Why is the jeweler Sokolov burying the industry?
What is now happening to the jewelry industry in Russia is difficult to choose any other definition than conspiracy. A conspiracy organized by the owners of large enterprises in order to eliminate as many small competitors as possible during an economically difficult and crisis period, to free up more resources and opportunities for themselves and to redistribute the market in their own way.
Despite how simple this sounds, we are talking about a serious multifaceted intrigue that involves both influential government officials and Duma lobbyist deputies. At the head of the plot is the owner of Russia’s largest jewelry company Artem Sokolov
(https://dzen.ru/a/YjTo_OLn-HJ6jzHf), who owns the brand that coincides with his last name. However, there are plenty of other participants. For example, the owner of Feliksov Diamonds and co-owner of the 585*Zolotoi chain, Alexei Feliksov (https://whoiswho.dp.ru/cart/person/1934377).
Or the deputy of the State Duma of the Russian Federation Vladislav Reznik (http://duma.gov.ru/duma/persons/99100886/).
A neat move
It is worth admitting that the operation was conceived and carried out in the most graceful way possible. The instrument designed to kill about 94% of the jewelry industry in Russia was a law passed by the Duma deputies and signed by the President – the Federal Law No.47 “On Amendments to Part Two of the Tax Code of the Russian Federation”, which will take effect on January 1, 2023. According to its norm, small and medium-sized jewelry businesses in our country will be denied special preferential tax treatment – Simplified and Patent-based. As a result, any company operating on this market will pay taxes on a general basis, regardless of their turnover and number of employees. On the surface everything looks more than decent and can even be justified by the urgent needs of the budget of the country. The only thing confusing is that these changes concern only jewelers, but only for those who know what we are talking about. The average man, for whom the word “jeweler” is almost equal in meaning to the concept of “oligarch,” this strange situation does not cause any controversy. However, the industry representatives, so it was historically formed, habitually avoid communicating with the media and do not manage to explain anything to anybody. Everything will be, as they say, in secret and will not get any publicity. At least that was the plan.
Everyone to their toes.
What is the essence of what is going on? The point is that the general taxation system, to which the law transfers the entire industry, was not originally intended for small businesses: they would not be able to “handle” it in terms of personnel and finances. This is why a simplified and patent system was introduced for such companies, which made it possible for micro-firms with personnel of 7-15 people, sole traders, jewelry stores with only one salesperson and so on to live and develop. Transferring them onto a common basis would be simply fatal for them, and the only question is how quickly they would admit their defeat and leave the market. The only question is, – how soon. And this is not about one or two businesses – according to the Assay Chamber in Russia, about two hundred jewelry companies belong to the medium-size business, a little less than two thousand are small businesses, and another seventeen thousand or so are the micro-businesses mentioned above. And these are the ones we are going to lose in the shortest time, which market analysts estimate ranging from six months to a year and a half.
It would seem that why would industry giants, with their gigantic turnovers, pay attention to all this trivia and make any effort to remove such insignificant competitors from the market? In normal times, they wouldn’t. After all, despite the fact that only 5% of companies on this market are big business, these are the ones who make 75% of all jewelry products. But the market is responsive to changes in the economy and the political situation in the country, and in a crisis the purchasing power of the population is falling and demand is reduced and profits become smaller. This is where the “giants” remember their “little brothers. After all, all together they occupy a very and very solid ecological niche, dilute the target audience, and also contribute to the growth of the potential buyer’s demandingness, offering better quality, varied, interesting products than can be presented by the giant retail chains spread all over the country. In this respect, the mass sector always loses out to small producers, and this is the case in all industries. So the decision to squeeze them out of the market is more than understandable and understandable.
Buy a lobbyist
Another thing is that to carry out such an elegant intrigue, which we are witnessing today, you need very solid resources, and not only material ones, but we are talking about connections in the highest circles. The owner of the SOKOLOV brand has them, of course, so it was not at all a problem to hire a lobbyist deputy who was the author of the bill created in advance by representatives of major jewelry companies. In this role he was one of the most influential parliamentarians, known as a man able to become a conduit for any well-paid idea – Vladislav Matusovich Reznik, a St. Petersburg politician, elected for some reason in Adygeya, which is far from the shores of the Neva. In his conversations with the media, he calls himself a “professional legislator. However, the main thrust of his lawmaking is quite far from the jewelry theme. According to the site of the State Duma (https://sozd.duma.gov.ru/oz?b[PersonDeputy]=P6197P&b[ClassOfTheObjectLawmakingId]=1&#data_source_tab_b), most of the bills he submitted this year dealt with hunting, hunting weapons, permission to shoot red-listed animals, and so forth. Nevertheless, on March 2 of the year 2022, he submitted for consideration of his fellow deputies bill No. 80334-8 “On Amendments to Part Two of the Tax Code of the Russian Federation (On Taxation of Individual Operations). And here is where the miracles began.
Let’s not talk about the distant past, but this year the bill submitted by Vladislav Matusovich has set a real record among the others that were considered by the deputies. Not in terms of elaboration and thoroughness of expert assessment, of course, but in terms of speed of processing and approval. Despite the fact that it was a piece of legislation affecting an entire industry, the deputies had only two days to adopt it both in first reading and in its general form, and then immediately sent it to the Federation Council for approval. (https://k1news.ru/news/society/rossiyskie-yuveliry-gotovyatsya-k-pohoronam/)
Deputies and Senators
True, not all deputies liked it, but even those who were against it voted for it with friendship and bravado. Mikhail Delyagin, deputy chairman of the Duma committee on economic policy, told Regnum news agency: “Frankly speaking, I read this law in the Duma session hall, and then tried to repeal it. Due to objective circumstances, it failed. (https://regnum.ru/news/3762561.html) Of course, it would be interesting to know what objective circumstances prevented a person who holds such a position in the State Duma from cancelling a law that is obviously unacceptable, or at least from trying to convince fellow deputies to vote against it, but Mikhail Gennadyevich did not go into this question.
