• Collecting Gems: Recession/Depression
• Auction Reports
• Notable Quotes
• Gem Movie News
• Victoria's Secret $5 Million Bra
• Gem Heists
• Burma In The News

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Collecting Gems: Recession/Depression
by Robert Genis

The crashing stock/commodities/real estate markets and the resulting recession make this a good time to try to figure out what will happen to gem prices in the near and long term. Prices of most high end gems remain high and firm, as evidenced by the recent influx of Burma goods brought into the US to beat the ban on Burmese stones. Most colored diamonds are also strong, though yellow diamonds are showing some weakness. Jewelry quality gemstones are probably going down in price in 2009 due to decreased demand for jewelry and the fact they are not really rare. The real question is whether fine, collectible gemstones will go down, stay stable or even increase with these market conditions?

Let's take a brief look at the most recent recessions and gem prices.

Recent Recession Prices
1980-1982 Recession
This recession was the reason Jimmy Carter lost the Presidency. The Iranian revolution brought about the 1979 oil crisis and prices rose. Inflation was rampant. Precious gems, diamonds, gold, silver and rare coins went to unbelievable heights. After Ronald Reagan became president, the prices of these collectibles crashed. In retrospect, some of these gemstones were never really rare and have never recovered in price. Certain stones also moved contracyclically. For example, stones that bucked the downward trend were Kenyan tsavorite, Burma spinel, colored diamonds and Colombian emerald.

1990-1992 Recession
The short recession of 1990-1992 was caused by easy monetary policies after the 1987 stock market crash. Burma ruby, Burma sapphire and Colombian emerald were all stable during this recession. White diamonds were weak. Tsavorite and spinel, the stellar performers of the previous recession declined in price. Interestingly, Tanzanite rose in price.

2001-2003 Recession
This recession was caused by the dot.com bubble bursting and the September 11th attacks. Burma ruby and sapphire, Burma spinel and Colombian emerald decreased slightly during this period. White diamonds and tsavorite were stable. Tanzanite decreased the most of any collectible gem.

2008 Financial Crisis
The collapse of the real estate market led to bank collapses in the US and Europe. The amount of credit is sharply curtailed. Today's recession seems to have affected lower quality and treated gemstones but not the higher quality unheated gem goods.

Recent Recessions/ Gem Prices Summary
The bottom line is high quality gemstones often operate in their own pricing cycles, almost irrelevant to world economic cycles. Treatments, bad publicity, plus supply and demand issues seem to have a more vital effect on gemstone pricing than economic conditions. This explains why the prices of different stones don't all go up or down together.

In the worst case scenario, let's take a brief look at what might happen to gem prices in a serious Depression:

Gem Prices: the Depression of 1929-1932
We have colored gemstone pricing from Sydney Ball, Economic Geology, 1935. It charts the prices of emerald, ruby and sapphire from 1178-1934. All the major gemstones declined in price during the last Depression. What is fascinating is emeralds decreased the most and sapphires and ruby the least. Also, if you compare the prices of fine gemstones vs. stocks or commodities, the conclusion is investors would have been better with their money in gemstones than stocks or commodities during the Great Depression.

We have pricing data for rough diamonds back to the Great Depression. According to The Diamond Connection by Anthony. C. Sutton, white diamond rough prices fell 22% in 1930, 32% in 1931, and 19% in 1932. However, the stock market during this time went down 22% in 1930, 41% in 1931 and 52% in 1932. Sutton posits: suppose you put $100,000 in diamonds in 1929 and $100,000 in the stock market, diamonds would have been the less destructive investment.

Bullish Argument for Gems in Depression
Gemstones and diamonds have a history of being viewed as the ultimate portable safe haven during periods of war, currency devaluation and financial panics. Diamonds preserved wealth in Depression-era Europe. Gemstones were used by wealthy families to escape state oppression in Europe, Russia, China, and other parts of the world. Rare gems have often provided a new life for people escaping these catastrophes. One example is the Tereschenko Diamond. It was secretly whisked out of Russia by a sugar baron on the eve of the Revolution in 1916. The 42.92 carat fancy blue diamond surfaced at Christie's in 1984, and sold for $4.5 million in Geneva.

