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. Last Updated: 07/27/2016

Diamonds and ice; Yakutia industry to open

The lack of a coherent foreign investment policy for Russia's diamond industry is not stopping the Russian government from encouraging the formation of joint ventures in this once closed industry.


The Russian Minister for Foreign Economic Relations, Pyotr Aven, said in an interview with The Moscow Times that downstream processing in the diamond industry, especially jewelry making. Bright be the fast step the government is prepared to take in approving Western participation.


Aven called the question of whether the Russian government intends to allow foreign investors to become directly involved in gem and precious metals mining "a very difficult question".


"It is not resolved completely", he said. "I would say I have my personal opinion, but here it is difficult to say".


The former Soviet monopoly producer, now known as Rossalmazzoloto, has stoutly resisted direct Western access to mining diamonds and gold.


But several options for indirect access, through equity stakes in Russian mining enterprises, technology transfer, and joint ventures are being considered.


Rossalmazzoloto's general director, Valery Rudakov, has said that new projects should be designed by the Russians and put out to competitive tender - a view that is incorporated in the new law on mining which was enacted early this year.


But Russian legislation on private investment and the constitutional separation of powers over natural resources between central, republican and regional governments, leaves the situation for Western investors highly ambiguous.


The diamond industry is almost entirely concentrated in the Republic of Sakha (Yakutia), in the Russian Far East.


The principal deposits are located in the mining towns of Mirny, Aikhal and Udachny; these remote sites are up to a thousand kilometers from the republic's capital, Yakutsk, and they remain under the direct control of


Rossalmazzoloto.


The Yakut republican authorities have extracted commitments for greater autonomy in the marketing of their output through De Beers. Ten percent of the republic's rough gem output was reserved for independent sale to De Beers by an agreement signed on March 30. De Beers has since told The Moscow Times that this will rise to 20 percent, with potential earnings to the Yakut government of $200 million a year.


A recent attempt by Yakut diamond miners to form their own association to act independently of the republic's authorities has been blocked by the head of the government, President Mikhail Nikolayev.


'The Russian government also has an agreement with De Beers for the exclusive marketing of uncut diamonds through the Central Selling Organization for a five-year period that ends in 1995.


De Beers is not yet considering investment in diamond mining in Yakutia or at one of Russia's largest imexploited deposits, in the Arkhangelsk region of northwest Russia.


Aven's remarks indicate readiness for some limited foreign investment options that the trade ministry wants to bring to the attention of Western firms.


Israeli diamond-cutters are reported to have recently agreed to set up a gem-finishing and jewelry plant, to be called "Kristall", in the region north of Lake Baikal, but details of the project have not'been confirmed.