Russia Has a Gem of an Idea to Take on India – by Yuliya Fedorinova, Olga Tanas and Thomas Biesheuvel (Bloomberg News – September 6, 2017)

Russia wants its biggest diamond miner to work more closely with the country’s top gem cutters so the industry can better compete in a market that’s dominated by Indian manufacturers.

As part of a plan to boost the competitiveness of Russian diamonds, the government wants Alrosa PJSC to offer more favorable terms to cutters including Kristall Production Corp., Russia’s largest, according to Deputy Finance Minister Alexey Moiseev. The producer, which digs more gems out of the ground than any other firm, is mostly state owned.

“Cooperation currently is rather limited and it has to expand,” Moiseev said in an interview in Moscow. Alrosa has largely shunned cutting and polishing to focus on mining, where it can get bigger margins.

Kristall and other Russian cutters currently buy stones from Alrosa at similar terms to overseas companies, and are struggling to compete with much larger polishing centers like in India. At the same time, there’s concern about stagnant demand and falling prices as young shoppers spend more cash on other luxury items such as electronics.

The plan may lead to Alrosa selling about 10 percent of its gems domestically, Moiseev said. This won’t be required sales, and the figure is “just an estimate of the demand from Russian cutters.” There are no plans for Alrosa to invest in Kristall, he said.

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