"As instructed, we converted the Gazprom and Yukos bonds into equity, securing 35% and 30% stakes, respectively."
Seok-won sat cross-legged on the penthouse sofa where he had been staying, listening to Landon's report on his arrival in Moscow a few days earlier.
"Except for Alrosa, all the other companies have also agreed to convert their bonds into equity," Landon continued, opening a folder that contained a document summarizing the shareholding ratios he had acquired for each company.
Having already reviewed this once before the negotiations, Seok-won quickly scanned the document and nodded.
"So the state-owned companies refuse to give up shares?"
"Exactly. Both the Russian government, which holds part of the stake, and the Sakha Republic, where the diamond mines are located, are opposed to converting their shares into stock. Acquiring equity there will be difficult," Landon explained.
At that, Pavlovich, sitting on the opposite sofa, interjected.
"Unlike other companies struggling due to the oil price collapse and economic downturn, Alrosa, which mines and exports diamonds, is relatively financially stable. That's why they're resistant."
Recalling that Alrosa didn't go public until 2013—and even then sold only 14% of its total shares—Seok-won pursed his lips.
"Unfortunate, but there's nothing we can do. When do the Alrosa bonds mature?"
"In three years."
"Then let's hold onto them for now and dispose of them once the price recovers."
"Sir, however, Alrosa has made a proposal," Landon said.
Seok-won tilted his head in curiosity.
"A proposal?"
"Yes. They want to repay the bonds early using rough diamonds."
Seok-won furrowed his brow, incredulous.
"The bonds aren't even near maturity—three years still remain. And they want to repay in diamonds rather than cash? What's their reasoning?"
Pavlovich, being more familiar with the local situation, stepped in to answer on Landon's behalf.
"It's because their inventory of rough diamonds has piled up too much."
"...?"
"Last year, they expanded the Udachny open-pit mine, which was already the largest in the generation, doubling production. But contrary to expectations, global economic stagnation caused demand to drop significantly, and it seems they're facing major difficulties."
Seok-won tilted his head in thought.
"Even so, diamonds don't spoil or degrade over time. They could just store them and sell when prices recover."
"That would be reasonable. But De Beers' machinations have made that difficult."
"...!"
De Beers controlled 90% of the world's diamond distribution, effectively monopolizing the market.
It was the company that popularized the tradition of giving diamond engagement rings with the slogan 'A Diamond is Forever,' making countless men worldwide shell out for it.
Moreover, it had been internationally condemned for secretly laundering "blood diamonds" mined in African conflict zones—diamonds sold to fund weapons.
'They made enormous profits from blood diamonds, but eventually faced international sanctions, which shattered their long-standing monopoly.'
Their downfall was a classic case of greed leading to self-destruction.
Given that De Beers virtually dominated diamond distribution, it was natural for Alrosa, a major mining company, to be tied to them.
"Is there some issue with De Beers?"
Seok-won asked, curiosity piqued. Pavlovich explained the situation in detail.
"Since demand dropped and retail prices fell, De Beers reduced the purchase price for rough diamonds."
"That's only natural if sales are slow."
"True, but the amount they demanded to cut was too extreme to accept."
"How much lower did they want it?"
"They reportedly asked for a 50% reduction from the original purchase price."
Hearing this, Seok-won let out a dry laugh.
"Half? They slashed it in half?"
"Yes, that's correct."
Landon shook his head in disbelief.
"Even I think De Beers is being excessively tyrannical."
"Seems that way," Seok-won replied.
Pavlovich, observing their reactions, continued.
"When Alrosa resisted and refused to hand over the rough diamonds at that price, De Beers immediately halted all purchases."
Seok-won leaned back slightly, letting out a small snort as if he had grasped the situation.
"The drop in retail prices is just an excuse. De Beers, monopolizing distribution, is using this opportunity to intimidate Alrosa, the largest producer."
"I think so too," Landon agreed.
Pavlovich nodded and went on.
"They've been unable to ship for over four months, so inventory has kept piling up. Even if Alrosa tries to sell to other distributors, De Beers blocks it. They're stuck, unable to do anything."
"The more the inventory grows, the weaker Alrosa becomes in the power struggle with De Beers. So they're offloading it to us and repaying the bonds early, huh."
"Exactly."
Seok-won crossed his arms, narrowing his eyes.
"By liquidating this massive inventory of rough diamonds, De Beers—the ones trying to act cocky—might start getting nervous. They've thought this through pretty well."
"They're offering to sell at 25% below the wholesale price De Beers used to pay, and on top of that, they're including several rare stones over 10 carats, including last year's Yellow Sun diamonds."
"Yellow Sun?" Seok-won asked.
"It's a vivid yellow 107-carat diamond mined from the Udachny open-pit mine."
