Putin promises to buy up diamonds

The Russian prime minister promises help for the diamond producer

Russian Prime Minister Vladimir Putin has promised to buy up diamonds, as part of a $1bn (£605m) support package for diamond miner Alrosa.

The state-controlled miner has $3.6bn in outstanding debt and state support will help service it, during what Mr Putin called a "difficult period".

Diamond sales have lost their sparkle during the global recession.

Alrosa produces 25% of the world's rough diamonds and is the main rival to De Beers, the South African company.

"We understand that this sector, which gives serious revenues to the federal budget and regional budget, is in a difficult situation and needs support due to the global market situation," the Russian prime minister said.

"To support the sector, the state has agreed to significantly increase state purchases of diamonds," he added.

Diamonds are one of the biggest sources of income in Russia's Yakutia region, with gem sales making up 30% of local government income.

Alrosa's importance to Russia and Yakutia makes it a prime candidate for government help as Russia endures its worst recession since the 1990s, analysts said.

Dull demand

Alrosa, which sells more than half its polished diamonds in the US market, is not the only diamond company to have been knocked by the recession.

Profits at De Beers, the world's biggest diamond producer, have slumped in the "most difficult" economic environment in decades.

In the first six months of 2009, it made a profit of $3m , down from $316m a year earlier.

While demand is weak in the US, De Beers said that many in China and India are still buying gems.

E-mail this to a friend

Printable version