Bearish Argument for Gems in Depression
The bearish argument is gems are luxury items not necessities. In booming economic times, demand and prices are high. On the other hand, during periods of financial depression, prices of gems can fall. A real world Depression example is the French Revolution. Prices of gems were high during the extravagances of the French court. After the revolution, a general financial depression occurred and prices declined dramatically.

Clues From Art Market
The Wall Street Journal, November 20, 2008 wrote an interesting piece, "The Fine Art of Surviving the Crash in Auction Prices." It stated art collectors who borrowed money to finance their collections may face serious financial hits. However, collecting art is a passion, even an addiction, and it doesn't end based upon market trends. Collector Larry Walsh states the art collector is now in the catbird seat because he can collect better material than before. An art collector states that the volume of art sales at auction speaks to the real strength, not the weakness of the art market. Christopher Burge, Christie's chairman mentions art collectors are finding an excuse not to buy and he’s seen several downturns the last 40 years and they don't last. Art behaves like luxury real estate with the best material increasing and holding it's value. The silver lining of the downturn? Art collectors will have access to art that would not normally be available.

The art market is interesting in that it is somewhat analogous to the gemstone collecting market. Go back and reread the last paragraph and substitute the word gem for art.

Conclusion
New auction records are being set in the midst of dire economic times. This means collectors still want to purchase top, rare gemstones at any price despite economic conditions.

Most financial advisors suggest a percentage of one's portfolio be in hard assets. This will always make sense. Remember, your diamonds, gemstones and precious metals are crisis hedges.

You will have them no matter what. Can you say that about your financial stocks? For all we know, many stocks and bonds may become worthless. This is not true with diamonds and precious gems that you can hold in your hand.

The US government stimulus plan is basically printing money. With almost $9 trillion committed to various bailouts, so far, the eventual outcome probably is hyperinflation and a declining dollar. Many economists agree gemstones are one good place to have your assets when this occurs.

The supply of top collector gems are limited and this market reality helps limit downside movement in collector quality gemstone prices. Further, most collectors are long-term oriented and should not be "forced sellers". We have noticed decreasing collector demand in the last year. The bid/ask spread among many asset classes is great right now. This is a function of fear and lack of liquidity . This might create an opportunity for scavenger collectors. As Rothchild said, "Buy when blood is running in the street".

Does the current economy mean you should stop collecting gems? Let's look at the recent past history of the most famous gem collector. The epitome of the gemstone collector is Mr. Hancock. His family sold the famous .95 red diamond at Christie's in 1987. His collecting theory was to buy colored diamonds relentlessly. It mattered little to him about price increases or price decreases. He bought consistently. The business cycle was irrelevant to Mr. Hancock. . He did not care if the US economy was in an expansionary or recessionary phase. This is the key to successfully collecting/investing in the gemstone or collectible markets. Constant accumulation is probably also a safe strategy for stock/financial and real estate markets.

So if you have available funds, have some fun collecting in a quiet market. Opportunities like this may be as rare as fine colored gems.

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Auction Reports

Christie's London

The Wittelsbach Diamond, a colored diamond once owned by King Philip IV of Spain sold for $24.3 million at Christie's International in December. The 35.56 carat grayish-blue gem, mined in India , had been expected to fetch $13 million. The stone was purchased by Graff Diamonds. They are looking to recut the stone to make the stone flawless and get a deeper color.

This diamond is almost as famous as the Hope Diamond. In 1664, King Philip (1605-1665) gave the stone to his daughter, the Infanta Margarita Teresa, as part of the dowry of her marriage in 1667 to Emperor Leopold I of Austria. In the 18th century, it entered the crown jewels of the Bavarian royal family, the Wittelsbachs. The diamond stayed in the family, even after the monarchy was abolished in 1918. The Great Depression and the runaway inflation of the 1920s came close to bankrupting the dynasty and the Wittelsbach Blue was offered for auction at Christie's in 1931. At that time no buyer was found. The stone was returned to Munich, and disappeared from view.

