Kaliningrad’s amber
Artur Usanov
Consultant
Western Branch of the Russian Academy of National Economy and Public Administration (RANEPA)
Russia
Amber is fossilized tree resin and it is found in many parts of the world. The Baltic Sea region has deep connections with this organic gemstone going back many centuries ago. This is evidenced, for instance, by the existence of numerous old folk legends related to the origin of amber and its mythical properties as well as by a number of museums devoted to amber in several Baltic countries.
Trade in Baltic amber has taken place at least since the 16th century BCE. For example, the tomb of the Egyptian pharaoh Tutankhamen who lived in 14th century BCE contains large Baltic amber beads. In Roman times amber was an important commodity that was traded along the Amber Road – an overland trade route connecting the eastern coast of the Baltic Sea with the Mediterranean Sea.
The richest deposits of amber are concentrated on the Sambia Peninsiula in what is now Kaliningrad Oblast of Russia. Collecting amber pieces brought to the shore after storms was a traditional way to get amber. The Teutonic Order even monopolized amber collection and trade, and established an administration to manage these activities. Industrial mining of amber began in 1860s by German firm Stantien & Becker. Its mining operation were located near the town of Palmnicken (currently called Yantarny) and its output reached around 400 tonnes of amber per year in 1890s.
Today the Sambia Peninsula still remains the only place in the world where large-scale industrial mining of amber takes place. It is carried out by company called Kaliningrad Amber Combine. The company has had a tumultuous history. It was set up in 1947 after end of the World War 2 as part of the Gulag system using forced labor. Only after the death of Stalin in 1953 it was reorganized as a civil enterprise. Gradually, the company started to increase its production by improving its mining technology and developing a new open-pit mine. In 1950s its production of amber averaged 230 tonnes annually but in 1970s it was more than 600 tonnes. By 1989-1990 annual amber production reached more than 800 tonnes.
After the start of the market reforms in Russia the company fell on hard times. In 1993 the company was privatized as joint-stock company Russian Amber. However, in 1996 the regional court found that its privatization was carried out illegally and company was returned to the state (federal) ownership. This did not help to stabilize its finances and it remained on the brink of bankruptcy for several years. Amber production in some years declined to less than 200 tonnes. In 2003 the company was put into administration and emerged from it only in 2008. Management incompetence (or worse) and pilfering of amber from the company by is workers were some of the major reasons for its troubles. However, probably even more important was widespread illegal mining of amber by small groups of miners on land and at sea. Much of the illegally obtained amber was smuggled to neighboring Poland and Lithuania.
In 2013, Amber Combine was transferred to the state corporation Rostec, whose primary mission was to develop high-tech industries in Russia. Although amber mining is obviously a non-core business for Rostec, its management was able to improve company’s operations. One reason was more effective suppression of illegal amber mining by law enforcement. Sales of amber were transferred to the St. Petersburg exchange thereby providing transparency and broadening the access to raw amber. In 2021 Amber Combine produced 576 tonnes of rough amber compared with 244 tonnes in 2014. Its sales margin was above 40% for the last five years.
The mining operations take place in an open cast mine at the depth of 40-60 meters where the seam of so-called blue soil is located. The amber content in the blue soil seam is on average 0.5-0.6 kg per m3. Proved reserves of amber for the existing mine is over 100 thousand tonnes. However, prognosticated resources on the Sambia Peninsula are estimated to be over 300 thousand tonnes.
The direct economic contribution of the company to Kaliningrad’s economy is rather limited. The revenue of the Amber Combine in 2021 was equivalent to 43 million EUR and it employed 1,016 workers. Its share in the gross regional product was roughly 0.4% in recent years. However, the company production supports a sizeable jewelry and retail sector in Kaliningrad. Even more importantly, amber is an essential part of the regional brand. The oblast is often unofficially referred to as an amber region. A lot of organizations in Kaliningrad use the word amber and its derivative in their names. Amber is one of the reasons why tourists to come to Kaliningrad. These factors led the Russian government to issue a strategy for the development of the amber industry in 2017.
Significant part the extracted amber is exported: in 2020-2021 amber exports were even higher than the production output (due to decrease in amber stocks). The largest buyer of Kaliningrad’s amber was Lithuania; China, Poland and Latvia were also large importers.
The largest alternative supplier of amber to the market is Ukraine. While state-licensed production there is small – a few tonnes, output of illegal mining is estimated as 150-200 tonnes per year. Small volumes of amber are also produced in Poland, Lithuania, Dominican Republic and Myanmar.
Overall, Kaliningrad Amber Combine’s market share is substantially higher than 50%. Its market dominance bears a resemblance to that of De Beers in the rough diamond market, which lasted for more than a century until the 2010s. However, today it is a subsidiary of Anglo American plc, a multinational mining company, and its share of the market declined to 20+% (in carats). It reminds us that the market conditions never remain fixed forever and changes can occur quite rapidly.
Email: a_usanov@outlook.com
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