Alrosa is financially stable, has margin of safety to seek opportunities to sell diamonds, including on Russian market - Moiseyev

MOSCOW. May 18 (Interfax) - Alrosa , which is subject to U.S. sanctions, is quite financially stable, and the company has a margin of safety to seek opportunities to sell its diamonds, Deputy Finance Minister Alexei Moiseyev told reporters in the State Duma.

Moiseyev noted that Alrosa's inclusion in the U.S. Treasury Department's specially designated nationals and blocked persons (SDN) list has caused serious problems with diamond sales.

"Naturally, Alrosa has serious issues, and we are considering various means regarding this. To date, we see that the financial condition is quite stable, and the company has the possibility and stability to seek opportunities to sell its diamonds," Moiseyev said when answering about the possibility of selling part of the company's production to the Russian State Precious Metals and Gemstones Repository (Gokhran).

Specifically, the Finance Ministry expects to increase the share of sales of the company's products on the domestic market.

"One of the initiatives that we are currently preparing is the possible liberalization of the procedure for circulating rough and polished diamonds on the domestic market in order to provide some part of the market for them at least in Russia," Moiseyev said.

The Finance Ministry has already sent its proposals to the government.

When asked whether the proposed liberalization was related to tax easements, as in the case of investment gold, he said, "Including".

Alrosa, regulators and banks were previously considering possibly organizing exchange trading in investment diamonds in Russia, though the idea did not find mass distribution and appeal, having not moved beyond the sale of piece expensive stones and products.

The domestic market has usually accounted for no more than 10% of Alrosa's revenue, while the largest Russian buyer of the company's diamonds, Smolensk-based Kristall, is part of the Alrosa group.

Russia supplies about 30% of the world's diamonds. In early March, the United States banned the import of rough and polished diamonds from Russia, though the measure does not apply to products that have undergone substantial processing outside of Russia. The bulk of rough diamonds from Russia is cut in India, which produces 95% of the world's polished diamonds. For India, diamond cutting and jewelry manufacturing is the third largest source of export earnings.

Although the key sales channels of Russia's Alrosa have not yet been sanctioned, the company's important, long-term customers, the U.S. retailers Signet and Tiffany, have stopped buying. The ban on purchases by Tiffany, whose owner is LVMH Moet Hennessy Louis Vuitton, includes diamonds of Russian origin, regardless of where they have been cut.

Meantime, some Indian cutters have begun refusing to buy stones from Russia owing to the uncertainty created, and they are preparing for indicating the origin of each stone and redirecting diamonds from Russia to the markets of China, Southeast Asia, or the United Arab Emirates (UAE), Bloomberg reported in mid-May.