European Union Does Not Allow De Beers Conclude Contract with Russia’s Alrosa

Does the European Union mind the contract with the Russian diamond monopoly Alrosa?

The European Union seriously deals with the world diamond company De Beers now. The anti-monopoly investigation against this corporation started in Europe in the summer of the year 2001. It seems that the management of the company will soon have to ask the EU a permission to go to a bathroom. De Beers has been trying to conclude a contract with the Russian diamond giant Alrosa since 2002. However, this contract is hard to conclude at the moment over the controlling board of the European Union – the European Committee.

The planned contract contradicts to the anti-monopoly law of the European Union. Since Europe is the most important market area for De Beers, the management of the company asked the European Committee to evaluate the terms of the contract. The officials of the Committee decided that that the agreement would allow De Beers to establish the total control over the European market. De Beers did not have a way out. The company spent so much energy to make Alrosa conclude that contract, so the result was very discouraging, taking into consideration the fact that Alrosa was originally going to do its business alone.

The five-year contract between the two diamond monopolies, the South African company De Beers and the Russian company Alrosa, is evaluated in the sum of four billion dollars. Pursuant to the terms of the contract, Alrosa was supposed to sell a half of its diamonds abroad with De Beers’s mediation. The other half of Alrosa’s diamonds was supposed to be sold to any other Russian diamond-cutting company. Then they will be able to export rough and cut diamonds independently.

By the way, De Beers controls 60-65% of the world’s diamond market. It is the only company that can guarantee stable prices on diamonds. Furthermore, Alrosa can be sure of its profit, if it cooperates with De Beers (Alrosa mines almost one-fourth of all diamonds in the world). At the same time, American and European customers are interested in making diamonds as cheap as possible. They would need to destroy De Beers’s monopoly for that, and hundreds of independent sellers would take measures to make prices drop then.

However, neither Alrosa, nor De Beers perceived the European Committee’s verdict as something really tragic. European officials like having talks and consultations to discuss every little detail, they like to set up various committees, conduct independent investigations. De Beers believes that the European Committee will eventually approve the contract with Alrosa. However, experts think that the share of Russian diamonds that are sold to De Beers will be reduced considerably. Well, there is nothing horrible about it. There is no agreement between De Beers and Alrosa so far, so the South African company purchases diamonds from the Russian one, discussing the terms of each transaction separately. Nothing can stop them from acting so further on.

Kira Poznakhirko PRAVDA.Ru

Translated by Dmitry Sudakov