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. Last Updated: 07/27/2016

Russia, De Beers Renew Talks On Diamond Marketing Deal

Russian diamond producer Almazy Rossii-Sakha and South Africa's diamond giant De Beers renewed talks Monday on a crucial new diamond marketing deal, but Russian industry officials said the agreement could still be far off.

"I do not share the optimism that the agreement will be signed in a couple of days," Vyacheslav Shtyrov, president of Almazy Rossii-Sakha, said.

He said Russian officials did not consider the talks "as a full-fledged set of negotiations, rather consultation."

De Beers and the Russian government signed a memorandum of understanding last February to replace a five-year old deal that obliges Russia to sell 95 percent of its rough diamonds through De Beers' Central Selling Organization, which accounts for about 75 percent of the world trade in rough gems.

Almazy Rossii-Sakha has been authorized by the Russian government to negotiate a new deal. Despite intensive discussions during the past two months, however, the document has not been worked into a formal agreement.

Shtyrov said although Russia had to give up some claims for more independence in diamond sales, the memorandum "opens a new future for working with De Beers on a more profitable basis."

The most significant concession made by the South African company was allowing Russia more leeway to engage in domestic diamond cutting.

"Previously De Beers has never welcomed the growth of diamond cutting industry in countries that also mine raw diamonds," he said.

Almazy Russia-Sakha, which is 75 percent state owned, saw its net profits rise last year by 6.5 percent, to 1.4 trillion rubles ($291 million), Shtyrov said.

Shytrov acknowledged Russia would be "compelled to deal with De Beers as long as the diamond industry exists," although it would seek to win more control from the South African company.