Kremlin eyes Russian diamond giant Alrosa
09-24-2006, 04h17
MIRNY, Russia (AFP)
A model displays a gold crown with diamonds during an exhibition "Jeweller-2006. Best jewelry of Russia" in Moscow in early September. As the world's second-largest diamond producer, Russia's Alrosa has already made its mark on world markets. But the Russian state is aiming to transform Alrosa into Russia's latest national champion.
(AFP/File)
As the world's second-largest diamond producer, Russia's Alrosa has already made its mark on world markets. But for the Kremlin, this is just the beginning.
The Russian state is aiming to transform this secretive group into Russia's latest national champion, a mining giant that will branch out into metals and hydrocarbons and push Russia's economic expansion deep into Africa.
Alrosa is "a company of strategic importance," Finance Minister Alexei Kudrin said in February, placing Alrosa alongside state gas monopoly Gazprom and state arms exporter Rosoboronexport, two pillars of Russia's increasingly Kremlin-directed economy.
And though Alrosa, which produces 25 percent of the world's raw diamonds, is currently "one of the most closed groups" it will become more "open and public," said Kudrin, who is also chairman of the group's board of directors.
In the meantime, the Russian state plans to reorganize the company and consolidate it with other mining assets.
The Russian state "should receive 50 percent of the company ... by the end of the year," Alrosa's general director Alexander Nichiporuk said this week in eastern Siberia's Yakutia region, home to most of the group's diamond mines.
The Russian state currently owns 37 percent of the company's shares, and state bank Vneshtorgbank recently purchased another 10 percent that should wind up in Kremlin hands.
But Moscow faces fierce opposition from local authorities in Yakutia, Russia's largest region, who do not want to cede their 40-percent stake in the company.
Yakutia got its share of Alrosa via a secret decree in President Boris Yeltsin's time, and fears that losing it would mean the end of its economic autonomy from Moscow.
But the Kremlin has set its sights on Alrosa as part of its plan to re-establish control over key sectors of the economy that were yielded in the 1990s either to oligarchs or to regional administrations, as in Alrosa's case.
Alrosa is likely to serve as "an outpost for consolidating the state's assets in Yakutia," an immensely resource-rich region, and in time become "a mining champion," Troika Dialog analyst Alexander Kudrin said.
The diamond producer has recently acquired half of the Russian oil and gas company Sakhaneftegaz and plans to extract oil in Angola, as well buy up coal and gold deposits.
The company is also doing extraction work at the Catoca diamond mine in Angola and wants to develop similar projects in the Democratic Republic of Congo and Guinea, Nichiporuk said.
If Alrosa's ambitious plans become a reality, "it is very likely that in time it may decide to enter the stock exchange" to attract the necessary capital, analyst Alexander Kudrin said.
During the Soviet era, Russian diamonds were sold exclusively on the domestic market and to the South African giant De Beers, which with Alrosa has an exclusive contract.
Alrosa still sells 24 percent of its production to De Beers, but has already begun developing its own distribution network.
It has been asked to do so by European authorities which have cast a cold eye on the Russian-South African alliance and demanded that the two diamond giants part ways by 2009.
The Russian group is striving to develop an internationally-recognized brand that will rival the omnipresent De Beers, and has already opened offices in Hong Kong, Antwerp, Geneva, New York, London and Israel.
Alrosa sold 30-33 million carats of diamonds last year, totaling 3.4 billion dollars (2.65 billion euros) for a net profit of 550 million dollars, its president said.
The Russian giant is aiming for a similar profit margin this year despite a downturn in the market as the world's raw diamond stock grows.
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