29 Mar 2024 11:27

MinFin considering regular Alrosa diamond purchases, increasing Gokhran limits

MOSCOW. March 29 (Interfax) - The Russian Finance Ministry is considering the possibility of regular rough diamond purchases from Alrosa and increasing state repository Gokhran's limits for this purpose, the ministry's press service told reporters.

"A preliminary agreement on the possibility of purchases was reached in December, the first purchase was made in March. Purchases will be made on a regular basis. The possibility of increasing the limits is being considered," the press service said.

Specific amounts and volumes will not be announced due to the sanctions restrictions imposed on Alrosa.

In the future, the diamonds purchased by Gokhran will likely be sold, the specific terms will depend on the current market conditions, the ministry said.

A spokesman for Alrosa refrained from commenting on this issue.

Gokhran operates within a budget limit for the purchase of precious metals and precious stones, which is 51.5 billion rubles for 2024. The limit can be raised legislatively. In the first half of 2020, when rough diamond sales stopped due to the pandemic, the Russian government considered a request from the leader of Yakutia to buy $500 million to $1.7 billion of Alrosa's diamonds. The deal was approved, but it was not needed as market demand for diamonds recovered by the fall of 2020. Then Alrosa head Sergei Ivanov said at the time that the price for sales to Gokhran was lower than the market price.

In the past, Gokhran annually purchased $100 million to $200 million worth of rough diamonds, but now purchases will be made on a larger scale, a source told Interfax. However, they will not be on the scale of purchases made in 2009, when Gokhran bought about $1 billion worth of rough diamonds from Alrosa to help it through the financial and economic crisis.

Now the purchase of diamonds by Gokhran is one of the instruments of support amid sanctions, and will enable Alrosa to partially offset lost revenues "due to the current chaos in the sector caused by the ban on Russian stones," the source said.

Following the imposition of sanctions at the beginning of 2024, market participants must prove that rough diamonds are not of Russian origin, and rough diamonds from various continents intended for sale in G7 countries are sorted at a sole control center in Antwerp, Belgium. The new rules have led to many problems with payments and logistics.

Following the imposition of the second phase of the sanctions on March 1, import procedures slowed even for rough diamonds received directly from African producers, more than 100 Antwerp dealers said in an appeal cited by Reuters. Market players said they expect new problems when additional requirements for tracking diamond products go into effect on September 1.