This is the first installment in a two part series. We start by surveying the financial underpinnings behind the current Chabad expansion in Russia, what is often synonymous with Lev Leviev's money.
Leviev and Sharon
Meet De Beers: Using its monopoly, De Beers has created an artificial scarcity of diamonds, thus keeping prices high. The modern tradition of diamonds as a part of engagement in many cultures has been largely created by De Beers through an amazingly effective advertising campaign started in 1939. The "A Diamond is Forever" campaign not only convinced the public that the only suitable gift for engagement is a diamond, but also served to limit the market in used diamonds.
Meet Lev Leviev: Forbes Magazine writes about the man who Cracked De Beers: "Leviev grew up in the Uzbek capital of Tashkent. Though under communism his [buchari] family was committed to the Chabad-Lubavitch movement, and all the males, Leviev included, learned to perform ritual circumcisions in secret. Leviev's father Avner was a successful textile merchant and a collector of rare Persian carpets. After seven years of waiting, the family emigrated to Israel in 1971, having converted their wealth into $1 million in rough diamonds, which they smuggled out of the country. But when they tried to unload them in Israel, they were told the diamonds were of inferior quality, worth only $200,000. Leviev, 15 at the time, vowed to right the wrong. Over his father's objections, he left yeshiva and a life of religious education to take up diamond-cutting."
"He opened his own cutting factory in 1977--when speculation in the burgeoning Israeli diamond market went unchecked. Most cutters held inventory, betting on ever-rising prices. When the market collapsed three years later, banks stopped extending credit and many cutters went bust. Leviev hadn't borrowed against his inventory and was in good enough shape to expand to 12 small factories over the next five years. Scrambling to find enough rough diamonds, he flew frequently to London, Antwerp, Johannesburg and Siberia. He also adapted laser technology and acquired cutting software--a revolutionary innovation at the time--to capture more value from his precious supply. Later his cutters could produce digital 3-D models of various diamond cuts, taking into account imperfections, size, weight and shape before touching the stone. "Part of his genius," says Charles Wyndham, cofounder of International Diamond Consultants and a former director of De Beers' selling arm, "was marrying cutting-edge technology to exactly what the market wanted."
Meet Arcadi Gaydamak: "Born in Moscow in 1952, Gaydamak was 20 when he became one of the first Jews to immigrate to Israel from Leonid Brezhnev's Soviet Union, a journey that earned him two audiences with then Prime Minister Golda Meir. But life in Israel was difficult and not to his liking, he said, and he left for France six months later, with three francs in his pocket. Gaydamak said his subsequent rise to riches was due to "quite a bit of luck."
Arcadi Gaydamak
"Having no formal education, Gaydamak worked initially as a gardener and a bricklayer. In 1976, he opened a translation bureau near Paris, servicing Russian commercial delegations visiting France, and made contacts at a number of French companies. By 1982, Gaydamak Translations was a highly successful business, and he opened a branch in Canada."
"As East Europe's old regimes crumbled in 1989, Gaydamak's financial genius found its true expression. He diversified and expanded into more lucrative import-export trades with the former Soviet Republics in coal, meat, wheat and, finally, weapons."
Gaydamak holds French and Israeli passports in addition to diplomatic Canadian and Angola passports. He travels in a capacity of a representative of the government of Angola.
Although Gaydamak is currently wanted man in at least four European capitals, he denies all allegations and points to the fact that he was never charged. Just when he hoped that the arms scandal faded from memory his name surfaced again less than a year ago in connection with the money laundering investigation that rocked Bank HaPoalim.
(I am not able to list here all of the Gaydamak�s heroics. His endeavors make your head spin. It's interesting that many people of that type, including Gaydamak and Leviev never finish a formal education. They are truly a force of nature, their energy can't be contained in a classroom. Leviev is predictable though but Gaydmak is off the wall creative Ashkenazi business genius. It is written elsewhere that "he returned to Judaism". What a fascinating man. I hope to meet him one day.)
UNITA soldiers
Meet Angola: Portugal granted Angola independence in 1975. The country engaged in a protracted civil war. A former Marxist regime of Jos� Eduardo dos Santos supported by USSR and Cuba fought rebels of UNITA supported by USA and South Africa. As many as one million people have died in the fighting since 1975. Treaty was signed between Jonas Savimbi of UNITA and Jos� Eduardo dos Santos but fighting erupted again in the late nineties. The treaty prohibited Angola from purchasing arms. At that time Arcadi Gaydamak allegedly sold Russian free for all post perestroika arms to Angola in exchange for oil. This is when Gaydamak joined the billionaires club.
Jos� Eduardo dos Santos, Angola�s President (fluent in Russian due to his Marxist roots) and UN�s Anan with the wives.