It resurfaced in 1961 when the heirs of one of Europe's most successful diamond dealers, Romi Goldmuntz, sought out a fellow Antwerp jeweler Joseph Komkommer. They unwrapped the big stone on Mr. Komkommer's viewing table and asked him to cut it. Mr. Komkommer sensed that the diamond was historically significant, refused to tamper with it, and together with other dealers bought it from the Goldmuntz family.

By 1964 the Wittelsbach Blue had been passed on to a Hamburg jeweler and it disappeared from view again.

It was sold to the department store magnate Helmut Horten, who then gave it to his young bride, Heidi, as a wedding present in 1966. Horten died in 1987, but his widow now ranks as the wealthiest woman in Austria. It is believed The Horten Foundation placed the diamond for sale. The Bavarian Government wanted to bid on the stone to bring it home but was not successful due to economic conditions.

Christie's Geneva
In November, a 42.28 carat Kashmir sapphire ring set a world sapphire record selling for nearly $3.5 million. The pre-sale estimate was $2.9 million to $3.8 million. It's the most expensive sapphire ever sold at auction. This new record was despite the current economic conditions. No one knows who the buyer was. The previous world auction price was set by Christie's in April 2007, when a Kashmir cushion-cut sapphire pendant of 22.66 carats sold for over $3 million. That sapphire retains the record per carat of $135,000 against $80,000 for the latest one.

Also, a 63.22 rectangular fancy intense yellow diamond sold for $1.3 million. Half of the jewels on offer failed to sell because of the present financial crisis. Jewels netted a total of $22.5 million. The top three diamond lots didn't sell. The jewelry market is driven by top-end diamonds, which brokers and leading fine jewelers say have come off price peaks touched earlier this year to more sustainable levels. They are a barometer of the financial health of high net worth individuals. Most of the buyers were international but Americans were scarce.

Christie's Hong Kong
In December, Christie's Hong Kong jewels sale gem prices were resilient considering the current economic slowdown. Even white diamonds held up their prices. Christie's Hong Kong sold $33.52 million with 63% of the lots selling. All the top 10 lots were purchased by Asians. The top lot was a pair of circular-cut, D-color flawless diamonds of 16.11 carats and 16.08 carats, respectively. It was bought for $5.65 million, or approximately $175,000 per carat. A 9.25 carat Kashmir sapphire sold for $1.82 million.

Christie's New York
In December, sales totaled over $16 million, with 84 percent of the items sold by lot. Private buyers purchased the top 10 lots. A pair of pear-shaped D-color flawless diamonds of 17.01 and 17.79 carats, sold for $3.55 million, or $102,000 per carat, to a private buyer. A circular-cut E-color potentially flawless diamond of 10.28 carats sold to a U.S. private for $1.058 million or $103,000 per carat.

Christie's London

At Sotheby's Magnificent Jewels Auction, a 8.02 carat Fancy Pink pear-shaped diamond sold for $1.32 million. The top three pieces at the Magnificent Jewels Auction did not sell- The Lesotho I, which is a 71.73 carat emerald-cut diamond cut from a rough diamond of 601 carats and which had an estimated sale price of between $3 million and $5 million did not sell. A 10.48 carat fancy deep blue flawless briolette diamond, carrying an estimated sale price of $6 million to $9 million did not sell. Finally, a 1.92 carats rectangular rare fancy red VS2 diamond, having an estimate sale tag of $2.5 million to $3 million also did not sell. Some believed the red grading was not accurate.

Sotheby's New York
Sotheby's New York Magnificent Jewels sale totaled over $20 million in December. Sixty-two percent of the items offered sold. A 36.99 carat, fancy vivid yellow diamond ring sold for $2,658,500, or $71,871 per carat. A 15.37 carat, D-color VS2 pear-shaped diamond mounted sold for $1,224,900 or $79,694 per carat. Many of the regular diamond buyers from the diamond trade were absent from this sale. Consumers are sticking with the rare, the unusual and that which, if not purchased now, may never be seen again.

