Ukraine: A Global Diamond Cutting Hub with No Mines of Its Own. Why?

November 11, 2003, Kyiv. Imagine a jeweler whose hands craft exquisite pieces worthy of London auctions, yet he lives in a workshop with a leaky roof and commutes to work on a broken road. A grotesque image? Perhaps. But it is an almost perfect metaphor for today’s news from the world of Ukrainian raw materials and processing.

On one hand, there is brilliant success, proudly reported by officials at yesterday’s press conference. On the other, there is sober, almost cynical calculation that calls into question the sense of any grand strategic projects. A paradox worthy of the pen of Ilf and Petrov, it vividly illustrates our eternal dilemma: we can virtuously cut what we do not have, but struggle to decide what is more profitable to extract from under our feet. While we debate the prospects of mining our own diamonds and gold, the Kyiv and Vinnytsia plants quietly convert imported raw materials into 7% of all small diamonds in the world. This figure, announced by the director of the State Gemological Centre, Volodymyr Indutnyi, makes one wonder: are we global players in the diamond business or just clever subcontractors at someone else’s feast?

For European and American investors, Ukraine’s established role as a diamond cutter offers a unique entry point into a high-value niche market with skilled labor, while the debate over resource development highlights both the risks and the long-term potential of the country’s mining sector.

Diamond Cutting: Our Hidden Championship

The situation with diamonds resembles the story of two plants (in Kyiv and Vinnytsia) that found themselves in the right place at the right time. Joining the Kimberley Process (roughly, the “diamond OPEC” fighting blood diamonds) opened the door to the global market for them. And they broke through: clients from Israel, Belgium, Russia – this is no small feat. Annual profit is about $35 million (approx. £21.1 million* / €40.2 million*). But as Indutnyi immediately stunned everyone, the potential is “hundreds of millions of dollars.”

The only thing preventing its realization is a simple fact: we have no raw materials. We are jewelers dependent on diamond rough supplies from abroad. And while the Chinese, before joining the WTO (which only happened last year), were dumping, our plants had an extremely hard time. Now a window of opportunity has opened slightly. The question is, will we have the perseverance and intelligence to use it, or will we miss the chance again?

Gold and Diamonds vs. Crushed Stone and Pragmatism

What about our mineral resources? Here, the picture outlined at the same press conference is even more… let’s say, down-to-earth. Literally. The head of the relevant department at the Ministry of Finance, Viktor Vydolob, says honestly:

To start developing at least one of the five explored gold deposits, a minimum of $200 million (approx. £120.7 million* / €229.8 million*) is needed. The state does not have that kind of money. We need investors and, critically, clear laws.

And here enters the main paradox of the day. The same Volodymyr Indutnyi, praising the diamond plants, asks a rhetorical question: isn’t it more profitable to dig crushed stone? His logic is as ironclad as an excavator bucket:

“We invest $10 million in crushed stone, buy 2 plants. Thus, we immediately join several European road construction consortia, create jobs. We achieve 50-60% economic efficiency in 2-3 years… Diamonds are giant processing volumes, colossal investments that will pay off in 20-30 years.”

And, to be honest, it’s hard to argue with him. Especially when you recall the state of our roads. This is not a metaphor but a concrete business case: quick payback versus a strategic project for generations.

The Glitter of the Future or Solid Ground Underfoot?

So where is our benefit? In pursuing the long-term glitter of diamonds and gold or in pragmatic crushed stone that will bring money and infrastructure here and now?

My humble view as someone studying business suggests we need both strategies. But wisely.

1. Diamond Cutting is an already functioning high-value business. It must not just be supported but aggressively developed: attract investment into those very plants, train more gemologists and cutters, build the brand of “Ukrainian cut.” This is our chance to become permanently entrenched in the value chain, even without our own mine.
2. Crushed Stone and Resources are the foundation. Quick money, jobs, development of related industries, and, importantly, our own construction independence. Ignoring this is economic suicide.
3. Gold and Diamond Mining is the global goal. But for that, we don’t just need a pile of money, but first and foremost — stable, transparent rules of the game. As long as they are absent, major international investors will not come. And we will keep dreaming about treasures buried in the ground.

The conclusion of the day is simple: we have already entered the elite diamond club as the best machine adjusters. It’s time to become not only craftsmen but also full-fledged owners in it. And to do this, we need to start with the simplest thing — put our own house in order. At least with the help of that same crushed stone. Otherwise, we will forever be choosing between the unattainable dream of El Dorado and a bird in the hand, forgetting that we can raise an entire flock.

* Exchange rates as of 11.11.2003: 1 USD = 0.8703 EUR / 0.6115 GBP. Calculations based on NBU rate: 1 USD = 5.3320 UAH. Calculations are illustrative and conditional. This is not financial advice.