Diamond Output Planned to Double

The nation's largest diamond producer Almazy Rossii-Sakha, or Alrosa, and its largest diamond cutter Kristall said Friday they planned to join forces and double the country's diamond output.

The two firms said they had serious concerns following a recent announcement by South Africa's De Beers that it would abandon its role as custodian of the diamond market and focus instead on boosting global demand for gems.

"State enterprises in Russia's diamond and gems complex, represented by Kristall and Alrosa, are seriously worried by the possible consequences of changes in the diamond market and announce that they will unite their efforts to develop output of rough diamonds, production of finished diamonds and sales of gems in Russia and abroad," they said in a statement.

"The aim of this is to double output of diamonds in Russia, by increasing the effectiveness of production and sales," the statement, signed by Alrosa head Vyacheslav Shtyrov, added.

He said the two would also create a huge enterprise uniting Russia's diamond mining and cutting sectors "to effectively protect its position on the domestic and world diamond markets."

The new group will increase its sales network of cut diamonds domestically and abroad.

Alrosa and De Beers have a marketing agreement in place until the end of 2001 under which Alrosa must sell at least $550 million worth of uncut diamonds to De Beers, but not more than 26 percent of De Beers' sales.

A De Beers spokeswoman said in London the deal was effective and that Alrosa's announcement was a positive development.

"The agreements are working well. We have regular meetings with our partners and there are lots of ideas on the table or under discussion," she said.

"Any move to increase promotion, as they seem to be suggesting, would be exactly along the lines of the way in which De Beers wants the industry to go."

Alrosa and Kristall added that their new plans were not aimed against the South African giant.