Unimaginable Wealth in Diamonds Revealed

Women working at a Russian diamond mine

Diamonds have no inherent value. You can’t eat them, and they won’t protect you from the weather. When processed, however, they are very pretty, sparkly, and useful for cutting really hard materials. Moreover, diamonds are extremely rare and, as a result, very expensive.

What if they weren’t so rare? What could happen if suddenly the supply is shown to be ten times larger than previously thought? That very situation is now unfolding, as the size of a gigantic diamond field in Russia was revealed in mid-September. Popigai Astroblem, a 62-mile-diameter crater in eastern Siberia, contains trillions of carats of diamonds, which translates into hundreds of thousands of tons of the stones. These diamonds were formed by the extreme pressure and heat caused by the impact of an asteroid that fell to earth. (The asteroid was probably between three and five miles wide.) Called impact diamonds, the stones are extraordinarily hard, so they are particularly valuable for scientific and industrial uses.

Russian geologists have known about the diamond field since the 1970s. The information had been kept secret to protect Russia’s already thriving diamond industry. Industry officials were following the economic laws of scarcity and supply and demand. They were controlling the supply of diamonds to maintain their scarcity. Goods that are scarce but desirable can command high prices. If the Popigai diamonds were suddenly released into the market, the global price of diamonds would plunge, and Russia would lose millions of rubles in income. So would other diamond producers.

Now the word is out. For now, Russia can still control the supply, so the price will remain high—no matter how many tons of shiny rocks lie in the wilds of Siberia.

Image credit: © Jerome Levitch/Corbis

Related Links

• Russia Reveals Shiny State Secret: It’s Awash in Diamonds
  This article includes the basic story and background as well as a link to a quiz about Russia.
  (Source: Christian Science Monitor, September 17, 2012)
• Popigai Crater
  Learn about the geology of the asteroid-impact crater and how the diamonds were formed over 35 million years ago.
  (Source: Wikipedia; accessed September 30, 2012)
• Economics Basics: Supply and Demand
  This site includes graphs to effectively explain economic concepts such as the laws of supply and demand.
  (Source: Investopedia; accessed September 30, 2012)
• Mūsā
  Read about a historic case of supply and demand involving another scarce and valuable commodity.
  (Source: Encyclopaedia Britannica; accessed September 30, 2012)