyacheslav Shtirov; the 2007-2008 board had 6 Sakha representatives, so the Sakha representation has been reduced in line with the 32% shareholding in Alrosa held by the regional government.
The Alrosa management had two seats on the old board — the Chief Executive Officer Sergei Vybornov and the Vice President, Ivan Demyanov. Vybornov has been omitted from the new listing, and Demyanov remains. No CEO of Alrosa has been excluded from the board before. Last week, Vybornov told an industry outlet: “Alrosa has only one shareholder — the state — who could fire me, and it has said it does not plan to do so.” Vybornov’s spokesman was contacted for comment, but his telephone was not answering. (more…)
Alrosa has issued the following statement, dated June 8, through a Russian internet publication, www.rough-polished.com:
“ALROSA intends to bring a case before the Court of the United Kingdom claiming damage to the company’s commercial interests due to the publications by John Helmer posted on the PolishedPrices website. The Russian diamond mining company has already engaged the Mezhregion Bar Association to prepare this lawsuit.
As ALROSA informed rough-polished.com, the company “believes that publishing materials on would-be changes in its management with reference to some unnamed sources is directly damaging the company’s commercial interests while ALROSA is concluding long-term contracts.”
“Indeed, the company’s important customers had anything but simple experience interacting with ALROSA, when the rules and principles of mutual relationship were not transparent providing enough grounds for all kind of rumours,” ALROSA stressed. (more…)
A new ratings report by Fitch has declared Alrosa, the state-owned Russian diamond miner, to be twice as profitable — as measured by Ebitda margin — than global leader, De Beers.
Alrosa doesn’t issue production figures for its mines by carat, but claims a 25% share of global diamond mine output by value. Diamond sales in 2008 have been reported at $2.8 billion. Anglo American, a part-owner of De Beers, reports that the latter produced last year about 48 million carats, and holds a 40% global mine market share. De Beers’s sales in 2008 were $6.9 billion.
According to the report issued by Fitch on May 21, Alrosa’s advantages include its lower rouble cost structure and state financial backing. “The company’s EBITDA margin is 30%, on average, ” according to Fitch analyst Sergei Grishunin, “which exceeds the EBITDA margin of market leader De Beers, which had an EBITDA margin of 17% in 2008 and 2007.”
According to Grishunin, the value of the Kremlin’s financial support for Alrosa this year will include Rb45 billion in procurement of rough diamonds for the state stockpile agency Gokhran in the first half of the year; and Rb44 billion in financing from the state VTB Bank for covering some of Alrosa’s maturing obligations to foreign lenders. At the current exchange rate, these inputs are worth $1.5 billion and $1.4 billion, respectively. (more…)
De Beers has agreed to sell its controlling stake in Archangel Diamond Corporation (ADC) to a North American investment fund which aims to intensify the litigation campaign in the US and Europe against LUKoil and Archangelskgeoldobycha (AGD), the two Russian companies charged with raiding the Grib diamond pipe.
At a board session on Friday, a bid by De Beers to call in a $10 million loan, and put ADC into liquidation, was topped by an offer to repay the loan, ADC’s remaining creditors, and conserve the company and its minority shareholders. Had the liquidation plan gone ahead, the latter would have lost everything.
ADC has yet to make an announcement, identifying who has made the offer which the board has accepted, or the terms. It is believed the offer comes from a lawyer-managed US fund, which is well-known as an investor in high-value litigations, with a strong record of winning large settlements for the cases it has taken on.
At this point, the fund appears to be paying about $14 million to clear ADC’s debts, and committing itself to a litigation budget of another $10 million, in order to pursue claims against the Russians of $4.8 billion; this sum includes $30 million in ADC’s direct investment in the exploration and testing of the Grib pipe; $400 million in lost profits according to ADC’s 40% stake in the halted mining venture; $800 million in profits lost from other diamond pipes within the Verkhotina-area exploration and mining licence; and $3.6 billion in triple punitive damages under the Colorado state racketeering statute.
The most recent De Beers valuation of the Grib pipe, based on early 2008 diamond prices, puts the project’s mineable value between $8 and $10 billion. (more…)
Sergei Vybornov, the chief executive of Alrosa since February 2007, is likely to be replaced, sources close to the company have told Polished prices.com. An announcement is expected to be made before the annual general meeting of Alrosa shareholders, scheduled for three weeks’ time, on June 20.
Vybornov’s spokesman has been refusing to answer his telephone, or respond to questions about the replacement, although Russian diamond industry figures have been speculating about it for weeks.
On Tuesday, Vybornov summoned reporters from Bloomberg to his office in a demonstration that he is still at the helm. He was not asked, and he didn’t say, whether he intends to remain at his post.
Bloomberg reports that Vybornov repeated an earlier announcement, following the last round of executive and shareholder meetings this month, that Alrosa has cut mine output so far this year by 4% from last year’s level. Vybornov was also reported by Bloomberg as saying that about two-thirds of this year’s production will be offered to the state stockpile agency, Gokhran. The state’s buying price has not been disclosed, but it appears to be close to cost.
If this sales plan holds, the sale to Gokhran would represent about $1.6 billion in target value. Altogether, the Alrosa Supervisory Board confirmed on May 14 that it plans $2.1 billion in production value this year; the company does not issue output figures in carats, nor releases an average per-carat price supporting its announcements of production and sales targets. (more…)
A meeting of Alrosa management board, followed by the board of directors, last week decided to modify earlier estimates of this year’s mine production plan, but slashed this year’s target profit figure. This is the first official indication of how effective the state purchasing scheme for Alrosa diamonds is proving to be. But it also reveals the low, virtual cost price at which the state stockpile agency Gokhran is purchasing the goods.
According to a prominent international diamantaire, the outcome should mean that Alrosa will operate a much higher capacity than its international rivals, De Beers and Rio Tinto, but without a bottom-line loss.
The Executive Board met on April 13, and was followed the next day by the Supervisory Board. No decision was taken on the highly sensitive issue of whether to replace the current chief executive, Sergei Vybornov. Sources close to the company confirm that the chief executive’s position has been under review and debate for months. It is now believed that if no consensus candidate is agreed by June 20, the scheduled date of the annual general meeting of Alrosa shareholders, Vybornov will have successfully fought off his critics and rivals.
