Russia Wants ALROSA To Offer Better Terms To Country's Diamond Cutters

(IDEX Online) – The Russian government wants ALROSA to work more closely with the country’s top diamond cutters so the industry can better compete in global markets.

As part of a plan to boost the competitiveness of Russian diamonds, the government wants ALROSA to offer more favorable terms to cutters including Kristall Production Corp., Russia’s largest, according to Deputy Finance Minister Alexey Moiseev.

“Cooperation currently is rather limited and it has to expand,” Moiseev said in an interview with Bloomberg.

Kristall and other Russian cutters currently buy stones from ALROSA at similar terms to overseas companies, and are struggling to compete with much larger polishing centers such as India.

The plan may see ALROSA selling around 10 percent of its gems at home, Moiseev said, adding that there are no plans for ALROSA to invest in Kristall.

Although ALROSA would sell diamonds to Russian polishers at market prices, it would be able to offer them certain benefits, such as allowing them not to buy the whole contracted volume or only choosing certain stones and returning the rest back to the miner, Moiseev said. The government is also mulling more cooperation between Kristall and ALROSA’s own small, but unprofitable polishing unit, the report said.

The plan could run into the same issues faced by African diamond producing countries Botswana, Namibia and South Africa who have found that diamonds can be manufactured more cheaply in India which processes close to 90 percent of the world’s diamonds.

Russia also plans to ease excessive controls for importing and exporting stones, as well introducing regulation identifying origins of diamonds to make the market more transparent, Moiseev said. This includes special passports for gems by year-end and may eventually lead to special nano marks on gems.

"The ultimate goal is to get a person to be able to scan a code in the shop and find out where the stone in coming from," Moiseev said, adding that more jewelers will use devices to help them detect synthetic stones.

ALROSA will need to spend more on marketing to support demand, according to Moiseev. “Millennials still understand what diamonds are and do not deny them, and will grow to buy them,” he said. “The question is if the next generation will.”