But if only it depended on the activity of the Duma deputies! The Federation Council worked just as quickly, meeting the deadline of one day to approve the parliament’s resolution and submitting the bill to the presidential administration for signing before the March holidays. So it turned out that the head of state had already signed it on the 9th. Everyone who, one way or another, is involved in pushing through the laws needed by business knows how much a single State Duma deputy’s consent costs. But how much money should be brought to the members of the Federation Council for quick approval, and how much money should be brought to the right people in the AP in order to slip the law for the Guarantor’s signature in time, and at the very moment when he signs the paper without looking – it’s even hard to imagine! However, only this year the head enterprise of the SOKOLOV brand in Kostroma brought in more than 60 billion rubles for its owner (https://kostroma.today/news/kostromskaya-oblast-okkupirovala-yuvelirnyj-rynok-rossii/), so even the largest expenses on buying lobbyists were not a problem for him. Of course, let’s not think that the President of Russia could have deliberately signed such a law.
Not Russia’s friends
As a result, a bill devised by the owner of the largest domestic jewelry company, created through the joint efforts of Artem Sokolov with his factories, stores and representative offices throughout Russia, Alexei Feliksov with his 585 for the general public and Feliksov Diamonds for those with money, co-owners of the Sunlight chain, This chain is constantly threatening to close almost four hundred of its stores, but still continues to take money from the consumer by selling Chinese consumer goods under the guise of domestic luxury jewelry, and the other owners of a very large jewelry business was transferred to the lobbyist MP Reznik, who loves hunting red-listed animals, and approved by corrupt officials. On January 1 it will come into force and will become, as our ancestors used to say, a death knell for a lot of real craftsmen, jewelers from God.
But maybe this is all for the good of Russia? After all, it is not for nothing that the law is signed by the head of our state, which is trusted by the vast majority of Russians. Maybe Sokolov and Feliksov and the other co-authors of this situation are true patriots who decided – without asking anyone, really – to sacrifice their industry for the good of the country, to support it financially in conditions of economic confrontation with the West! I would like to think so, but something prevents it.
Perhaps the fact that Feliksov, at the end of September, when partial mobilization was declared, distributed a letter through the 585*Zolotoi mailing list, calling for people to go out and hold protest rallies. The same letter with the slogans “Buy gold later, stop the silence!” and “Do something, silence is not the gold in our situation!” about which all the Russian media wrote this fall. It’s true that later, when the competent authorities became interested in this mailing list, the network representatives said that it was all the tricks of hackers (https://newdaynews.ru/ekaterinburg/772455.html), but the residue remained.
Or maybe it’s because the SOKOLOV brand produced silver pendants-pendants “naXvoynu” and “naXvoyne,” and at the very moment when the Russian army was having a particularly hard time at the front? (https://lenta.ru/news/2022/12/12/sokol/) For a while they were sold on the official brand page in Wildberries, but after the indignation of users in the comments the goods were hidden. However, this tasteless traitorous handicraft can still be purchased at several online flea markets for only 1.5 thousand rubles. And with it – the corresponding article of the Criminal Code for each buyer. Artem Sokolov, as well as Feliksov in his letter, did his best to deny this “work of jewelry art,” but judging by the price tag, pendants were produced by the Kostroma-based Yuvelit Factory, which is a legal entity of SOKOLOV, and there is no denying and everything cannot be written off on hackers.
Perhaps only Sunlight is not ashamed of blatant anti-Russian activities. We should make a remark here: only blatant ones, because we simply do not know whether this network finances the AFU and whether it transfers funds to the Azov battalion.
Expect a sad ending
It remains only to understand what is fraught with the entry into force of this law so generously paid for by big jewelry companies and so skillfully pushed through the highest legislative body of Russia. First of all, it will bring about the bankruptcy and departure from the market of almost two dozen thousand companies and, consequently, the loss of jobs for a great number of highly skilled professionals in their narrow profile. This situation will in turn bring to life the so-called “gray” sector of the jewelry industry, i.e. will encourage a great number of unregistered artisans who fulfill certain private orders, operating with precious metals purchased in a most diverse but obviously not legal way. As you know, they will not pay taxes to the state, which “cheated” them. The state or, more precisely, the relevant competent authorities will track them down and punish them, but not very effectively. In general, the situation will be roughly the same as it was at the turn of the 1970s and 1980s.
Having annihilated all the small-time competitors the big jewelry manufacturers and large retail chains will absorb the entire market, come to certain agreements among themselves and begin to regulate pricing and assortment as it suits them. (https://www.kostroma.kp.ru/daily/27488/4698848/) It is unlikely the giant enterprises which have in fact become monopolists will refuse the temptation to standardize the supply and raise prices. As a result the shelves will find themselves, just as in the late Soviet Union, cluttered with completely cookie-cutter jewelry sold at prices which are scarcely affordable to the average man. In a few years the supply will exceed the demand and this will lead to the final death of the industry. It is unlikely this is what Artem Sokolov and his company are aiming for, but the outcome looms ahead with the inevitability of the verdict. However, the heads of the jewelry giants are unlikely to wait for it staying in Russia. They have long since had a bridgehead outside of it. For instance, the parents of the owner of the SOKOLOV brand settled in Switzerland long ago and are doing very well there. It appears that the situation with the other conspirators is similar.