The latter continue to maintain their confidence the chief executive will be replaced. But Vybornov, who has not responded to direct questions for some time, has issued an optimistic bulletin for the company’s prospects this year. “I believe there is a very good outlook in terms of demand for Russian rough,” he said in a series of statements recently delivered to the Russian news agency, Interfax. According to Vybornov, there is global shift in demand under way, away from the US. “On the whole, demand in America may drop considerably since they all there lived on credit for a long time…As for other markets, they are already recovering. Dubai is a very good market – it is a new world-scale center of diamond jewelry trade…It is likely that the market will shift to Asia and Europe and I think it will virtually balance off the drop in U.S. demand completely.” (more…)
If the senior management of Alrosa, the world’s number-2 diamond miner, mounted the review platform above Lenin’s tomb in Red Square, and stood in line for a two-hour military review, the goings-on inside the corporate executive suite wouldn’t be any clearer. But the body language might signal whether the company’s boss, Sergei Vybornov, is out of line, terminally.
But without that, all that can be read into an announcement from last Friday’s session of the Executive Board, is that the company management had an important visitor on Friday, and that after he had left, all that could be announced was uncertain.
Alrosa, the Russian diamond miner, is to reduce its dollarised production target for this year by 15.9%, according to the company’s record of an Executive Board meeting, held at Mirny, in the Sakha republic, on Friday.
The future of CEO Sergei Vybornov is also being considered by the company board, according to sources, who have told Polished Prices that Vybornov has agreed to step down once a replacement has been found for him. The board has also agreed, according to these sources, that Sakha President, Vyacheslav Shtirov, will not be Vybornov’s replacement.
The board’s new communique says nothing explicitly about the long-running feud between Vybornov and Shtirov. However, it notes that the Executive Board, a senior management body, included Shtirov in its deliberations on Friday. This is unusual. Shtirov is formally a member of the company’s Supervisory Board, equivalent to a corporate board of directors, which includes members nominated by the shareholders, and is chaired by federal Finance Minister, Alexei Kudrin. The last Supervisory Board meeting was held on December 30. The last public notice of an Executive Board meeting, convened on December 12, did not include Shtirov. (more…)
For weeks, Alrosa, Russia’s diamond mining challenger to De Beers, has been waiting for the appearance of a miracle to keep the mines producing at last year’s volumes, and avoid layoffs and financial damage to the fareastern region of Sakha, where Alrosa is the chief income generator.
That miracle is a secretive government agent called Gokhran. Legally a branch of the Ministry of Finance, it has a history going back three hundred years to the time when Tsar Peter the Great decided he needed something more formal than bodyguards and hobnailed chests in which to keep his treasure.
During the 1990s, Gokhran played a key role in releasing, as well as withholding Soviet-era stocks of rough diamonds, plus platinum and palladium. The result created several diamond fortunes in Tel Aviv and San Francisco; the speculative spikes in the price of the platinum group metals were the foundation on which several celebrated Johannesburg mansions and Eastern Cape beach villas were erected.
Today, much depleted in valuables, compared to fifteen years ago, Gokhran is rebuilding its strategic significance in the international diamond market. This is because it has the potential, with Russian state funding, to buy up Russian rough diamond production. Unlike the other global diamond miners, which are halting mine operations, slowing mills, and laying off miners and prospectors, the alliance between state-owned Alrosa and state-funded Gokhran has the potential to make an enormous Russian grab of global diamond market share — and keep it.
That is what Alrosa, with a 25% share of the market, is waiting for. But will Godot, I mean Gokhran arrive in time? On Thursday last [March 19], it seemed so. Russian government ministers agreed then to make a substantial increase in budget money for Gokhran to buy Alrosa’s mine output this year. It is far from clear, however, what proportion of the production will not be bought by Gokhran; and what cuts to the mine output plan Alrosa management may now be obliged to make, if any. (more…)
Despite a blackout of news from Archangel Diamond Corporation (AAD:CN), the Canadian mining junior will seek US court orders to oblige two key Russian executives to give testimony on oath in ADC’s claim that it has been unlawfully deprived of its stake in the multi-billion dollar Grib diamond pipe, in northwestern Russia.
The threats of a US court order to testify, and of legal sanctions for possible evasion of the subpoena or perjury, have been the most powerful weapons ADC has held in its decade-long attempt to recover its mining rights from the Russians named in the court claims. It has taken that long for the US courts to consider whether to exercise jurisdiction over the Russians — the ruling could come very soon.
Before diamond values crashed last year, De Beers had estimated the Grib deposit to contain 74 million recoverable carats, worth about $8.2 billion. It is the largest diamond mine ever discovered by a foreign mining company in Russia. Despite technical mining difficulties, the project is believed to have significantly better profitability prospects than new DeBeers projects in Canada, where book values have been heavily written down.
Financed by DeBeers, which holds a 59.4% stake, ADC held a conference last month with the presiding judge in the Denver, Colorado, District Court. The judge has called for the filing of third-party deposition notices, which may be signed shortly. Lawyers for ADC will not comment on the identities of those to be deposed. However, in an earlier phase of the US proceedings, 11 individuals were listed for interrogation. They included the former CEO of ADC, Timothy Haddon; Vagit Alekperov, the CEO of LUKoil, one of Russia’s leading oil companies; and Alisher Usmanov, a well-known owner of iron-ore mines and steelmills in Russia, and part-owner of the UK football club, Arsenal.
The named defendants in ADC’s claim are two Russian companies, Arkhangelskgeoldobycha (AGD), the current licence holder and miner of the diamond project; and LUKoil, the controlling shareholder of AGD. Alekperov and Usmanov are accused in ADC’s court claim of being participants in “a scheme of fraud, breach of express and implied contract, civil conspiracy, intentional interference with contract, breach of fiduciary duty, and unjust enrichment”. ADC is claiming $1.2 billion in compensatory damages for the loss of its investment and profits in the diamond project, plus triple punitive damages of $3.6 billion for the alleged racketeering conspiracy. (more…)
Sergei Vybornov, the chief executive officer of Alrosa for the past two years, is mobilizing federal government and industry support in Moscow to oppose a bid by Sakha President, Vyacheslav Shtirov, to replace him, and take over the top post at Alrosa.
