Install

Get the latest updates as we post them — right on your browser

. Last Updated: 07/27/2016

Alrosa Secures $1Bln State Pledge

RIA-Novosti / APPutin holding a lump of ore as he visits the Mir diamond mine, near the town of Mirny, Sakha, on Friday.

MIRNY, Sakha Republic — Prime Minister Vladimir Putin on Friday pledged $1 billion in state support for diamond miner Alrosa this year to help it ride out a steep global decline in demand for gemstones.

“The overall level of support for the sector should total 30 billion to 35 billion rubles [$950 million to $1.1 billion] this year,” Putin told a meeting of senior officials after visiting Alrosa’s giant Mir diamond mine in eastern Siberia. “This is difficult to do given the financial-economic crisis, but we shall do it,” Putin said.

The state support, which will include more state purchases of gems, is likely to help state-controlled Alrosa service about $3.6 billion in outstanding debt. Two sources who declined to be identified said the $1 billion would be used by the State Precious Metals and Gems Repository, known as Gokhran, to buy diamonds from Alrosa.

Alrosa, the main rival to De Beers, produces one-quarter of the world’s rough diamonds and is one of the main sources of income for the Sakha republic, home to 950,000 people.

“We understand that this sector, which gives serious revenues to the federal budget and regional budget, is in a difficult situation and needs support because of the global market situation,” Putin said. “To support the sector, the state has agreed to increase state purchases of diamonds significantly.”

Putin said Gokhran’s purchases had risen to 14.5 billion rubles from 3.7 billion rubles. Alrosa was seeking to sell Gokhran another $3 billion worth of gems during 2009 and 2010 to earn enough to service its debt.

“The support given by the state will allow Alrosa to fulfill its obligations and to finance its investment program,” an Alrosa spokesman said.

Putin gave no details about state purchases planned for 2010.

Alrosa president Fyodor Andreyev said Friday that he expected that diamond demand would recover by 2011 as long as there was no second wave of the financial crisis.

Putin also ordered officials to work out a way to give a state guarantee to Alrosa to help it restructure its debts to domestic and foreign creditors.

“In recent years, $17.5 billion of diamonds have been found here [in Mirny] and about $80 billion in the republic as a whole, but when you work out how much has actually been invested here in the republic, in its infrastructure, the figures are really not very significant,” Putin said.

“The problems come from this and have been mounting for decades,” Putin said.