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Notable Quotes

"Diamonds haven't hit bottom yet, they are still searching. But pearls continue to rise and so do Kashmir sapphires. In this market there is interest in things that are truly rare and irreplaceable."
Andy Cohen, a Geneva-based trader
Reuters
November 20, 2008

"People want to buy rarity. They want diamonds and color gemstones that are not easy to replace."
Rahul Kadakia, Christie's
November 20, 2008
Reuters

"We believe...especially because of the current economic climate people turn to more valuable goods. Objects of high value are more stable and inflation-proof, and, therefore, a good investment."
Pejmani spokesman
Marketwatch
December 1, 2008

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Gem Movie News

Flawless
A fantastic movie opened this year for gem movie buffs. The heist movie is Flawless, starring Demi Moore and Michael Caine. Moore stars as female executive at the London Diamond Corporation that finds herself frustrated by a glass ceiling after years of faithful employment. She befriends a janitor (Caine) who is reaching the end of his tenure at the company. He is looking to help himself with a generous retirement package that includes the firm's diamonds. Together they hatch a plot to steal the priceless diamonds, setting off a chain of events that send ripples all over Europe. Highly Recommended.

Racing the Monsoon
Michael Douglas and Catherine Zeta Jones will soon leave for India to shoot "Racing the Monsoon" in India. This is another sequel to the 1984 "Romancing the Stone". The movie is an action thriller about a diamond robbery on an Indian train, will pair Douglas with wife Catherine Zeta Jones. The film will also have Matt Damon. It will be the first major Hollywood-Bollywood collaboration and will have a budget of $45 million.

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Victoria's Secret Bra
Jeweler Martin Katz designed a $5 million Black Diamond Fantasy Miracle bra for Victoria"s Secret for Christmas. Brazilian supermodel Adriana Lima wore the undergarment with 3,575 black diamonds, 117 one carat round diamonds and 34 rubies weighing 1500 carats. The two largest stones are the black diamond drops totaling 100 carats.

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Gem Heists
Major jewel heists
The Associated Press
December 5, 2008

Here are some of the major jewel heists in recent history:

February 2008: Masked thieves drill a tunnel into the Damiani showroom in Milan, Italy, making off with gold, diamonds and rubies worth an estimated $20 million, though Damiani will not confirm the worth. Nine men were arrested in December in connection with the robbery.

October 2007: Thieves steal about $28.4 million in gems from the Harry Winston store in central Paris.

March 2007: 120,000 carats in diamonds, worth $28 million, are stolen from open safe-deposit boxes in an ABN Amro bank in Antwerp.

March 2004: Twelve pieces of jewelry worth about $31.5 million, including the 125-carat "Comtesse de Vendome" diamond necklace, are stolen from a store in Tokyo's Ginza district.

February 2003: Thieves empty 123 safe-deposit boxes at Antwerp Diamond Center in Belgium, netting an estimated $100 million in the world's largest safe-deposit box theft.

1994: Machine-gun-toting thieves take $45 million in gems from the Carlton Hotel in Cannes on the French Riviera.

March 1984: $15.4 million in jewels and gold are stolen when thieves crack a safe in a Hong Kong garment factory

Audacious Jewel Robbery in Paris
By Graham Bowley
New York Times Blog
December 5, 2008

Update:
The golden doors of Harry Winston were closed to the public late this afternoon, although women in furs still picked their way around a growing knot of television cameras arrayed outside.

Doron Lévy, a spokesman for the Union of French Jewelers, said that there was a meeting planned today to discuss security and the jeweler's public statements about the robbery. The elegant street of Avenue Montaigne was crowded with luxury brand names like Dior, Chanel and Gucci. The Christmas season is the peak time for jewelers when they have most of their stock.

