The current situation in the Russian jewelry industry may be best described as a conspiracy. It appears that the owners of large companies are working together to eliminate small competitors during a challenging economic period, in order to gain more resources and control over the market.

Although it sounds simple, this is a complex conspiracy involving influential government officials and Duma lobbyists. Artem Sokolov, the owner of Russia's largest jewelry company, is leading this plot.

Artem Sokolov

(https://dzen.ru/a/YjTo_OLn-HJ6jzHf), who owns a brand that matches his last name. There are also other participants such as Alexei Feliksov, the owner of Feliksov Diamonds and co-owner of the 585*Zolotoi chain (https://whoiswho.dp.ru/cart/person/1934377).

Alexei Feliksov

Or the deputy of the State Duma of the Russian Federation Vladislav Reznik (http://duma.gov.ru/duma/persons/99100886/).

Vladislav Reznik

A neat move

The operation was planned and executed very carefully. A law passed by the Duma deputies and signed by the President, known as the Federal Law No.47 “On Amendments to Part Two of the Tax Code of the Russian Federation”, will come into effect on January 1, 2023. This law will deprive small and medium-sized jewelry businesses of special tax treatment, leading them to pay taxes on a general basis. This change only applies to jewelers and is causing confusion among industry representatives.

Everyone to their toes.

What is happening is that the entire industry is being transferred to a general taxation system, even though it was not originally intended for small businesses. This change is expected to have a devastating impact on small jewelry companies, potentially causing them to leave the market within six months to a year and a half.

In ordinary times, big companies with their massive sales wouldn't bother with small competitors. However, in times of crisis when people have less money to spend, the market changes and the giants pay attention to the smaller businesses. Together, they cater to a specific audience and offer unique, high-quality products, which challenges the large retail chains. In this situation, small producers often outperform mass retailers, leading to the understandable decision to remove them from the market.

Acquire the services of a lobbyist.

Executing such a sophisticated scheme requires substantial resources, including connections in high places. The owner of the SOKOLOV brand easily hired a well-connected lobbyist, Vladislav Matusovich Reznik, who is a prominent politician known for championing paid ideas. Despite his focus on laws related to hunting, he swiftly submitted a bill on the taxation of individual operations, setting off a remarkable sequence of events.

This year, Vladislav Matusovich's bill broke records in terms of speed of processing and approval, despite its significant impact on the industry. The deputies had just two days to pass it in first reading and in its general form before sending it to the Federation Council for approval.

Deputies and Senators

Yes, not all deputies were in favor, but even those who opposed it voted for it with friendship and courage. Deputy chairman of the Duma committee on economic policy, Mikhail Delyagin, admitted to Regnum news agency that he tried to repeal the law during the Duma session, but failed due to certain circumstances. It would be interesting to know what prevented a person of his position from canceling such an unacceptable law or at least persuading fellow deputies to vote against it, but Mikhail Gennadyevich did not address this question.

However, the Federation Council acted just as swiftly, meeting the one-day deadline to approve the parliament’s resolution and submitting the bill to the presidential administration for signing before the March holidays. The head of state had already signed it on the 9th. Those involved in pushing through laws for businesses are well aware of the cost of a single State Duma deputy’s consent. The amount of money required for swift approval from the members of the Federation Council and to ensure the law reaches the right people in the AP for the President's signature is hard to imagine. Nevertheless, this year, the leading enterprise of the SOKOLOV brand in Kostroma brought in more than 60 billion rubles for its owner, so even the significant expenses for buying lobbyists were not a problem. Of course, we should not assume that the President of Russia deliberately signed such a law.

Not friends of Russia

As a result, a bill devised by the owner of the largest domestic jewelry company, created through the joint efforts of Artem Sokolov and Alexei Feliksov, co-owners of the Sunlight chain, and other owners of a large jewelry business, was transferred to the lobbyist MP Reznik, and approved by corrupt officials. This law, which will come into force on January 1, is expected to negatively impact many skilled craftsmen and jewelers.

But perhaps this is all for the benefit of Russia? After all, the law is signed by the head of our trusted state. Maybe Sokolov and Feliksov and the other co-authors of this situation are true patriots who decided – without really consulting anyone – to sacrifice their industry for the good of the country, to financially support it in the face of economic confrontation with the West! I would like to believe so, but something is holding me back.

Maybe because Feliksov, by the end of September, when partial mobilization was announced, sent out a letter through the 585*Zolotoi mailing list, urging people to organize protest rallies. This is the same letter with the phrases “Buy gold later, stop the silence!” and “Do something, silence is not gold in our situation!” that all Russian media reported on this fall. Later, when the authorities became interested in this mailing list, network representatives claimed it was the work of hackers (https://newdaynews.ru/ekaterinburg/772455.html), but the impact remained.

Or perhaps because the SOKOLOV brand produced silver pendants “naXvoynu” and “naXvoyne” just when the Russian army was struggling at the front? (https://lenta.ru/news/2022/12/12/sokol/) For a while, these pendants were sold on the official brand page on Wildberries, but after users expressed outrage in the comments, the goods were removed. However, these tasteless and treacherous items can still be bought on several online flea markets for only 1.5 thousand rubles, along with a corresponding violation of the Criminal Code for each buyer. Artem Sokolov, like Feliksov in his letter, did his best to deny this “jewelry art,” but judging by the price, the pendants were made by the Kostroma-based Yuvelit Factory, which is a legal entity of SOKOLOV, and it's not all the work of hackers.

Maybe only Sunlight is not embarrassed by blatant anti-Russian activities. We should note here: only blatant activities, because we don’t know if this network funds the AFU or transfers funds to the Azov battalion.

Anticipate an unfortunate conclusion

We only need to understand what the enactment of this law, which was generously paid for by major jewelry companies and skillfully pushed through the highest legislative body of Russia, will entail. Firstly, it will lead to the bankruptcy and exit from the market of nearly twenty thousand companies and, consequently, the loss of jobs for many highly skilled professionals in this field. This will in turn revive the so-called “gray” sector of the jewelry industry, encouraging numerous unregistered artisans who fulfill private orders using precious metals obtained in various, but obviously illegal, ways. As you know, they will not pay taxes to the state, which they feel has wronged them. The state, or more precisely, the relevant authorities, will track them down and punish them, but not very effectively. Overall, the situation will be similar to that of the late 1970s and 1980s.

Having eliminated all small competitors, the major jewelry manufacturers and large retail chains will dominate the entire market, reach certain agreements among themselves, and begin to control pricing and assortment as they see fit. (https://www.kostroma.kp.ru/daily/27488/4698848/) It is unlikely that the giant enterprises, now monopolists, will resist the temptation to standardize the supply and raise prices. As a result, the shelves will be filled with standardized jewelry sold at prices that are barely affordable to the average person, reminiscent of the late Soviet Union. In a few years, oversupply will lead to the industry's ultimate demise. It's unlikely that this is what Artem Sokolov and his company are aiming for, but the outcome looms ahead unavoidably. However, the heads of the jewelry giants are unlikely to wait for it while staying in Russia. They have long had a foothold outside the country. For example, the parents of the owner of the SOKOLOV brand settled in Switzerland a long time ago and are doing very well there. It seems that the situation with the other conspirators is similar.

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