Almost at the same time De Beers withdraws from Angola while allegations of "blood diamonds" financing the civil war and even the terrorist activities of Al-Qaeda are being widely reported. (see BBC NEWS: Al-Qaeda 'traded blood diamonds'). This was the time when Angola sought to open new distribution channels for it�s diamonds. Similarly Russia was eager to get out of De Beers marketing agreements. Lev Leviev stepped in to provide distribution channels with a bold challenge to the mighty De Beers.
Mineweb reports: "Gaydamak and Leviev have been partners, and according to Gaydamak, he introduced Leviev to his now lucrative diamond mining and diamond trading operations in Angola. He told Ha'aretz he had "opened the gates of that country [Angola] for Leviev and helped him get a monopoly on its diamond exports."
" International diamond industry sources report that Leviev has had close links with the marketing of diamonds by the Angolan government, particularly Ascorp. In 1999 and 2000, the government and Isobel dos Santos, daughter of Angola's president, Jose Eduardo dos Santos, set up the current marketing scheme, when they purged the allegedly corrupt management of Endiama, the state diamond company; and established Sodiam as the sole buyer of all diamonds produced in the country.
Sodiam and Leviev then established Ascorp to aid Sodiam in the export marketing of diamonds. Ironically Endiama chief fired for alleged corruption became the chairman of Ascorp."
Jonas Savimbi, UNITA leader (killed in 2002)
Meet ALROSA: Russian diamond monopoly, it naturally deserves a few hair raising volumes in it�s own right. But what is pertinent here is that ALROSA partnered with Leviev in Angola and Russia.
Meet Dan Gertler: An Israeli competitor of Lev Leviev. Dan Gertler was making inroads into the diamond resources of the Democratic Republic of Congo (formerly Zaire). He was arranging training of the Congolese army by the Israeli military experts in exchange for influence. Gertler's companies already control more than 80-percent of the rough produced for sale by the government of the Democratic Republic of Congo.
Meet Putin in Israel: Behind the scenes drama during the last months Putin's visit to Israel was a shift of the Russian diamond policy away from Leviev. Mineweb reports Alrosa switches diamond marketing: "Sources close to the company suggest that in cleaning up Alrosa's financial operations, the federal authorities believe that Leviev's involvement in Alrosa's diamond marketing arrangements should be curtailed."
Reuters photo by Grigory Dukor
In a second article Putin's Israel trip to accelerate diamond revolution Mineweb reports: "The word in Angola is that Lev [Leviev] is more or less out of the buying game since March,�"
�Moscow industry sources believe that Alrosa views Gertler as a potential rival to Leviev in Israel, as well as worldwide. "Leviev has positioned himself in Russia," said a source close to the Alrosa supervisory board, �as the main spokesman of the interests of Israeli business. Simultaneously, in Israel he promotes his ostensible connections to the Kremlin. Separately, he is trying to make himself an intermediary, not only in bilateral business, but also in bilateral politics. However, the Kremlin does not require intermediaries, and in Moscow Leviev�s activities appear excessive, and are causing irritation."
Israeli Globes published an extensive article on this subject. Diamonds aren't forever, Lev Leviev's grip on Russian and Angolan diamonds is loosening:"...top diamond merchants sat at the same table with Putin at the state dinner President Moshe Katsav held in Putin's honor. Someone apparently made the innocent mistake of thinking that people working in the same industry have the same interests. That is how Dan Gertler and Lev Leviev found themselves sitting at the same table.
This came a day after Alrosa CEO Alexander Nichiporuk (who sat between Gertler and Leviev at the state dinner) announced a new partnership with Gertler to export $250-300 million worth of diamonds a year from Angola's Katoka mine, apparently at the expense of Leviev."
Moshe Schnitzer
"Sitting at the same round table was former Israel Diamond Exchange president Moshe Schnitzer and his grandson Dan Gertler...Next to them sat Nichiporuk, a powerful man and a member of Putin's inner circle, with silver hair and an immaculate Western suit. New Diamond Exchange president Avi Paz sat next to him, then Rabbi Lazar and Leviev, to complete the circle...The result was that the atmosphere at the table could be cut with a knife.
In an interview with "Globes" earlier, Nichiporuk had removed any doubt that the balance of power had changed, and that Gertler was now Alrosa's main partner in both Angola, and in Alrosa's strategic target - the Democratic Republic of the Congo (Kinshasa)."
Alexander Nichiporuk
"Poker-faced, he carefully avoided commenting on the new balance of forces Alrosa created between Leviev and Gertler. Nichiporuk did say, however, "We were partners with Leviev for many years, as well as with others," adding, "We want different members of the Israel Diamond Exchange as our partners. It's not good to create monopoly relations."