Seok-won's eyes widened slightly in surprise.
"If it's over 100 carats, that's about the size of a newborn's fist, right?"
"About that size, yes."
"That's going to be quite valuable."
"Not only because of the size, but vivid yellow is a rare color, so each will easily exceed $20 million."
Seok-won let out a short whistle.
"Whew… as expected, diamonds command quite the price."
Seeing them in person would likely be spectacular, and Seok-won couldn't help feeling a surge of excitement.
"What do you think, Landon?"
Landon shrugged and replied,
"Considering we bought Alrosa's bonds at a deeply discounted price, it doesn't seem like a bad deal. The problem is, even if we take delivery of the rough diamonds, there's not really a practical way to use them."
"True. If we tried to sell them to another distributor, De Beers certainly wouldn't let that slide," Seok-won replied.
"Exactly. They could easily turn into a burdensome asset," Landon added.
Seok-won nodded at Landon's concern, but a sense of opportunity made him reluctant to pass on this chance.
Running his smoothly shaven jaw thoughtfully, an idea suddenly struck him.
'Wait, one of my companies owns Gucci…'
While not a jewelry brand, releasing limited-edition necklaces or bracelets using these diamonds might be a clever move.
'If the response is good, we could even launch it as a full product line.'
He would, of course, need to discuss the idea with lead designer Jacob Thompson and CEO Alexander Vindman, but it seemed like a promising plan.
Even if that didn't pan out, the rough diamonds were essentially liquid assets, and the Alrosa bonds had been purchased at a 90% discount, so a small loss wouldn't matter.
'Honestly, selling just one of those Yellow Sun diamonds could cover the entire investment.'
With his decision made, Seok-won lifted his head.
"Tell Alrosa we'll accept their offer."
"Understood," Landon replied.
Landon had been concerned that taking the rough diamonds might become a burden, but knowing that Seok-won had more than enough revenue from other ventures, he didn't add another word.
"So, what's the update on acquiring the Sakhalin oil field development rights?"
Seok-won smoothly shifted the topic, and Landon replied,
"We've agreed with the Russian government to acquire a 50% stake in Sakhalin Block 3 for seventy million dollars."
Seok-won took a sip of coffee, set the cup down, and asked,
"What's the estimated reserve?"
"According to Russian government data, the field is estimated to contain 5.376 billion barrels of crude oil and 1.073 trillion cubic meters of natural gas."
"Even if only half of that estimate is extracted, it's still a supergiant oil field," Seok-won remarked.
"Exactly. Among the Sakhalin blocks, this one has the largest mammoth-scale oil and gas reserves," Landon confirmed.
"That's the kind of field any resource-focused company would want a piece of," Seok-won said with a satisfied smile.
Nodding, Landon added,
"The larger the reserve, the lower the production costs, which increases profitability. Plus, it allows for long-term extraction of oil and gas."
"Excellent," Seok-won said, clearly pleased.
"Contact our branch director in Japan, Porter, and have him reach out to Mitsui and Mitsubishi to discuss a potential equity swap," Seok-won instructed.
"An equity swap?" Landon asked, his eyes widening in surprise at the unexpected directive.
Seok-won tilted the corner of his mouth into a small grin.
"Yes. We'll swap the 45% stake those companies hold in Sakhalin Block 2 for the 50% stake we just acquired in Block 3."
"But Block 3 has much higher estimated reserves and a larger stake on our side. Why would we even consider swapping?"
"That's right. I also wonder why we would bother," Landon admitted.
Across from them, Director Pavlovich looked equally puzzled.
"Even though both are offshore blocks, Block 2 is closer to the coast, making development easier. For a company like ours, with no prior resource development experience, Block 2 could actually be more advantageous than Block 3," Seok-won explained, thinking silently,
'Above all, Block 2 has proven oil and gas fields with successful commercial production, whereas Block 3, despite high expectations, will likely just burn through money without yielding results.'
After all, the "estimated reserves" are just that—estimates. There's no guarantee the oil and gas are truly there.
"Even if we develop Block 3, we're only providing the funding. ExxonMobil will handle the actual exploration and drilling, right?"
"In my judgment, Block 2 seems more promising than Block 3, so let's proceed that way," Seok-won said, pushing firmly despite knowing it might seem strange.
The truth was, Block 3 was essentially hollow, and Block 2 was the real prize—but who could openly say that? If anyone asked how he knew, he had no answer.
Landon found Seok-won's willingness to enter what looked like a losing deal puzzling, but he had no choice but to follow. Seok-won always came up with plans that defied expectations.
"…Understood. I'll convey it as you instructed," Landon said.
"Do whatever it takes to persuade the other side and make the equity swap happen," Seok-won emphasized again, deepening the sense of mystery in Landon's eyes.
"…Yes. I will," Landon replied.