Russia May Double Diamond Output

August 1, 2000

Russia May Double Diamond Output

Russia's diamond industry plans to double its output of polished diamonds and improve its sales channels at home and abroad, The Wall Street Journal reports. Russia is the world's second largest diamond producer.

Since 1959, Russia's diamond mining monopoly Almazy Rossii-Sakha, or Alrosa, has sold its diamonds through De Beers. However, according to The Journal, Alrosa recently said it's considering ending its partnership with De Beers and competing head-to-head unless De Beers improves the terms of their agreement. Russia supplies 26% of the diamonds sold through De Beers, and De Beers and Alrosa have a three-year trade agreement that continues through next year.

Alrosa and Russia's largest diamond cutter, Kristall, said last week they were "concerned by the potential consequences of changes on the diamond market" and would "unite their efforts to develop output of rough diamonds, production of polished diamonds and sales of gems in Russia and abroad," The Journal reports. The companies said they plan to double the output of polished diamonds and aim to boost diamond revenues for government coffers and widen Russia's diamond sales channels.

De Beers, however, does not seem worried. Tom Tweedy, a De Beers spokesman, told The Journal the current trade pact is working smoothly and said it wouldn't necessarily contradict De Beers' new strategy if Russia sold more polished diamonds. "If they are going to put an effort into marketing, that's exactly part of our strategy – to get other people to come into marketing," Tweedy told The Journal.

Alrosa and Kristall did not specify what amount of growth they expected in rough diamond production, but a mining analyst told The Journal it would take three to seven years for Alrosa to significantly increase rough diamond output. Currently, Russia has a stockpile of rough diamonds valued at nearly $1.6 billion.

- by Julia M. Duncan