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12 Jul, 2010 14:49

Diamond ruling adds to Alrosa lustre

The European Commission has broken an exclusive supply deal between Russia’s Alrosa and global diamond giant, De Beers, leaving the Russian company looking for a new outlet.

The market has not taken the EC ruling as a sign that there will soon be a flood of cheap diamonds, with prices rebounding strongly during the first half of this year. But it does leave Alrosa with a major sales problem, according to vice- president, Sergey Ulin.

“We are looking for a transparent market of diamond cutters, with adequate profit margins. We had that kind of relationship with De Beers, which consumed half of the rough diamonds produced in Russia. We're now working with other leaders in the cut diamond market.”

Russia is becoming more significant not just as a producer, but also as a consumer with the US and China leading in demand for gems and industrial diamonds. The potential to grow the market here was one of the main themes of the diamond congress in Moscow, which drew all the world's major players, with Alex Popov, President of the Moscow Diamond Bourse, enthusiastic about the interest in Russian diamond consumers.

“We need more cooperation. I'm happy with the representation of all countries here that will raise the level of the awareness of the Russian consumer market, first of all, as well, of possibilities working in the Russian market. We are one of the best consumer markets in the world; we need to use that potential.”

The diamond market is entering a new era – with De Beers likely to cede some of its dominance in favour of Alrosa, which is expected to acquire a significant place in the market. But the underlying principle that has kept diamond prices high for decades will remain. The market may become more transparent, but Russia has no intention of removing its sparkle by flooding it with stones.