Shtirov made his bid at a meeting with Prime Minister Vladimir Putin on February 25. A spokesman for Putin told PolishedPrices that Shtirov was alone with Putin at the meeting. The spokesman declined to say what the two men had discussed on the subject of the diamond industry and the future of Alrosa.
The official text from the prime ministry is in the form of a partial transcript, in which Shtirov refers to the problems of his region, but mentions Alrosa only once, diamonds once. The transcript of Shtirov’s remarks refers in some detail to the region’s oil, coal, and gold-mining developments. All Putin is recorded as saying is that while the market prices of oil, coal, metals, and diamonds are declining, the price of gold is rising. He is reported to have repeated himself on this point, while Shtirov is reported as pointing out that gold production from the region, while a healthy 18 tonnes (579,000 ounces) last year, cannot be expected to increase without fresh and costly capital investment, which the Russian banks are reluctant to finance. According to the transcript, Putin said: “We’ll solve the problem with gold mining.” Shtirov then says that he expects a solution for state guaraneteed advance funding of goldminers will be devised soon. The published transcript ends with Putin saying: “Good.”
Since sources familiar with what was discussed claim that Shtirov’s bid to leave the presidency of Sakha and retake Alrosa was the piority of discussion with the Prime Minister, they interpret Putin’s reported remark about goldmining as taken too crudely out of context to make sense; and also to be irrelevant to the decision Shtirov was asking for. (more…)
Among the hard-pressed global diamond miners, only one, Russia’s Alrosa, has the capacity to sustain last year’s mining volumes without adding to the inventory overhang, or flooding the market, both of which will crush the price. This is because the Russian state stockpile agency Gokhran is ready to spend state funds in order to buy, and to hold the stones off the commercial market until demand begins to recover, and diamond prices revive.
De Beers acknowledged last week, according to remarks by spokesman Stephen Lussier, that it is “going to significantly reduce production levels to align them with levels of demand. There’s no point in digging a diamond out of the ground when you don’t have a client ready to buy it.” The company, which has been producing roughly 51 million carats annually, about 30% of the world’s rough diamond supply, is not estimating the size of its mining cutback beyond the statement from London spokesman Lynette Gould that “the reduction in production will be significant”.
BHP-Billiton (BHPB), which claims it produces about 3% of global diamond supply from the Ekati mine in Canada, has said its mine plan is unaffected, and there are no shutdowns. However, in its report of February 9 on production in the six months to December 31, 2008, BHPB disclosed that it had mined just 1.4 million carats; that was drop of 27% on the same period of 2007. This is not a market cutback by another name. BHPB spokesman Iltud Harri told Minesite: “BHP Billiton hasn’t announced any cutback in terms of our diamond production. However, actual production for the first half was 27 per cent lower than the corresponding period last year due to lower grades following changed ore sources. In terms of the future, as Ekati – BHP Billiton’s only producing asset – transitions from open pit mining to underground mining, the mix of ore processed will change from time to time.”
BHPB’s sales policy in the present market, Harri added, is that “we sell at the market price and always sell what we can.” He said data on the company’s diamond inventory are “commercially confidential.” (more…)
Alrosa is negotiating with Lazare Kaplan International (LKI) to decide whether to renew their expiring rough supply and polishing contract, or wind up their relationship. The talks and the details of the longstanding relationship between the two companies remain shrouded in unusual secrecy.
Alrosa sources say it is not certain whether the expiring contract, signed for a 10-year term in March 1999, will be renewed.
A Russian source told PolishedPrices that “everything regarding the Alrosa-LKI contract is hidden and non-transparent. The reason for this is that LKI has very advantageous conditions under this contract, according to which they have the right to pick the stones before buying.” In 2005, Alexander Nichiporuk, then Alrosa’s chief executive, sought to terminate the contract, because he believed Alrosa was penalizing itself in supplying rough on LKI’s terms. He did not prevail, and in February 2007, Nichiporuk was replaced by Sergei Vybornov. He is supervising the current negotiations, along with Sergei Uhlin, who runs Alrosa’s international marketing strategy. Neither agreed to comment on the issues in negotiation at the moment.
LKI, which reported in January that it is currently losing money on rough and polished sales, does not publish the value of the diamonds it buys from Alrosa, and cuts in Moscow, before exporting them. A company statement last month referred to the March 1999 agreement, and added: ” Under the terms of this agreement, the Company sells polished diamonds that are cut in facilities jointly managed and supervised by the Company and ALROSA personnel. The proceeds from the sale of these polished diamonds, after deduction of rough diamond cost, generally are shared equally with ALROSA.”
In the six months ending November 30, 2008, LKI is reporting that revenues from its sales of polished were down 21% to $61.1 million. Sales of rough in the same period fell 50% to $58.5 million. (more…)
Jonathan Oppenheimer, the embattled heir to Nicky Oppenheimer and to the struggling De Beers group, and Vagit Alekperov, chief executive and controlling shareholder of LUKoil, one of Russia’s leading oil producers, have started fighting again over the disputed Grib pipe; also known as the Verkhotina project in the northwestern Russian region of Arkhangelsk.
The diamonds at stake, unmined below the surface, were estimated a year ago to be worth $9.7 billion. Until the start of January, Oppenheimer and Alekperov were almost equal partners in a joint venture, signed last April, to develop a mine at Verkhotina. Now they are adversaries again, as Oppenheimer reshuffles his crew for a fight; and Alekperov signals that he is engaging a French company to start independent drilling at the minesite.
Oppenheimer has appointed one of his closest associates in the company to the board of Archangel Diamond Corporation (ADC). The announcement of Tony Guthrie to the ADC board was issued by ADC on January 23.
ADC’s Toronto listed share (ticker TSXV:AAD) lifted from 5 Canadian cents to 6.5 cents on the news. The Candian junior, controlled by De Beers, is the only foreign mining company ever to find, and try developing a diamond mine in Russia.