Mr. Levi described the thieves as professional and extremely imaginative, exploiting a weakness of jewelers by posing as women since store employees are more likely to open the doors to women.

Harry Winston, he said, "is very sensitive to the question of security, but when you are exposed to a very motivated team who know your style of functioning and working, it's much more complicated."

Original post:
Armed thieves have carried out another brazen and meticulously planned robbery of the Harry Winston store in central Paris, making off with an estimated $102 million in jewelry.

According to the French press and other reports, as many as four robbers, three of them men disguised as women, entered the boutique near Paris's best-known avenue, the Champs-Élysées, at around 5:30 p.m. on Thursday, in plain sight of about 10 customers and 15 employees in the store.

The thieves confronted the staff with guns drawn, overturned display cases and escaped with nearly all the jewelry in the place, according to the BBC.

The store was the target of another robbery just over a year ago, when other unknown thieves took about $28.4 million in merchandise, ranging from a platinum ring priced at $2,800 (the cheapest item they stole) up to a $5 million diamond-studded bracelet.

Just a coincidence?  This time around, according to the BBC, the police said the thieves seemed "well informed and knew the names of some of the shop's staff." They "appeared to know their way around - addressing some of the staff by their names and identifying where stock not on display was being stored," according to the BBC report.

No details were immediately available on the specific items of jewelry the thieves stuffed in their bags in the latest robbery, though The Associated Press said the "three or four thieves swiped rings, necklaces and luxury watches," citing an unnamed police official.

According to the Guardian - inevitable headline, "Gunmen 'in drag' steal jewelry & watches available from Harry Winston's online store "start at more than £14,000, while the most modest necklace costs £52,000." (A pound these days is equivalent to about $1.46.)

Harry Winston is one of the world's best-known luxury jewelers, and one of its most publicity-minded as well, lending expensive pieces to film stars and celebrities to wear at red-carpet events and creating spectacular one-of-a-kind showpieces for the ultra-rich. According to Deutsche Welle, the firm "designed the famous tiara worn by Empress Farah Diba for her wedding to Shah Mohammed Reza of Iran. The tiara's centrepiece was the 60-carat Nur-ul-Ain pink diamond. Harry Winston also cut the famous 69.42-carat pear-shaped diamond the late actor Richard Burton bought for his wife Elizabeth Taylor's 40th birthday."

Accordingly, some hype may have crept into the value estimates for the stolen goods: Le Figaro says the actual retail value is probably between $60 million and $80 million, and the thieves would probably not be able to fence the stuff for anything remotely close to retail value.

Still, the audacity of the robbers is clear: the store, on Avenue Montaigne, is just around the corner from a police station, and mere footsteps from the tourist hordes of the Champs-Élysées.
Last year's attack, carried out by four or five masked thieves who all appeared to be men, was described at the time by Katrin Bennhold of The New York Times as "one of the largest jewelry thefts ever." And this year's swoop by the thieves dwarfs even that.

Paris seems to be the place of choice for really big jewel heists. In September 2004, two diamonds said to be worth $18.5 million were taken from an antiques fair; the police never found the perpetrators. In 1994, armed robbers stole about $21 million in gems from the jeweler Alexandre Reza in central Paris.

But the Belgian city of Antwerp, a center of the diamond trade, has seen it done on a more industrial scale: According to Agence France-Presse, in February, 2003, a team of thieves took diamonds and cash from more than 120 vaults at a heavily guarded diamond exchange in the city, making off with gems that may have been worth more than 100 million euros ($128 million).

Pink Panther gang jailed for £100m jewellery thefts
Telegraph.co.uk
By Henry Samuel in Paris
December 4, 2008

Top jewellers and police chiefs the world over fear and grudgingly admire the international crime syndicate whose cold professionalism has reaped them £100 million in jewellery heists over the past decade.

The educated gangsters - who all have multiple identities and speak several languages - earned their nickname after stealing a £500,000 diamond from a Mayfair jewellers in 2003 and hiding it in a jar of face cream. They were apparently inspired by the original Inspector Clouseau film in which the world's most expensive gem is hidden the same way.

