World Diamond Market Is a Scam

by: Eddy Elfenbein

The New York Times has an article today on the diamond market and how Russia is loading up on supply and waiting for the economy to recover.

I find the world diamond market fascinating because it’s almost completely rigged. If the free market had its way, diamonds would be insanely cheap.

The diamond market used to be controlled by De Beers. They’re the ones who run those “diamonds are forever” ads. (Sure they’re forever, all carbon is.) I believe that diamond rings are a wedding staple only in the United States. Lately, De Beers has fallen on hard times and Russia is taking over the market.

The recession also coincided with a settlement with European Union antitrust authorities that ended a longtime De Beers policy of stockpiling diamonds, in cooperation with Alrosa, to keep prices up.

Though it is a major commodity producer, Russia has traditionally not embraced policies that artificially keep prices up. In oil, for example, Russia benefits from the oil cartel’s cuts in production, but does not participate in them.

Diamonds are an exception. “If you don’t support the price,” Andrei V. Polyakov, a spokesman for Alrosa, said, “a diamond becomes a mere piece of carbon.”

You know the song, “carbon is a girl’s best friend.”