The ADC release is curt, giving no reasons for the shakeup of its board. “Archangel Diamond Corporation … has announced the resignation of Mr. Bruce Cleaver as Chairman of the Board and a director of the Corporation and Mr. Jonathan Dickman as a director of the Corporation. The Board expresses its appreciation for their services to the Corporation. Mr. Robert Shirriff, a current director of Archangel, has been appointed Chairman of the Board in place of Mr Cleaver. The Board has appointed Mr. Tony Guthrie and Mr. Steven Thomas to the Board to fill the vacancies created. Mr. Guthrie is a mining engineer and senior manager with De Beers Group Services in Johannesburg. Mr. Thomas is Chief Financial Officer of De Beers Canada in Toronto and is also Chief Financial Officer of Archangel.” (more…)
With a 17-line announcement the Toronto-listed Archangel Diamond Corporation (ADC), a De Beers-affiliated company, has cancelled its agreement to mine diamonds in the Arkhangelsk region of northwestern Russia. Almost twenty years of exploration and mining effort, including the first major diamond discovery in western Russia for a century, have been abandoned.
ADC shares (ticker AAD:CN) dropped 32% in Toronto trading on Monday, following the disclosure, and are now priced at 9 Canadian cents.
A press release from ADC claims the company has withdrawn from the Russian project, because the Russian government has failed to meet deal implementation deadlines, which expired during the holiday period.
The ADC announcement says that “in connection with its proposed acquisition of a 49.99% equity interest in OAO Arkhangelskoe Geologodobychnoe Predpriyatie (“AGD”) from OAO LUKOIL(“LUKOIL”) (the “Transaction”) described in the Corporation’s news release dated April 16, 2008, Archangel has exercised its rights to terminate and has terminated the Share Purchase Agreement (“SPA”) between LUKOIL, the Corporation and De Beers Societe Anonyme dated April 15 2008… because two conditions precedent to the SPA have not been fulfilled by the long stop date of December 31 2008…The Board of Archangel is now considering future options for the Corporation including financing options and a potential resumption of the litigation currently suspended.” (more…)
With the end of the year 2008, the last of the legendary diamond cartel deals has sunk back into the murk from which it originated when Cecil Rhodes created his African Diamond Syndicate in 1873.
Forced three years ago by a ruling of the European Commission (EC) to halt trading of rough diamonds, De Beers and Russia’s diamond miner Alrosa have wound up a series of trading agreements that date back — most of them secret, some open — for almost 50 years. Although the EC ruling was subsequently overruled by the European Court of Justice, De Beers and Alrosa decided separately that their best interests would be served if, from now on, they produce and trade competitively. From January 1, Alrosa will no longer sell and export a fixed quantity or value of rough diamonds each year to De Beers.
At peak, in the 1990s, De Beers was buying more than a billion dollars’ worth of Russian rough from Alrosa through official channels, and doing profitably on the leakage, or unofficial trade, as well.
Before January is out, it will also be clear whether the Russians have decided to roll up De Beers’s coattails, and oust Archangel Diamond Corporation (ADC), a De Beers-controlled Canadian subsidiary, from its position as co-owner and operator of the newest of Russia’s diamond mines in the Arkhangelsk region of northwest Russia.
Does this mean that the Russians believe that Alrosa, which accounts for about one-quarter of the global supply of mined diamonds, is better positioned to weather the market-wide collapse of diamond value than De Beers, which controls about 40% of diamond output? Because Alrosa is backed by Russian state financing, treasury guarantees, and the capacity of the state stockpile to absorb Alrosa’s diamonds until they can be sold, the answer is a tentative yes. Therein lies the potential for a revolution in international diamond clout. (more…)
Alrosa, Russia’s state-owned diamond miner, has reported that rough sales this year have slipped by 1.1%, and will slip by ten times that margin in 2009.
Alrosa, a wholly state owned shareholding company controlled by the federal government, does not issue production and financial results by the half-year or quarter. It also does not disclose conventional production data by diamond weight (carats). Like-for-like comparisons by carat, mine source, and year are also not available. Instead, production results are cited in ore tonnage excavated, and in US dollar value terms for diamonds recovered, making precise volume comparisons impossible. Announcements of result data are timed arbitrarily, and executives do not respond to detailed questions.
In the latest press release posted on the Alrosa website, rough sales by Alrosa, excluding its share of sales of production from the Catoca mine in Angola, are reported as totaling $2.76 billion. This was reported in a Russian news agency citation from Alrosa CEO Sergei Vybornov as a decline of 1.1% on the 2007 level. It is also down on the sales projection by the board three months ago of $2.85 billion.
The information provided in the Alrosa Annual Report for 2007 is unclear. In Vybornov’s report to shareholders at the opening of the report, and in the sales section of the report, Alrosa’s rough sales revenues were given for the year as totaling $2.79 billion; this comprised $2.13 billion for Alrosa’s wholly owned mines in Sakha; and $663.1 million in sales from the Nyurba mine, whose equity is equally divided between Alrosa and the Sakha regional government. The figure for the main mines was reported as falling 4.3% from the 2006 result, while the Nyurba figure was rising by 3.8% on 2006. (more…)
A 21-day ultimatum has been issued to the Russian government to put up the Grib pipe in Arkhangelsk for development by a joint venture between De Beers and LUKoil; or else De Beers will walk out of Russian diamond mining for good.
Sources close to De Beers claim that some senior executives in London are bluffing, in order to halve the $100 million payment which De Beers must pay LUKoil, if the agreement is finalized with the Kremlin by December 31. These executives believe that falling global demand, declining diamond prices, and a growing shortage of cash oblige De Beers to seek a modification of the terms of agreement, signed with LUKoil in mid-April. But some De Beers executives are more reportedly pessimistic. After a recent review of project costs, they are proposing to abandon the Arkhangelsk project altogether, and expect that LUKoil and the Russian government will oblige them by ignoring the ultimatum’s New Year deadline.
The ultimatum came in a press release from De Beers’s Toronto subsidiary, Archangel Diamond Corporation (ADC), labeled “notification of a Termination Event”. (more…)
The Russian government agency responsible for negotiating the terms of DeBeers’s new Grib diamond mine project in the Arkhangelsk region of northwestern Russia has agreed to extend a deal deadline, which fell on November 15.
