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INTERVIEW-Big changes in Russian gem market since Soviet era
 
 
LONDON, November 16, 2008 - Pavel Sokolov, president of Sokolov Co., a leading Russian gemstone company, tells Jewellery Outlook about the Russian market for coloured gemstones. He established his company 20 years ago after leaving his job at St. Petersburg State University where he had worked as a mineralogist and lecturer in the geological department since 1972. For the past 15 years Sokolov Co., a family business which now employs up to 30 people, has been cutting and selling gemstones.

Pavel Sokolov is the International Colored Gemstone Association (ICA) Ambassador to Russia and is widely recognized as a leading authority on the coloured gemstone market in Russia. Although he is based in St. Petersburg, he spends much of his time in the German gemstone capital of Idar-Oberstein. His company has branches in St. Petersburg, Moscow, and the jewellery centre of Kostroma. 

Jewellery Outlook: How has the Russian gemstone market changed since Soviet times?

Pavel Sokolov: It has changed markedly.  In Soviet times the gemstone market didn’t exist at all. You could buy only diamonds with big problems -- and also all kinds of synthetic stones set in gold.

In special salons (of which there were very few) one could buy very nice silver jewellery with nephrite, jasper, agate, charoite, amber and so on. Sometimes you could buy jewellery with emeralds.  Emerald and alexandrite mines were operating in the Ural region near Ekaterinburg.

Pavel Sokolov, president of Sokolov Co.


However, all mined stones were passed to GOKHRAN – a special state depository in Moscow. Alexandrites were kept in GOKHRAN; emeralds were partly sold, and partly kept in GOKHRAN. Semi-precious stones such as topaz, garnet etc. were practically absent from the market. Tourmaline, aquamarine, and tanzanite were absent on the whole. As for sapphires and rubies – you could buy only synthetic stones.  Good quality cultured sea pearls were also absent.

Now there are a lot of Russian companies supplying coloured gemstones to Russia from all over the world. The diamonds are from Russia, and from India and Belgium. The majority of coloured gemstones used by Russian jewellers are imported, as there are practically no deposits of coloured gemstones good for faceting in Russia except for emeralds, alexandrites and demantoide.
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Jewellery Outlook: Which stones are most in demand in Russia?

Pavel Sokolov: The tastes of Russian customers bear traces of Soviet times even now. The most popular are topaz, garnet, emerald and diamond.

More or less in fashion are aquamarine and tourmaline. Stones such as tanzanite and paraiba tourmaline are practically unknown in Russia. Some companies began to import sapphires of medium and high quality and these came into fashion.

Top stones such as rubies have appealed to Russian customers only in the past three to five years. The Soviet generation was bored by synthetic rubies and could not even imagine buying a genuine ruby.
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Jewellery Outlook: Where are Russia’s leading coloured gemstone deposits located?

Pavel Sokolov: With the exception of diamonds, jewellery-grade stones are practically not mined in commercial volumes in Russia.

The Ural Mountains accounted for a lot of gemstones in the past, but the majority of deposits have been exhausted and are not mined now. Emerald and alexandrite are mined at the Malyeshevo deposit, Ural region. Very attractive and beautiful Russian demantoide is washed out from alluvial sands of several rivers in the Ural mountains. There are deposits of pink, green and polychromatic tourmaline in Malkhan, some 400 km to the south-east of Lake Baikal.
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ewellery Outlook: Which Russian cities account for the biggest turnover in coloured gemstone trade?

Pavel Sokolov: First of all - Moscow; then St. Petersburg and Ekaterinburg; Kostroma and Kostroma region (manufacturing around 60% of gold jewellery in Russia); and other large cities.

Jewellery Outlook: What are the main problems faced by foreign suppliers of coloured gemstones to the Russian market?

Pavel Sokolov: In accordance with Russian law, for import 18% VAT and 20% custom tax should be paid immediately when crossing the border. Plus shipment charges, insurance, and customs broker services. We calculate roughly that it will be 45-50 % of the invoice value.


 

The custom procedure is overly complicated: it requires too many documents and specially trained personnel, and takes several days, even for our company. And we have been arranging custom clearance several times a month for more than 10 years.

If you want to return stones from Russia to another country, it’s also very complicated. VAT is principally returnable but with very big problems. Custom tax is not refundable. If you want to sell semi-precious gemstones from company to company, this is easy.

If you want to sell semi-precious gemstones from company to private individuals, you have to supply your office/shop with a cashier desk and keep separate accounts.

If you want to sell precious coloured stones (emeralds, rubies, sapphires and alexandrites) to private individuals, it is forbidden (except diamonds).

When selling precious stones from company to company, both companies must have a special registration at the Ministry of Finance.

Jewellery Outlook: What is the impact of Russia's 20 percent import duty on the trade in coloured gemstones? Will the duty be abolished?


 

Pavel Sokolov: In Russia all gemstones are at least 20% more expensive than the rest of the world. Will the duty be abolished? I don’t know.

Jewellery Outlook: Is there a certification process for coloured gemstones in Russia?

Pavel Sokolov: According to Russian law, wholesale trading from company to company can be done without certificates. You don’t need certificates if you sell loose (unset) semi-precious stones to private individuals. But theoretically you can sell precious stones (diamonds, emeralds, rubies, sapphires and alexandrites)  only with the state certificate of the Ministry of Finance. However, in practice the Ministry of Finance issues certificates only for diamonds.

Jewellery Outlook: What is the outlook for prices of coloured gemstones in the Russian market? What effect will the global financial crisis have on the Russian market for coloured gemstones?

Pavel Sokolov: Well, I don’t know. At the moment it is unpredictable. I’ll be happy if the selling prices jump two to five times, but experience shows that most likely it will be quite the opposite unfortunately.


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