| The European Commission is preparing to approve a trade agreement between ALROSA and De Beers On the eve of the approval of a new diamond trading scheme between the global monopolist De Beers and ALROSA, Brussels is clearing the way for the Russian company to the free market. On Friday, the European Commission, in a special statement, expressed fears that large-scale purchases of diamonds from ALROSA by De Beers could further “increase the monopoly capabilities of De Beers and oust the independent Russian diamond supplier from the European market.” As expected, the EU called on all interested parties to submit their views within a month regarding trade relations between ALROSA and De Beers, the algorithm of which the latter presented at the end of last year. Based on feedback from market participants, the European Commission will make a decision on whether the proposed scheme ensures competitive conditions for diamond trading or whether there are signs of a cartel between the two monopolists.
The new trading system, on which European officials are expected to render their verdict in a month, provides for a threefold reduction in the volume of sales of Russian precious stones to De Beers over the course of six years. According to this plan, ALROSA should sell diamonds worth $700 million to De Beers this year, $625 million next year, $550 million in 2007, $475 million in 2008, and $475 million in 2008. m - by 400 million; in 2010 and beyond, sales volumes between the two companies should not exceed $275 million.
If Brussels decides that the proposed scheme violates competition in the European rough diamond market, then, according to ITAR-TASS, a large fine will most likely be imposed on De Beers (which controls 60-65% of the world's supply of precious stones). The consequences of such a decision for the Russian company (it accounts for 99% of diamond production in Russia and about 23% in the world) are still unknown. It was not possible to get comments from ALROSA itself.
The company proposed a supply reduction schedule in December after the European Commission opened an investigation into the level of competition in the diamond market. Prior to this, in accordance with the 2001 agreement, ALROSA was obliged to supply $800 million worth of diamonds to De Beers starting in 2002. However, the agreement never came into force because the EU was worried that most of the Russian diamonds would fall into the hands of De Beers, as a result what will happen to the price increase? As a result, in March of the year before last, the European Commission recognized that the agreement was contrary to antimonopoly legislation. Since then, ALROSA has continued to sell most of the stones to De Beers, but within the framework of the temporary “free seller - free buyer” regime. In order to maintain free competition, the European Commission recommended reducing the supply of Russian diamonds in favor of De Beers. According to European officials, this would allow ALROSA to effectively compete in the market and develop its international supplies independently or, for example, through companies such as Rio Tinto or BHP Billiton.
De Beers initially opposed the reduction in its supply, arguing that an increase in the flow of Russian precious stones into the free market would destabilize prices and the industry as a whole. While ALROSA, which is striving to increase its role in the international arena, is freed from the trade dictates of De Beers, obviously to its advantage. It was the Russian side that initiated the new trade scheme, which provides for a reduction in supplies. “We want to know the true price of diamonds, that is, to have direct access to the free market,” explained the now former head of the Russian diamond company Vladimir Kalitin. At the same time, ALROSA is confident that Brussels will approve its proposal. Yana GODOVANAYA |
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