Gokhran helps stabilize diamond market this year, to continue this function - Moiseyev

MOSCOW. Dec 6 (Interfax) - The involvement of the Russian State Precious Metals and Gemstones Repository (Gokhran) has helped stabilize the diamond market this year and it will continue to play such a role in the future, despite the fact that it sells relatively small batches of mostly small inexpensive stones, Russian Deputy Finance Minister Alexei Moiseyev told Interfax in an interview.

According to Moiseyev, Gokhran was a stabilizer in the diamond market this year, selling rough diamonds worth about $230 million from its stocks, which exceeded the current budget limit. About 70% of rough diamonds offered for sale were purchased by Alrosa, acting at the request and in the interests of its long-term customers amid an acute shortage of rough diamonds required by diamond cutters to fulfill a growing number of orders.

Gokhran's participation prevented diamond prices from skyrocketing, as it happened with gas prices, Moiseyev said. Gokhran's intervention could not balance the market, which is estimated at more than $15 billion, but prevented a market failure, Moiseyev said.

In the future, sales of diamonds from Gokhran will follow roughly the same logic as this year, Moiseyev said. Gokhran will sell mostly small inexpensive stones from its stocks, most of which were formed during the 2009 financial and economic crisis, when Gokhran bought out the entire $1 billion output of Alrosa.

"It is advisable to replenish the Gokhran with diamonds, which retain their high liquidity even during a crisis, because this is the period when Gokhran reserves may be needed to finance the federal government's spending commitments. The liquidity of small inexpensive stones at such times is almost non-existent, so it would be wise to sell them during a period of high demand. That will, firstly, help maximize revenues for the federal budget and, secondly, have a certain stabilizing effect on the market and increase the liquidity of Gokhran," he said.

Some portion of good gem-quality stones will also be sold, at least in part because Gokhran has obligations to support the Russian diamond cutting industry, which specializes in high-quality stones.

The state of Gokhran's stocks made it possible to factor into the budget a fairly ambitious forecast for next year's sales (10 billion rubles), Moiseyev said.

In terms of the speed of diamond sales, Gokhran faces natural limitations due to the lack of specialists for pre-sale preparation as well as the ongoing inventory of a huge backlog of Soviet jewelry industry products, he said.

"When replenishing Gokhran stocks, we give preference to gold, which is more reliable, if not in terms of price, then in terms of liquidity," Moiseyev said.