Don’t count De Beers out yet. The South African diamond behemoth may get its hands on close to $800 million in rough diamond supply from the Russian mining giant Alrosa after all.
To recap quickly, De Beers, which sold $800 million in rough diamonds from Alrosa in 2003, ran afoul of the European Commission’s anti-monopoly rules and was told to gradually reduce its buying of Russian goods until they came down to $210 million by 2010. Then in 2005, the EU decided that Alrosa should cut deliveries from $600 million in 2006 to $400 million in 2008 and finally cease supply altogether by 2009.
It now appears that Moscow might have quietly come up with a game-plan to finesse the EU ruling. According to a commentary by the Russian paper Vedomosti, posted online, Alrosa president Sergey Vybornov has announced that the mining giant would sell 80% of its production on a Moscow (trading) floor. While it wasn’t clear which ‘floor’ Vybornov was referring to (the Moscow diamond bourse perhaps?), he did make one thing amply clear – that as Russia is not a member of the EU, the Moscow ‘floor’ is not subject to EU regulations. He also reiterated that most diamonds would now be sold under long-term contracts. The Alrosa boss was quoted as saying that there were “legal ways to give De Beers the opportunity to continue buying Alrosa’s diamonds”.
The commentary also quoted Vybornov as saying, “Alrosa will reduce the number of its clients, keeping only the big ones, whose policy is understandable and who will really support the market”.
The Vedomosti commentary stated that, “Diamond giant De Beers based in South Africa has been Alrosa’s main buyer for 50 years, although the European Commission has made two attempts to interfere”. That, according to the commentary is what pushed Alrosa into changing its sales policy.