Members of the gang, believed to come from across the former Yugoslavia region, has carried out around 100 daring raids across the globe, including in London, Dubai, Geneva, Monaco and Tokyo.

Most are at large but three were caught in France after swiping almost £7 million pounds in luxury gems and watches.

A court in Chambéry, southeastern France, found the three men - all Serbs - guilty of organised armed robbery in Biarritz, Cannes, Courchevel and Saint-Tropez in 2001 and 2003.

Boban Stojkovic, 35, and Goran Drazic, 35, were respectively handed down six-year and ten-year sentences. The group's mastermind, Dragan Mikic, 33, was sentenced in absentia to 15 years. He is currently on the run after escaping via a ladder from a French prison in 2005, as accomplices peppered the compound's watch tower with machine gunfire.

"We are dealing with hardened, professional delinquents," the judge said in his summing up. "They are almost all intelligent, but when one is intelligent, why follow the path of easy money?," he asked the jury.

The Pink Panthers' attention to detail led one criminologist to describe their work as "artistry."

In Biarritz, for example, they applied fresh paint to a bench opposite the jewellery store they were about to rob to deter potential witnesses from sitting there.

In August 2005, disguised as tourists in flowery T-shirts, gang members casually walked into the Julian jewellers in the crowded port of Saint-Tropez in broad daylight. Minutes later, they left with the stolen gems and - to the amazement of a crowd of onlookers - sped off in a waiting motorboat.

"Their cold determination is only matched by their highly meticulous mode of operation," said Christophe Haget, judicial police chief in Monaco, where the gang struck twice last year.

"No fortress scares them," he told Le Figaro.

Last year, wearing mask and in black suits, eight gangsters rammed two limousines through the front window of a luxury shopping mall in Dubai to break into the Graff jewellers. The whole operation took 90 seconds and the gang escaped with 11 million dollars in watches and gems.

Diamond District jeweler behind two massive gem heists
by Chas Smith, Alison Gendar and Thomas Zambito
New York Daily News
December 8th 2008

A Diamond District jeweler staged two massive gem heists and was plotting a third robbery when he was busted, Manhattan federal prosecutors say.

Brian Greenwald, 37, and 11 others were charged in the bungled robbery of $1 million in jewels from a FedEx truck five days before last Christmas.

Thieves were forced to abandon their bounty on a Brooklyn street when a bumbling team of hijackers couldn't figure out how to detach six cargo containers from the floor of an 18-wheeler they stole from its driver at gunpoint.

Prosecutors also say Greenwald enlisted a pair of armed bandits dressed as FedEx workers to rob his Fifth Ave. business of nearly $5 million in valuables in 2005 so he could collect the insurance, prosecutors say.

In the 2005 heist, thieves busted into the store at 580 Fifth Ave. off W. 47th St. and bound five employees with plastic handcuffs before running off with loose jewels tossed into duffel bags.

Greenwald hasn't been charged with that crime, but his involvement is spelled out in an affidavit FBI agent Michael Zuk filed in Manhattan Federal Court.

Zuk said city cops became suspicious of Greenwald in the 2005 robbery because he showed little emotion for someone who had just lost a small fortune.

"The officers found Greenwald to be unusually calm for the victim of an armed robbery," Zuk wrote. "The officers concluded that his version of events was not credible and his demeanor was suspect."

Greenwald was being held in a Brooklyn federal lockup following his Friday arrest.

Court papers say he failed two lie detector tests and refused to take a third. Greenwald's insurer has refused to pay the claim for the 2005 robbery.

"He is totally innocent of all these charges," said his lawyer, Murray Richman. Greenwald is separated. His wife and two children live in Brooklyn.

The feds say Greenwald and the others were plotting a third heist Thursday night. A witness who participated in the bungled 2007 robbery tipped FBI agents to the plot.

In the 2005 robbery, thieves used company identification cards that belonged to defendant Hector Rivera to gain access to Doppelt & Greenwald on the sixth floor, prosecutors say.