At that point, and in the week that followed, De Beers and its affiliate Archangel Diamond Corporation (ADC), have continued talks with the Federal Antimonopoly Service (FAS) in Moscow on terms for domestic cutting and polishing of the project’s mined rough. These terms, in a vaguely worded “ancillary agreement”, are the precondition for the Russian government’s approval of the joint venture between DeBeers and LUKoil, which respectively own ADC and Arkhangelskgeoldobycha (AGD), the project operators. Prime Minister Vladimir Putin chaired the Control Commission for Foreign Investment, which gave its conditional approval, on October 10.
Putin then delayed signing the protocol of the meeting for a fortnight, before ADC acknowledged receiving it, along with the draft of the approval conditions. FAS told PolishedPrices.com that November 15 was the deadline by which DeBeers should reply and agree, or allow the approval, and the deal, to lapse. Tom Beardmore-Grey, ADC’s chief executive and a DeBeers veteran, refuses to answer questions, as speculation grows that the senior management of DeBeers in London has become so diffident about its long-term Russian prospects, and so reluctant to commit to new project conditions, it is considering the option of abandoning the Grib project altogether. (more…)
Market reports that Smolensk Kristall refused last month to buy rough from Alrosa have been denied by Alrosa.
According to sources in Alrosa, the Russian state diamond company, Kristall proposed a 20% discount on purchases of Alrosa’s current rough price. Alrosa refused to supply, claiming that its pricing is in line with levels reported by De Beers in September transactions.
Instead of a price discount, Alrosa said that Kristall, along with other buyers, may exercise the option not to take 20% of an assortment, if they are unprofitable to cut.
Alrosa also told PolishedPrices that Kristall’s pricing would be loss making for Alrosa. (more…)
De Beers has a hundred-million dollar hook in its mouth, and it isn’t sure whether to bite, or try spitting it out.
Russian sources say that the conditional approval, granted last month by Prime Minister Vladimir Putin for the Verkhotina diamond mining project to commence with joint venture partner LUKoil, has now been drafted into an “ancillary agreement”.
Tom Beardmore-Gray, the De Beers executive who heads Archangel Diamond Corporation (ADC), has declined to answer questions about what is in the agreement, and whether De Beers is likely to accept it.
An ADC source said: “We are currently seeking further clarity on the condition attached to the Commission’s approval and as such we are not able to comment right now on the specifics of any beneficiation programme or on the potential economic impact on any of the parties.” De Beers said through a spokesman: “We are an insider so we are unable to disclose anything further.” (more…)
Philip Short, a journalist from the BBC, has published a new book which claims to be a biography of Vladimir Putin. It isn’t.
What it is instead is a biography of one hundred and twenty-three westerners — what they claim to know about Russia’s leader and what for commercial motive, reason of state, or vanity they have told Short in interviews he conducted for his book. They include spies he names without their cover – John Scarlett, Richard Dearlove, Richard Bridge, Kate Horner, Martin Nicholson, and Pablo Miller from the Secret Intelligence Service (MI6); Hans-Georg Wieck and August Hanning of the Bundesnachrichtendienst (BND); Jean-Francois Clair, Raymond Nart, and Yves Bonnet of the Direction de la Surveillance du Territoire (DST); Seppo Tiitinen of the Finnish Security Intelligence Service (SUPO); Mark Kelton, Michael Morell, Peter Clement, Michael Sulick, Michael Morgan, Paul Kolbe, and William Green of the Central Intelligence Agency (CIA); Juri Pihl, head of the Estonian Internal Security Service, and Eerik-Niiles Kross, chief of Estonian intelligence; and several dozen other ambassadors, consuls, advisers, headquarters staff, journalists, and think-tankers.
Not one of the spies was operational in Moscow for the past twenty-one years of Putin’s terms in office.
There is a flash of originality in this book. Not a single source on which Catherine Belton’s book on Putin relies has been interviewed by Short; in his references to Belton’s claims Short reports they “appear to be untrue”. He reaches the same conclusion about two other books about Putin, Karen Dawisha’s and Masha Gessen’s. “Neither book pretends to be a balanced account”, Short says. Dawisha’s book “is marred by numerous errors of fact”. “All three”, Short warns, “set out the case for the prosecution, and like all prosecutors, the authors select their evidence accordingly.”
The Poles have always had a serious problem with their neighbours.
They have the Germans on their western flank, the Russians on their eastern flank, and inside their borders there used to be the Jews, but now there are the Ukrainians. In September 1939 there were about 3.3 million Polish Jews. Since February 24 of this year, the Ukrainians in Poland have come to the same number.
The war which the Polish government and military have been fighting against Russia is proving to be almost worthless politically to Law and Justice (PiS), the ruling party in Warsaw; and also to the Civic Platform (PO) and its allies, the principal opposition coalition (KO). The PiS was 15 percentage points ahead of the KO in the voter polls a year ago, 35% to 20%; the margin between them now is 11 points, 38% to 27%. The gains for each are close to the margin for statistical error.
Economically, the war is costing much more in public outlays for the refugees than the value of US and NATO arms flows and related war income. By the time Warsaw pays for its new US weapons, it will owe more than when the war started; and there is still no relief from the European Union funding freeze and penalties.
What’s to be done, the Poles ask themselves – and who’s to blame when they realise the answer is something between not much and nothing.
When it comes to bulldogs fighting under a rug Winston Churchill thought they were Russians. Little did he know about Canadians in Ottawa.
The chief dogs in this fight are Trevor Cadieu and Chrystia Freeland (lead image, right). Cadieu is a lieutenant general who specialises in planning armoured operations against the Russian army in Europe; Freeland is the deputy prime minister, scion of Galicia in western Ukraine, and candidate prime minister to replace Justin Trudeau, if she can.
As the Canadian politician most directly connected to the Ukraine by family and property, and the most active advocate of war against Russia, Freeland has promoted Canadian military strategy and plans to wage that war on Ukrainian territory and across the Ukrainian borders for many years.
In Ottawa also, Cadieu has been director of war plans since mid-2019. No public record is known of his visits to the Ukraine in the following two years. His appointment as chief of Canada’s defence staff was announced in August 2021, then withdrawn in September following the start of an official investigation of sexual assault charges dating from his military cadet days. When the investigation ended in an official indictment, Cadieu resigned. By April he was in the Ukraine again, working directly on coordinating the new supplies of tanks, armoured vehicles, howitzers, and other artillery from NATO member states to the Ukraine.
