Andrey Ivochkin: Russia's largest diamond company and Russia's government have different views

The Russian Finance Ministry recommended the government to cancel the quoting of rough diamonds export. This is the major conclusion of the session of the committee for the issues of development of the diamond complex. The session took place on December 5 at the Finance Ministry and was presided over by the head of the department, Aleksey Kudrin. The Ministry also recommended the restrictions from the lapidary enterprises - it goes about the diamonds, which are cut beyond the customs territory of the Russian Federation, and also about the export of the diamonds by the home diamond enterprises. As the press-service of the Russian Finance Ministry informed, it is planned to allow the lapidary enterprises to export up to 15% of rough diamonds abroad – the diamonds, which were purchased at the Russian diamond-mining companies.

JSC ALROSA - Russia’s major diamond company – is expected to get a long-term (up to 5 years) quotas for the exports of diamonds, which will allow to raise the efficiency of the work of the lapidary enterprises and to strengthen the stability of the mining enterprises, raise the volume of tax supplies from the enterprises of the diamond complex.

The company ALROSA was not lucky to conclude another contract with the corporation De Beers. The contract is about the export of the Russian diamonds and it has been recently coordinated with the spokesmen for the Trans-National Corporation in South Africa. Having studies the general terms of the contract, the committee recommended to hold another round of negotiations between JSC ALROSA and TNC De Beers pertaining to the coordination of the delivery volumes of rough diamonds. This issue envisages the gradual reduction of guaranteed De Beers diamond sales during the period up to 2006. In spite of the fact that the annual diamond sales quota by the Russian company De beers will make up $800 million (which is lower than the quota of the functioning agreement – 1 billion dollars), the government did not agree with the offers of the diamond company.

Vyacheslav Shtyrov, the director of the company ALROSA said that the government recommended to reconsider the annual volumes and sales range before the document was elaborated, taking account of the interests of the Russian lapidary industry. In other words - to keep the majority of diamonds in Russia and to sell those diamonds to De Beers, which are not really in demand.

“We believe that the volume of the diamonds, sold by ALROSA, is enough for our industry. Our goal for the nearest future is to sell as much diamonds as we need to on the world market and to sell the rest to De Beers. I think we will achieve this during our negotiations, it will also be possible to find a compromise both with the government and with De Beers,” – the head of ALROSA stated.

Some independent experts said that the reason why the Finance Ministry sent the draft of the agreement for further development, was the fact that the government was totally against the large volume of export of rough diamonds, as it is stipulated in the draft of the contract. The state is first and foremost interested in the export of the cut diamonds and jewellery, not of the rough diamonds. That is why the Finance Ministry is insisting on the reduction of the diamond export owing to the increase of the rough diamonds sales on the home market. It is not good for ALROSA to sell the diamonds within Russia due to the low solvent demand of the lapidary enterprises. Nevertheless, ALROSA failed to convince the Finance Ministry, so the agreement will be given another consideration to.

Andrey Ivochkin PRAVDA.Ru

Translated by Dmitry Sudakov

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