(IMI) OVERVIEW OF ARMENIA'S DIAMOND-CUTTING

UNCLAS SECTION 01 OF 03 YEREVAN 002320

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TAGS: KTDB BBSR BEXP BTIO AM
SUBJECT: (IMI) OVERVIEW OF ARMENIA'S DIAMOND-CUTTING
INDUSTRY


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SUMMARY
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1. This cable reviews the diamond-cutting industry in
Armenia as of October 2004. It includes an overview and
contact information for major diamond-cutting enterprises
and a discussion of the possible advantages in Armenia for
foreign investment. End summary.


2. Diamond processing has been one of the most rapidly
developing industries in Armenia. By value, diamonds are
now Armenia's largest export and import. In value-added
terms the industry's production has risen from USD 89
million in 1999 to USD 250 million in 2003. All the large
diamond factories have capacity for expansion, and are open
to any foreign cooperation that can help them procure
supplies of raw diamonds, the industry's limiting factor.


3. Before independence, Armenia boasted one of the seven
large Soviet diamond-cutting plants. Armenia still has a
generous allowance of raw diamonds under Russia's export
quota system, but the rising price of Russian diamonds has
meant that the quotas have gone unfilled while diamond
processors have turned to other suppliers and agreements
with western firms.


4. Currently, there are about 50 companies active in
diamond cutting in Armenia. They can be divided into three
groups:

-- Foreign-owned companies that ship their own diamonds to
Armenia for processing (Shoghakn, Arevakn, Lori, and
Diamotec Factories);

-- Companies that buy raw diamonds from their own suppliers
and sell the finished product through their own distribution
channels (Diamond Company of Armenia); and

-- Locally-owned companies that polish diamonds on a fee-
for-service basis for foreign customers who supply the uncut
diamonds and take back the finished products (Andranik,
Aghavni, Dzoragyugh factories).


5. Armenia's largest diamond factories are those wholly
owned by foreign firms who are both the primary supplier and
client. Belgium's Arslanian Cutting Works, owned by Haik
Arslanian, an ethnic Armenian businessman from Antwerp,
employs about 400 diamond cutters in its Lori factory that
produces USD 75 million in diamonds annually. The Belgian
company Tashe operates a smaller diamond cutting plant,
Arevakn, in the village of Nor Hajn, Kotayk province. In
the same village Russian-Israeli businessman Lev Leviyev
owns a processing plant that employs nearly 1,500 cutters
and exports its entire product for sale in Israel. The
Belgian luxury jewelry company Rosy Blue owns and supplies
the Diamotec polishing company, which employs 700 diamond
cutters in the town of Talin, Aragatsotn province.


6. The Diamond Company of Armenia (DCA) produces USD 30
million of cut diamonds annually. Unlike the other large
diamond factories, DCA is independently owned and finds its
own suppliers of raw diamonds and controls the distribution
of its product. DCA employs 1,000 people.


7. Several smaller Armenian firms (namely, the Andranik,
Aghavni, Dzoragyugh factories) finish diamonds and other
gems on a fee-for-service basis. For interested investors,
Armenia's diamond industry offers the following advantages:

- Availability of inexpensive, highly qualified diamond
cutters;
- Availability of modern equipment at the existing plants;
- No taxes on imports of raw materials and exports of
finished products;
- No taxes on repatriation of profit; and
- Government support of the industry aimed to facilitate
new investment.

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MAJOR DIAMOND CUTTING COMPANIES
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Aghavni
Arshak Mkhitaryan, Director
Nor Geghi village
Kotayk province
Tel: (374-24) 21-434

Andranik
Vladislav Tovmasyan, Director
Nor Hajn village
Kotayk province
Tel: (374-24) 42-650
Fax: (374-24) 42-667
E-mail: info@diamonds.am
Website: www.diamonds.am

Arevakn
Vardan Andreasyan, Director
2 A. Harutyunyan Street
Nor Hajn village
Kotayk province
Tel: (374-24) 41-067
Fax: (374-24) 41-068

Diamond Company of Armenia (DCA)
Gagik Abrahamyan, President
1 Ayasi Street,
Yerevan-82
Tel: (374-1) 589-993
Fax: (374-1) 543-916
E-mail: dca@arminco.com
Website: www.dca.am

Diamotec
Edgar Hovhannisyan, Director
Town of Talin
Aragatsotn province
Tel: (374-49) 02-282

Lori
Grikor Shahnazaryan, Deputy Director
Nor Hajn village
Kotayk province
Tel: (374-24) 23-7ll
E-mail: grikor@lorinor.am

Shoghakn
Sergey Gasparyan, Managing Director
Nor Hajn village,
Kotayk province
Tel: (374-1) 282-592
Fax: (374-1) 281-769
E-mail: diamonds@shoghakn.am
Website: www.shoghakn.am

Yerevan Jewelry Plant
Emil Grigoryan, President
12 Arshakunyats street,
Yerevan-23
Tel: (374-1) 525-321
Fax: (374-1) 525-713

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KEY CONTACTS
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Ministry of Trade and Economic Development of Armenia
Gagik Mkrtchyan, Head of Diamond Cutting Industry Department
5 Mher Mkrtchyan Street,
Yerevan-10
Tel: (374-1) 566-198
Fax: (374-1) 566-198
E-mail: g_mkrtchian@yahoo.com

Association of Jewelers and Diamond Manufacturers of Armenia
Emil Grigoryan, President
Arthur Gyulnazaryan, Managing Director
12 Arshakunyats street,
Yerevan-23
Tel: (374-1) 563-893
Fax: (374-1) 544-202
E-mail: goldjew@infocom.am

GODFREY