Speaking through an Ottawa defence reporter named David Pugliese, Cadieu declared his innocence of the criminal charges and promised to return from the Ukraine to answer them. He then disappeared as the Russian forces intensified their targeting of Ukrainian and NATO general staff as they prepared operations to save Odessa in the southeast, and Lvov in the west.
On Friday Pugliese reported Cadieu had surrendered to Canadian police and been released to appear in a local court in August. In the meantime Pugliese has reported an active online debate between supporters and critics of the sexual misconduct charges; these include a comment in support of Cadieu from retired Brigadier-General James Cox claiming the charges against him amount to “sedition to undermine national leadership;” by that he meant mutiny by the politicians against the generals.
As deputy prime minister with supervision over most government ministers and war plans for the Ukraine, Freeland has claimed to have known nothing of the sexual misconduct which was identified a year ago against General Jonathan Vance, chief of the defence staff between 2015 and 2021. At the time Freeland declared: “No woman serving Canada should be sexually harassed while doing that, and I’m happy right now today to apologize to any woman who was sexually harassed while serving her country;” by that she meant to condemn no one by name of anything.
Freeland is missing from the list of high officials contacted by former judge Louise Arbour for her investigation of sexual violence in the Canadian military which began in May 2021 and concluded with the release of her 420-page report last month. Arbour is known in Europe as the NATO prosecutor of Yugoslav and Serbian President Slobodan Milosevic.
Arbour concluded her report on the Canadian Armed Forces (CAF): “Members of Indigenous and black communities, and other visible minorities and equity-seeking groups, have been largely absent, clearly not welcome. For years, women were simply shut out. When finally allowed to serve, women were made to feel they did not belong. They were denied opportunities to compete fairly and to thrive. They were harassed, humiliated, abused and assaulted, and, appallingly, many continue to be targeted today… One of the dangers of the model under which the CAF continues to operate is the high likelihood that some of its members are more at risk of harm, on a day to day basis, from their comrades than from the enemy.” By enemy, Arbour meant what Cadieu and Freeland mean.
There has been no disclosure, no indictment, no apology for the Canadian military role in the Ukraine, training and arming Ukrainians committed to reviving Nazi doctrine from World War II. Nor for the war crimes now alleged by eastern Ukrainians to have been committed by western Ukrainians during the civil war which began in 2014. According to Arbour, “the very success of CAF operations, which I am not in a position to assess, reinforces its view that it is unique, and that CAF can do everything without the assistance of outsiders, as it always has.” By not to assess, Arbour meant not to doubt nor criticize.
A Canadian with NATO warfighting experience comments: “The contradiction here is that the officer corps, heavily committed to the anti-Russia track that cuts across Canadian party lines, is heavily politicized and infected by the neo-Confederate faction in the US. They don’t appreciate what they see as [Prime Minister Justin] Trudeau’s ‘communism’. They believe the charges against Cadieu are an expression of it.”
“The truth, that no one, including Pugliese and other reporters will admit, is that the Canadian military, not to mention large swathes of law enforcement, is not reliable in terms of defending the Canadian state if the ruling faction pursues policies contrary to the officers’ wishes.”
There is no mutiny, at least not against the war against Russia, responds a veteran Canadian politician. “I have seen no indication that senior officers in the Canadian military oppose Canada’s hyper-aggressive approach to the Ukraine war. My impression from day one has been that Canada’s military is as belligerent toward Russia as any in NATO.”
The action the Lithuanian government implemented over the weekend to stop Russian trains carrying sanctioned cargos into Kaliningrad is regarded in Moscow as a long anticipated move, prompted among Lithuanian officials by the British government. The initial Lithuanian embargo action has been followed by a second one this week extending the blockade to trucks and road transport. Neither action has been publicly announced by the Lithuanian government.
The first news came from Anton Alikhanov, the governor of the Russian oblast of Kaliningrad, following a notice sent to him by Lithuanian officials. That notice has not been published.
Lithuanian president Gitanas Nauseda (lead image) has said nothing.
Lithuanian Prime Minister Ingrida Simonyte announced through the British Broadcasting Corporation that the blockade was not a blockade because only some cargoes were halted, and because “Lithuania is complying with the sanctions imposed by the European Union on Russia for its aggression and war against Ukraine ” . She also told the British state radio “it was important not to overreact”.
She tweeted: “Any talk of a blockade of Kaliningrad is a lie. Lithuania is complying with the sanctions imposed by the EU on Russia for its aggression and war against Ukraine. The sanctions were agreed by all the EU member states on March 15…. Passenger transit is also taking place, under a special agreement by the EU, RU, & LT. Steel and ferrous metal products account for only around 1% of the total rail freight to Kaliningrad via LT.”
In the three days which have followed the Lithuanian action, the US and British Governments, the European Union (EU), and the North Atlantic Treaty Organization (NATO) have not supported the Lithuanian blockade.
The Russian Security Council met on Wednesday morning, but issued no statement on Lithuania. The Secretary of the Council, Nikolai Patrushev, who was in Kaliningrad on Tuesday, had announced there that the “consequences will have a serious negative impact on the population of Lithuania.”
Yesterday, at the same time as President Vladimir Putin was chairing the Security Council meeting, the Russian Foreign Ministry announced it is delaying “concrete measures” in reaction: “The measures will not be diplomatic, but practical, they are now being worked out in an interdepartmental format, We are not talking about this not because we are hiding something, but because the process of their coordination and elaboration is underway. I would like to emphasize once again (the third time for today’s briefing): we have told the European Union and Lithuania about the need to change the steps they have taken. Perhaps something from that side will be changed, and, accordingly, our reaction will be different.”
In the rest of the world it is known as the cultural cringe. In Russia the wish to be loved by Americans is known as liberal reform.