The feds say Rivera bragged to others that he worked for "Jews" who hired him to collect debts.

The FBI said "Rivera acted as Greenwald's enforcer and was used for fear and intimidation."

"Inside jobs don't happen often, but when times get tough people get desperate," said Robert Fabrikant, who owns a jewelry store next door to the site of the 2005 robbery and has spent 53 years working in the Diamond District.

Austrian police recover stolen ruby worth $4 million
Associated Press
Nov. 6 2008

Authorities in Austria say they have recovered a stolen, uncut ruby known as the "Prince of Burma" worth more than US$4 million.

Austria's federal criminal investigations bureau says the ruby and other jewels were recovered and two men and a woman arrested in a raid Tuesday in the southern town of Villach.

All three are suspected of stealing the ruby, along with diamonds and other gems, from a German jewelry dealer in Milan, Italy, in August. Police say the dealer, identified only as a man from the German city of Idar-Oberstein, was tricked into going to Milan by the female suspect. Investigators say the man was seriously injured by a car during the theft. Police put the total value of the stolen jewels at US$4.5 million.

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Burma In The News

Burma: Ruby Ban Likely to be Undermined
Financial Times
Tuesday, 18 November 2008

In the western Thai town of Kanchanaburi, Kimnigt Sirigpuksa opens a purse and rolls out red stones.

With a beaming smile, the jewellery shop owner says they are uncut Burmese rubies. "I can get some others if you want," she says.

Verifying her claims is difficult, but that is the task of US customs officials following sanctions imposed by Washington on Burma and its ruling military junta.

In theory, the ban, which US officials began enforcing in October [2008], should have a significant impact on the trade in gemstones, particularly rubies, since Burma is the world's largest producer. In practice, however, some jewellers and traders see Washington's clampdown as futile.

The scepticism is prevalent in Thailand, the world’s largest trading centre for coloured gems. From his office on Silom, the Bangkok road that is a centre for gem traders and jewellers, Somchai Phorchindarak, chief executive of the Bangkok Gems and Jewellery Fair, says the US is missing its intended target, punishing instead small Burmese miners and farmers who search for gems, and the cutters and manufacturers who turn them into jewellery abroad.

Still, Mr. Somchai says the 1,500 companies in his association, of which 90 per cent are exporters, have to follow Washington's demands and stop dealing with Burma. "We have a good reputation and don't want to take any risks," he says. Such pre- occupations have prompted some luxury brands, including Cartier and Bulgari, to shun Burmese stones ahead of the US sanctions.

Burmese gems are still sold by leading auction houses and luxury retailers. In private, many argue that Burma's importance to the gem industry is too long-standing to be halted by the US. "There are simply too many stones from Burma already on the market, too many trading channels, both legal and illegal, for this to stop," says one trader.

Burma is a world leader in high-quality jade and rubies and developing alternative markets could raise new ethical problems, some experts warn. Emmanuel Ouachée-Feldmann, an independent expert, voices concerns about Tajikistan, where rubies are mined near the Afghan border. "To avoid Burmese stones, we are going to help boost the value of gems that might well already be controlled by Islamic extremists," he says.

Ronald Abram, whose eponymous business is one of Asia's leading jewellers, also draws a distinction between African blood diamonds and Burmese rubies. "All the very important rubies come from [family] vaults," he says. "When it comes to blood diamonds, it's our responsibility and we know what's happened. Those [Burmese] generals are dictators but nobody has proven to me that they butchered people for the rubies."

The biggest challenge for the US ban is likely to be its enforcement. While the diamond industry has put in place the so-called Kimberley Process to track where diamonds are mined, following a public outcry over diamond-funded wars in Africa, no such system exists for coloured stones.

"There has to be a proper and new process of certification," says an executive of Thien Po, a Thai exporter of jewellery, 60 per cent of which goes to the US. "This ban will just make the trading of the gemstones more difficult to control."

