Yesterday this column wrote about how to curtail President Putin’s profiteering as he ravages Ukraine -- how to bottle up his gas and oil within Russia, and how to prevent lucrative leaks beyond his borders. Doing so is immensely difficult, and means courageous belt-tightening throughout Europe. But gas and oil provide 60 percent of Russia’s GDP, so anything that we can do to hamper such sales will eventually cripple Putin’s military machine.
Yesterday, we also wrote about cutting his and Belarus’ income streams by boycotting potash, wheat, corn, and other commodities that the invaders of Ukraine sell abroad. We described what the loss of those supplies will mean across the globe. The overall picture is hardly encouraging, but the only better near term remedy is removing Putin. It is his war after all, not a combat either Russia or even its generals have wanted.
Today, we deal with additional chambers of the Russian moneymaking machine – its export of precious metals, uranium, and coal:
Nickel: Russia produces about 30 percent of the world’s nickel. But by far the biggest exporter is Indonesia, with about 62 percent of the world’s sales. Such disparate countries as Canada, Madagascar, New Caledonia, the Philippines, South Africa, Zambia, and Zimbabwe also mine the metal, important for galvanizing steel, magnets, batteries, and many other industrial uses. Washington should lead the world in boycotting Russian nickel; preferring nickel from many other sources will help to deny Russia income from that metal and, especially, from the skyrocketing rises in nickel prices that have occurred because of the invasion of Ukraine and fears of scarcity. The global price of nickel has quadrupled in the past ten days to $48,000 per pound. (A Chinese firm now controls nearly all of Zimbabwe’s nickel.) Again, barring Russian nickel is an unavoidable restrictive exercise for the rest of us, especially major industrial countries. But it needs to be done.
Palladium: Palladium, employed in catalytic converters -- a target today in America’s cities of thieves who steal converters from unsuspecting car owners – is another Russian metal in short supply. Now selling at almost $3000 per ounce, palladium is also used by dentists, jewelry makers, and in making aircraft spark plugs. Russia mines 30 percent of the world ‘s palladium, South Africa another 30 percent. Much of Russia’s palladium goes to China, but at least half has traditionally been sent to auto manufacturers in Europe and the United States. With those supplies cut off, and rhodium (also mined in Russia and South Africa and also used in catalytic converters) in equally short supply, the costs of automobiles will rise and add to inflation levels everywhere. Platinum can be used in many applications in place of palladium, but that switchover will take time and add to auto manufacturing costs. To confront Russia’s invasion of Ukraine, such sacrifices are both essential and unavoidably painful.
Diamonds: American consumers purchase 50 percent of the world’s diamonds. Just as jewelers learned to keep conflict diamonds out of American stores, so they must now stanch the flow of Russian diamonds. That should not be difficult, although Washington needs to articulate why such restrictions are going to be in place, and soon.
Russia earns $3 billion a year from diamonds, according to Ian Smillie, a leading Canadian expert on the global trade of such precious stones. Botswana, the globe’s leading producer of gem diamonds (as opposed to industrial diamonds), earns as much as Russia yearly from the polished stones, and now wants to move the international center of the diamond trade to its dusty southern African capital, keeping the headquarters of the Kimberley Process (which monitors licit and illicit diamond flows) away from Moscow, Beijing, or Vienna. Washington should hurry and support Botswana. “We have the most to lose if diamonds are badly managed,” Botswana’s President Mokgweetsi Masisi said last week, referring to Russia’s attempt to subjugate Ukraine and to turn a large part of the globe into its enemy.
A public company called Alrosa mines 90 percent of Russia’s diamonds. It is one-third owned by the Russian government, with a large part of the rest owned by a prominent oligarch, Sergei Sergeyevich Ivanov. His father, says Smillie, is a close ally of Putin. Toward the end of February, Washington restricted Ivanov’s travel and Alrosa’s ability to raise money legitimately.
This is a start but, Smillie says, Washington (and European capitals) should also carefully monitor the movement of diamonds and diamond proceeds through Antwerp, Dubai, Tel Aviv, and Mumbai so as to exclude Russian-sourced diamonds. Those are the major global cutting and selling centers. (In India, Mumbai is joined by Surat and Ahmedabad; and the business there is almost entirely in the hands of Jains.)
Eighty percent of all rough diamond s are traded in Antwerp, so Belgium should immediately close Alrosa’s office in the city and prevent its diamonds from being dispersed elsewhere. The Indian centers are equally important because after rough diamonds are sorted and sold, 70 percent end up in cutting and polishing centers there. It behooves Washington to lean on New Delhi to prevent diamond profits reaching Putin’s war effort. India is making an effort to bypass the SWIFT banking system controls by trading rubles for rupees directly. Washington needs to help India do better.
Alrosa also mines diamonds in Angola. That needs to be stopped. Zimbabwe is another source of diamonds, some falling into the Alrosa net. So those proceeds, and the clandestine shipping of diamonds from Zimbabwe to Dubai, and then on to India, needs to be curtailed.
Uranium: Although Russia is only the sixth largest producer of uranium in the world, after Kazakhstan, Canada, Australia, Namibia, and Niger, it supplied 16 percent of U. S. overall demand in 2020 but 50 percent of all fuel for U.S. power reactors. That is presumably why President Biden did not ban Russian uranium imports when he declared that the U. S. would purchase no more Russian petroleum. But as much as the power industry influenced that decision, now is the time nevertheless to end imports from Russia. Rusatom, its dominant company, is owned by oligarchs close to Putin, and possibly by Putin himself. So it makes sense for the Duke and Constellation Energy Corporations to end purchases from Rosatom.
Coal: Twenty-five percent of Russia’s massive coal exports go to China, but South Korea, Japan, and Taiwan together received almost as much. Germany, Belgium, and the Netherlands also rely on Russian coal for more than 60 percent of their heating and electrical generating needs. The coming of spring will help reduce that demand, but denying Russian earnings from coal in Europe will continue to be as difficult for European residents and customers as reducing gas and oil purchases. Yet as Ukrainians suffer, so Europe (and North America) need to urge their governments to buy as little energy sourcing as possible from Russia, the better to compel Putin the malicious marauder to see his income and war tap run dry. Armies are cash cows and Putin’s beasts need to be starved.
That is least all of us outside of the war zone can do. But even if we stretch ourselves and Europeans do the same, Putin does not want to hear the message. So additional ways must be found to end his czarist-like reign. That is what the leaders of the free world need to be discussing – earnestly and swiftly.
Bob – I hope this important information is also going directly to US government agencies and to our Congressional delegation (as back-up). // Mike Alexander