In the very first paragraph of a new book called “Collapse: the Fall of the Soviet Union”, the author, Vladislav Zubok – the name in Russian means a small tooth — reveals that on the morning of August 19, 1991, when the first coup was attempted against Mikhail Gorbachev, then President of the Soviet Union, Zubok was flying to the US by arrangement with Strobe Talbott, Moscow correspondent for Time and soon to be the Clinton Administration’s principal Russia expert. At the time Zubok describes himself as a “Moscow-based academic intellectual”. By this, he means he was no simple worker with a Moscow university degree. In Soviet class terms, he insists the reader recognise him to be an “intellectual”. That then was upper class, and Zubok wants the reader to know the difference between the Russian upper and lower classes — immediately, on the nineteenth line of his very first page.
Zubok also wants the reader to know he had been hired with money from “the prestigious Amherst College in Massachusetts”. What exactly was prestigious about Amherst, or Massachusetts for that matter — and to whom? And why does Zubok think that in a history of Russian politics between 1983 and 1991, such a remote place, with such an adjectival tag, was worth the mention?
The answer, like the other revelations of the first paragraph, reveals what this book turns out to be. It’s an exercise in American-style reconstruction of what a small group of Russians for hire were keen to give their masters, about the circumstances of the years leading up to Boris Yeltsin’s replacement of Mikhail Gorbachev, and Russia of the Soviet Union. But this isn’t Russian history. It’s the history of Russians with cultural cringe – the desire to be loved by Americans, and to tell them what they wanted, paid for, insisted on hearing then, and demand now.
The payoff, reported on the dust jacket of the book, comes from Talbott, Zubok’s original employer. He is quoted as saying: “This is a deeply researched indictment of Mikhail Gorbachev’s timidity and mercurial policies which backfired.” “Instead,” Talbott adds, “Russia at the turn of the 21st century was ripe for the rise of Putin.” Zubok was ripe for what Talbott meant. “In 2008,” according to Zubok’s history, Putin “used military force against Georgia, and in 2014 he annexed Crimea and waged an undeclared war on Ukraine in Donbass.” The blame for that, Zubok means, was Gorbachev’s mistakes. Without them, “had the Kremlin ruler made different choices… the Soviet Union could have gradually made its way into the world economy by a process of trial and error, with a nomenklatura-style state capitalism, and certainly with its institutions of power preserved.”
As for the Russian cultural cringe, Zubok is sure it was one of Gorbachev’s biggest mistakes. During his well-known trips abroad in the 1980s, Gorbachev took with him, Zubok records, “a “huge entourage…of journalists, social scientists, writers, theatre directors, filmmakers and other cultural figures. Most of them shared [Gorbachev’s] fascination, admiration, and envy for things Western.”
Zubok has written a book to prove he doesn’t suffer this cringe. The work proves the opposite. This is the problem with cringers. They are too bent out of shape to recognize the shape they are in.
On March 15 the British Government announced it is imposing a ban on exports to Russia of “high-end luxury goods”.
According to the official press release, “the measures will cause maximum harm to Putin’s war machine while minimising the impact on UK businesses as G7 leaders unite to unleash a fresh wave of economic sanctions on Moscow. The export ban will come into force shortly and will make sure oligarchs and other members of the elite, who have grown rich under President Putin’s reign and support his illegal invasion, are deprived of access to luxury goods.”
Exactly what counts as “luxury goods” was loosely defined in the government’s statement as “luxury vehicles, high-end fashion and works of art” and “antiques”.
But the regulation issued to enforce the policy is much more comprehensive. Section 11 of this regulation identifies “pearls, precious and semi-precious stones, articles of pearls, jewellery, gold or silversmith articles”. Section 21 covers “Works of art, collectors’ pieces and antiques”; that’s the kybosh for oligarch luxury — the Russia warfighters in London say they believe — to “cause maximum harm to Putin’s war machine”.
The official regulation defines this to cover goods higher in price than £250 (before VAT). They have been listed to include horses, caviar, wrist watches, xylophones, vacuum cleaners, ski boots, saddles, perfumes, and pottery. Russian women buying lingerie, Russian men buying pyjamas, Russian children buying rollerskates, and Russian housekeepers buying toasters have all been hit with “maximum harm”. Russian spies have been banned from buying British-made false beards and wigs.
Compression stockings for varicose veins will be stripped off Russian legs at the airport, and confiscated under the new rule. Bathing suits, however, if worn instead of underwear, are exempted from the ban.
On June 13, for the first time since the Russian military operation began in the Ukraine, a detailed Russian intelligence assessment has been published in Moscow of Polish strategy for the future of Ukraine. This follows several weeks of brief statements by Russian security and intelligence officials claiming the government in Warsaw is aiming at an anschluss or union with the “eastern borderlands” known in Poland as Kresy Wschodnie, and in the Ukraine as Halychyna; that’s to say, Galicia.
These Russian claims have been dismissed as propaganda by the Poles. Polish strategy, according to Warsaw sources, is to preserve the Zelensky regime in Kiev and the unified Ukrainian military command — and not to acknowledge the possibility of their defeat by the Russian army east of the Dnieper River.
In this week’s discussion between Vlad Shlepchenko, a military analyst for Tsargrad in Moscow, and Vladimir Kozin, a leading academic attached to the Russian intelligence think tank, the Russian Institute for Strategic Studies, they consider the scope of the strategic problem which they think the Poles, and behind them the US and NATO, will continue to pose, after the objectives of Phase-1 and Phase-2 of the Russian military operation in the Ukraine have been completed.
The Cossacks are known for many things, but not for being Roman Catholics like the Galicians of western Ukraine around Lvov, or like the Poles around Cracow.
Originally, the Cossacks swore off eating horsemeat, veal, hare, and pork. Pork is the principal meat of Lvivska (lead image, right) and Krakowska (left), the traditional sausages of Lvov and Cracow. They differ from one another in the spicing – Lvov with onion, marjoram, coriander and bay leaves; Cracow with nutmeg and sugar. In ingredients, the original Cossack sausages were closer to the Jewish ones.
In the war which is now extending from Europe to the world, taste in sausage shouldn’t be confused with race hatred. On May 22, when Andrzej Duda, the President of Poland, declaimed in front of President Vladimir Zelensky at the Verkhovna Rada in Kiev, that “you are – as your national anthem has it – of Cossack stock! You are magnificent!” Duda was making a racial observation with a profound mistake – and not only about sausages.