In the meantime, there are only a handful of laboratories worldwide with the testing facilities to determine the origin of rubies.

But the sanctions have won over some in the industry. Jewelers of America, a trade group for retail jewellers, says customer needs can be met without Burma. "While Burma is traditionally the home of the finest rubies, there are several other ruby sources," says the group.

Gem traders to fight Burma ban
Radio Australia
October 30, 2008

The world's gemstone traders have decided to fight back against a new US law banning the sale of Burmese rubies and sapphires.

The new law, which came into effect this week, makes it illegal for American gem dealers to buy Burmese products - even if the stones have been cut, polished and re-traded from a third country.

Previously the law banned gems bought directly from Burma but not those traded via other countries.

Dave Mathieson from Human Rights Watch told Radio Australia that closing the legal loophole was a small but important step.

"In terms of monetary value it's probably not huge, but in terms of symbolic value and the fact that these counter-measures are in place and being tightened up, it is important because it sends a signal to the Burmese military government and their business associates that abusive production of gems and other precious metals won't be accepted into the United States," he said.

But the International Coloured Gemstone Association, which represents 600 traders in 40 countries, describes the law as "well-meaning" but "misguided".

"The huge concern I have and many other people in the industry [have] is that this was targeted to help the people of Burma and in fact there was little or no collateral damage study undertaken and they've actually forgotten about the very people they were trying to help," said Andrew Cody, the association's president.

The production of opium poppies in Burma has decreased over the last decade, but some farmers are choosing to go back to the lucrative drug trade.

However, Dave Mathieson from Human Rights Watch disagrees with the gem traders' argument - that those at the bottom of the industry will be hardest hit.

"That's really not the case, because a lot of the miners around Mogok and other places inside Burma get paid appallingly anyway, so they never see any of the top end profits of the trade," he said.

"And the small traders, the ones that actually do mine and bring some of the stones out, those guys don't actually make that much money and these measures don't affect their low level sales."

Since the 1960s, Burma has held annual gem sales and at the trade fair earlier this month, more two thousand dealers spent an estimated $US175 million on Burmese gems.

Human rights groups say this money funds Burma's repressive military, but Andrew Cody says only around 5 per cent of the profits from gemstones filters back to the Burmese regime.

Jade and gem sale earns Myanmar US$175 million
The Associated Press
October 18, 2008

YANGON, Myanmar: Myanmar has earned more than 130 million euros (US$175 million) from its latest government-sponsored sale of gems, despite a U.S. ban on their import, an official said.

Most of the revenue from the 13-day auction was earned from the sales of jade, which fetched more than 128 million euros (US$172 million). Gemstones and pearls were the other items offered.

An organizer of the gems emporium, speaking on condition of anonymity because he is not authorized to release information, said Friday that 2,648 gem merchants participated from nearly a dozen countries, including China, Thailand, Japan and Canada.

In July, U.S. President George W. Bush signed legislation banning the import of gems from Myanmar, which already was the voluntary policy of retailers such as Tiffany's and Bulgari.

It is one of several economic sanctions Washington has applied to Myanmar's military government because of its poor human rights record and failure to hand over power to a democratically elected government.

U.S. officials said at that time that Myanmar has been evading earlier gem-targeting sanctions by laundering stones in other countries before they are shipped to the United States.

Myanmar gem sellers say the sanctions have little impact on their business because they rely on Chinese and Thai gem merchants, who are the major buyers.

The largest contingent at this latest sale was the more than 2,200 gem merchants who came from China, which is the main market for Myanmar jade. The second largest contingent of more than 70 gem merchants were Thais, who usually dominate the gems and jewelry bidding.

Organized by the Mines Ministry, the events are major revenue earners for Myanmar - one of the biggest jade and gem-producing countries in the world. Myanmar has held gem emporiums since 1964, and organizers launched a midyear sale in 1992.

Because of U.S. economic sanctions imposed on Myanmar in July 2003, which froze all U.S. dollar remittances to the country, international business transactions including the gem sales are done in euros.