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Russia is preparing to sell its largest diamond company in the country
Abstract According to a report from a Russian news network on February 5th, the Russian Ministry of Economic Development has started preparations for the sale of a 7% stake in Alrosa, one of the world's largest diamond producers. The government has already begun selecting investment bank consultants to assist with the process. Alrosa is a state-owned enterprise under the control of the Russian Ministry of Finance and the Republic of Sakha, with a 30% ownership stake held by the region. The partial privatization of the company was included in Russia’s 2011–2013 privatization plan.
Alrosa plays a crucial role in Russia’s economy, especially in the diamond industry, which is a significant source of federal revenue. The global diamond market has an annual value of approximately $7–8 billion, with major producers including Botswana, South Africa, Russia, Canada, Angola, and Belgium. Russia currently accounts for about 25% of global diamond output.
The company operates primarily in the Sakha Republic, where its largest diamond mines are located. These mines were discovered in 1949 and began commercial operations in the 1970s. Alrosa’s CEO, Kaliting, mentioned that the company can sustain production for 40–50 years based on current output levels. In 2003, Alrosa issued a $300 million European bond, reflecting strong demand for its diamonds.
Russia also has other diamond-producing regions, such as Arkhangelsk and Lomonosov, though large-scale mining has not yet been developed. In 2002, Russia mined around 2% of the world’s diamonds, contributing $1.584 billion to the federal budget. The government has plans to reduce diamond revenue’s share of the budget from 60% to 40% over five years, shifting focus to oil production.
In 2003, Russian geologists discovered new diamond deposits in Bashkir, potentially making it the second-largest diamond-producing region after Sakha.
In terms of sales, Russia’s jewelry industry is state-controlled, with Alrosa managing most of the trade. The company primarily sells its diamonds through De Beers, the world’s leading diamond trader, which controls two-thirds of the global gemstone market. While Russia has sought to reduce its reliance on De Beers, the long-standing partnership remains central to its export strategy.
In 2002, Russia repaid $14 billion in foreign debt, and by 2003, this figure increased to $17.2 billion. Some reports suggested that Russia planned to sell diamonds from its treasury to raise cash for debt repayment, though the exact amount remained undisclosed. The government assured that these sales would not affect global diamond prices.
To promote transparency and market openness, President Putin signed an order in December 2002 regulating the import and export of natural diamonds. This move aimed to support Alrosa’s long-term partnerships and transition the diamond sector toward a more market-oriented system.
With 4% of global diamond trade being illegal, the UN Security Council is considering sanctions against conflict diamonds. Many countries have adopted a unified certification system to ensure ethical sourcing.
In 2002, the U.S. accounted for 48% of global diamond consumption, followed by Japan (15%), Asia and the Middle East (11%), the Pacific (10%), and Europe (11%). Russia’s diamond industry faces challenges due to economic downturns and competition, but it remains a key player in the global market. With careful management and strategic planning, Russia aims to maintain its dominance in the coming years.