The Cossacks of the Ukraine came from the lands between the Dnieper and the Don Rivers – that’s between 700 and 1,400 kilometres from Galicia and a journey of nine to twenty hours by motor, days by horse. The Cossacks were Slavs and they were Orthodox Christians. By their ethnic origin, language, culture, and religion, they had little in common with the people who lived to the west of the Dnieper; that’s between Kiev, Lvov and the Polish border today. The Cossacks didn’t start eating pork sausage until after they gave up the nomadic life, got off their horses, and settled to farming.
When Duda told the Kiev deputies “I trust the goodness, the friendships made between millions of Poles and Ukrainians will mean we will be good neighbours forever now. This is a great historic opportunity and the great historic break–through”, he was getting closer to the truth of the history. But that is the history of several hundred years of wars and race hatred between the Galicians and the Poles, and between the Galicians and Poles together against the Russian Slavs. It’s also a story Duda, his political party, and the Polish opposition backed by Mark Brzezinski, the US Ambassador in Warsaw, recognize as a cause of war inside Poland, as well as outside.
The “historic break-through” which Duda declared in Kiev is only 81 years old, from the time of Duda’s grandfather.* That was in 1941, when the German Wehrmacht incorporated Galicia into the General Government of southern Poland (Generalne Gubernatorstwo in Polish). Four years later, as the Germans retreated westwards to Berlin, it became the covert strategy of the US Army and then the policy of successive US governments for the extension eastwards of the North Atlantic Treaty (NATO) alliance; since 1945 that policy has also included regime change in Moscow, and the breakup, first of the Soviet Union, and then of the Russian Federation. That was also the announced strategy of Ambassador Brzezinski’s father, Zbigniew Brzezinski, the National Security Advisor of the Carter Administration between 1977 and 1981.
Duda’s speech of May 22 was a Polish call to the Galicians to put aside the race hatred between themselves, and revive the race hatred which the two Catholic peoples, plus the Germans, have shown towards the Russians – also the Jews from whom the Zelensky family comes.
“How can I speak now,” Duda began his address, “when I am almost overcome with emotion”. Duda’s emotion was also calculated for the Polish audience who will vote in the next national election in just twelve months’ time.
Duda’s call to race war against the Russians was also an attempt to secure Poland against its more recent enemy Germany, and neutralize the US government’s attempt to topple the government in Warsaw. For Duda to manage this combination and hold on to power requires the appearance of a much closer Polish alliance with the Kiev regime than the Ukrainian military commanders and the Galician nationalists are contemplating at the moment, as they are forced into retreat westwards, like the Wehrmacht. Their taste in sausage isn’t Duda’s, or Brzezinski’s, President Zelensky’s or the Cossacks for that matter.
There ought to be a law, or at least a sanction – tenure cancelled, travel visa blocked – for American experts on Russia who claim to know from their reading of other American experts on Russia why Russia does things, and what will happen next.
Thane Gustafson, a Georgetown University professor publishing at the Harvard University Press, claimed very recently “it’s not too hard to reconstruct at this point what was likely going through Putin’s mind as he gave the order to attack…Putin was not nuts, not deranged, not isolated, etcetera. It was all a reasonable bet—by his strange lights—except that every one of the premises turned out to be wrong.” Gustafson is certain he knows this; how he doesn’t say.
But then Gustafson concedes: “All the cards are up in the air, and who knows how they will come down…I don’t know how this ends.”
There’s modest uncertainty for you — except that Gustafson is kidding. He wants you to know, he also says, that Russia is now a fascist state, and there’s really only one thing left he doesn’t know: because it’s such an effective fascist state, “the fact is that because of the regime’s control of information, we have very little idea of how Russians actually feel about the war, and how they will react to Putin’s apparent defeat.”
Gustafson didn’t notice he was squatting on the horns of a dilemma. If Russian regime control of information is so total(itarian), Gustafson’s information must come from the other side – American, Canadian, British, NATO headquarters in Brussels. The technical terms which professors usually apply to information emanating from one side of a two-sided war are misinformation, disinformation, propaganda, active measures, fake news, lies. Between these things and the information Gustafson says he’s sure of, he has trolled himself.
So, to repeat the question, what if Russians actually support the war and blame the US for starting it? What if they are as certain of this as Gustafson is certain Putin started it?
And what if the war ends in the US and NATO alliance retreat to Lvov; after which the Polish government will notify NATO HQ it is reviving its treaty claim to the Galician territory of the Ukraine; the chancellery in Berlin will then inform Brussels it requires the return of the ancient Danzig Corridor and Breslau, Polish territories currently called Gdansk, Wroclaw, and the Ziemie Odzyskane; and the Hungarian government will follow suit with the announcement of the recovery of historical Kárpátalja (Transcarpathia), the Zarkarpatska oblast of the Ukraine?
These were the spoils of the World War II settlement between the US and the Soviet Union in 1945-46. The territorial reversion claims aren’t new. What is new is that the US and the NATO alliance, plus the Galician regime still ruling between Kiev and Lvov, also in Ottawa, have aimed to change the terms of the post-war settlement by continuing the war eastward on to the territory of Russia itself, all the way to regime change in Moscow.
That is what Russia says it is fighting now to defend itself against. As Russian officials have been hinting in recent days, the foreign and defence ministries and the intelligence services are currently discussing in the Kremlin Security Council whether Russia’s long-term security on its western front may be best served by terms of a Ukrainian settlement in which the German, Polish, and Hungarian territorial claims are recognised.
So, if these are indeed the cards that are up in the air, as the professor in Washington, DC, acknowledges, he isn’t the only one who doesn’t know how they will come down.
In the meantime he and the Harvard printers want their new book to be a weapon in this war, targeted directly at President Vladimir Putin in the Kremlin. But what if the weapon misfires and they lose this war? Will Gustafson admit his ignorance or his mistake or his deception? Should he resign his professorship? Should Harvard pulp the new book? Or is the state in which Gustafson lives and lectures such an effective fascist state, losing the war against Russia to Germany, Poland and Hungary, minus the Ukraine, plus Russia, won’t matter to US officials any more than losing Afghanistan, Iraq, Libya, and Syria?