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Clock ticking on Swiss watches’ raw materials from Russia

Diamonds shine brightly at this year's Geneva watch fair but the sanctions slapped on Russia could soon force the Swiss watch industry to produce more subdued designs.

A diamond watch
A diamond watch "Egerie Moon Phase" is displayed in a window of Swiss luxury watch and clock manufacturer Vacheron Constantin, owned by Richemont group, on the opening day of the Watches and Wonders Geneva show, in Geneva on March 30, 2022. (Photo by Fabrice COFFRINI / AFP)

Russia is a major supplier of diamonds, gold and other precious metals to the luxury watchmakers exhibiting at Watches and Wonders, one of the world’s top salons for the prestige industry.

The Russian group Alrosa — the world’s largest diamond mining company — was hit by US sanctions within hours of the Kremlin-ordered invasion of Ukraine on February 24.

According to US Treasury figures, it accounts for 90 percent of Russia’s diamond mining capacity, and 28 percent globally.

And while trade between Switzerland and Russia is modest, gold is the chief import, ahead of precious metals such as platinum followed by diamonds not mounted or set, according to the Swiss customs office.

Compared to other sectors of the Swiss economy, “watchmaking was a branch that was less affected than others by supply problems in 2021”, Jean-Daniel Pasche, president of the Federation of the Swiss Watch Industry, told AFP.

But that may no longer be the case, he acknowledged, adding that it was hard to assess the repercussions for the watch industry at this stage.

“There are obviously reserves. Afterwards, we will have to see, depending on how long the conflict lasts,” Pasche said.

The booth of Swiss luxury watchmaker and jeweller Piaget at Watches and Wonder

The booth of Swiss luxury watchmaker and jeweller Piaget, owned by Richemont group, photographed on the opening day of the Geneva salon. (Photo by Fabrice COFFRINI / AFP)

Recycled gold and palladium
The Swiss luxury giant Richemont owns the Cartier and Van Cleef & Arpels jewellery firms, plus eight prestigious watch brands, including Piaget and IWC.

The group took the lead on Wednesday, saying all its brands have stopped sourcing diamonds from Russia.

The move will create a lot of work on the supply chain to find responsibly sourced, quality diamonds from elsewhere, Richemont chief executive Jerome Lambert told a press conference.

Gold supply is of less concern. For a decade or so, Richemont has been sourcing recycled gold for watchmaking, bought from industry and the electronics sector.

For palladium, used for instance for wedding and engagement rings, the group decided “ahead of the sanctions” to switch to suppliers specialising in recycled palladium, Lambert said.

Draining the stocks
At Patek Philippe, one of the most prestigious Swiss brands, the firm’s president is counting on his stockpile to ride out the storm.

“Luckily I produce in small quantities,” said Thierry Stern, who represents the fourth generation of his family at the company helm.

Watches made with titanium and ceramics are displayed at the booth of luxury Swiss watch manufacturer IWC,

Watches made with titanium and ceramics are displayed at the booth of luxury Swiss watch manufacturer IWC, on the opening day of the Watches and Wonders Geneva show. (Photo by Fabrice COFFRINI / AFP)

“So I don’t feel any difference yet,” he told AFP. For 2022, Patek Philippe plans to manufacture 66,000 timepieces.

“And if I can’t find certain stones, I can always do engraving,” said the head of the  brand, which relies on a wide range of disciplines including ceramics, marquetry and enamel.

H. Moser, a niche brand producing 2,000 watches a year for wealthy collectors, struck much the same tone.

“Purchases are made in advance. For example, for the casings that I want to make in 2023, I have already bought all the gold I need,” said boss Edouard Meylan.

“But maybe in six months’ time some of our suppliers will call to push back the deadlines because they haven’t received the materials,” he admitted.

Concerns over raw materials “will drive up prices, of course”, said Jon Cox, an industry analyst with the Kepler Cheuvreux financial services company.

However, compared to other sectors, luxury firms have more leeway to pass on costs to customers, he added.

At the Watches and Wonders salon in Geneva, where 38 brands are exhibiting until Tuesday, the displays are brimming with diamonds, reflecting the “generally upbeat mood” of the industry this year after a prosperous 2021.

However, given the war and its repercussions, “I imagine product development will move to more subdued luxury goods”, Cox said.

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POLITICS

Swiss president under fire for handshake photo with Russia’s Lavrov

While attending the opening week of the 77th UN General Assembly in New York this week, Switzerland’s president Ignazio Cassis was photographed shaking hands with Russia’s Foreign Minister Sergei Lavrov.

Swiss president under fire for handshake photo with Russia's Lavrov

Though Cassis announced beforehand that he would address “President Putin’s recent provocations” and that he would “condemn the nuclear threat”, Russia used the photo for its own propaganda purposes, with Lavrov publishing the picture of the two smiling diplomats in his tweet.

Cassis quickly reacted with his own post, explaining that his meeting with Lavrov was for a good cause.

“I called on Russia to refrain from organizing so-called referendums in the occupied territories of Ukraine. Switzerland is also very concerned about the threat of the use of nuclear weapons. Neutrality and good offices remain our instruments of dialogue”.

However, some in Switzerland and elsewhere have not accepted this response.

While the Foreign Ministry said “it sees no problem” with this photo, Swiss media Blick noted that “no head of state or minister of a Western democracy has allowed himself to be represented with Sergei Lavrov in such a posture”.

“This image would reflect an apparent normality in relations between the two countries, while Switzerland is still one of the countries hostile to Russia”.

It added, however, that Cassis might have had a noble motive in shaking Lavrov’s hand.

“In the aftermath of Vladimir Putin’s announcement to mobilise the reserve troops of the Russian army against Ukraine, this somewhat tense grip is more due to the contingencies of diplomacy than to a reconciliation”.

Others were less understanding of Cassis’ action.

“Our President is shaking hands with a war criminal… I can’t believe it”, said Bernhard Guhl, former national adviser to the Center party.

For Thierry Burkart, president of the Liberal party, “it’s unfortunate that this photo exists. But sometimes you just can’t avoid it…”

As for other social media users, one commented that Cassis “looks proud standing next to a genocide instigator… ashamed of my government”.
 

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