Foreigners will be able to buy large diamonds from the Russian State Repository
By Yulia Krivoshapko
(Rossiiskaya Gazeta) - Foreign companies will be allowed to buy Russian large-size diamonds at auctions held by Gokhran. Relevant amendments have been drafted by Russia’s Ministry of Finance. Experts note that making the community of diamond buyers wider is a forced measure, which had to be taken due to a sharp drop in demand and prices for rough.
As it follows from the new version of regulations for the sale of special-size diamonds weighing 10.8 carats and above in the domestic market, foreign companies operating in this country will be admitted to take part in such auctions. The Ministry of Finance clarified to RG that it would be obligatory for diamond auction bidders to be entities resident in Russia for tax purposes.
Currently, only domestically based companies are allowed to take part in bidding – mainly, these are cutting and polishing businesses. So if the amendments proposed by the Ministry of Finance are adopted, the buyers’ community will expand.
Demand for diamonds in the world market has fallen conspicuously, pulling down prices, which shed 15% in 2015, Sergey Goryainov, an expert of the diamond industry news agency Rough & Polished told RG. In his opinion, the main reason was a slowdown in the Chinese economy. “A few years ago, everyone expected the Celestial Empire would become the world’s leader in diamond consumption, but alas, these predictions did not materialize,” the expert said.
The situation is exacerbated by the declining interest towards jewelry in the Middle East turned apparent after the fall in oil prices. So far, demand is underpinned by the US, but this country is not able to pull the market alone. “So, most likely, diamond demand will stay low not only this year, but next year as well,” Sergey Goryainov believes.
Gokhran is now selling rough bought from Russia's largest diamond miner, ALROSA. This giant company, which ranks the second on the list of global diamond miners, had to be rescued during the downturn in 2008-2009. At that time, the state spent tens of billions of rubles to buy diamonds from the miner. “These are mainly small stones, which are not considered hot-ticket goods in the market, but given the right price they may well find buyers,” Sergey Goryainov said.
Large diamonds weighing 10.8 carats and more are quite another thing. They are fewer in number at the State Repository, but demand and, of course, prices for such stones are as a rule higher. So, if sold, they are good money-earners even now. The specifics of diamonds weighing over 10 carats are in that there is no uniform scale to determine their value. Therefore, their appraisal follows a special procedure. Gokhran experts set their price, while experts from companies taking part in an auction set theirs. If some buyer offeres a price higher than the price asked by Gokhran, such stones are sold. If offered prices are below those of Gokhran, diamonds remain in the repository.
Recently, the Ministry of Finance announced an auction for special-size diamonds. It is scheduled for the 12th of April.
Trading sessions at Gokhran are not quite the usual type. Here, there is no one to bring down the auction hammer. Buyers are given an opportunity to view diamonds before the auction - the stones are on display at Gokhran during one month. Then, buyers submit their bids in sealed envelopes. On the appointed day, the auction principal announces diamond lots and opens the envelopes carrying the names of buying companies. Those, who offer the best price, win. Bidding is considered invalid if every lot offered for sale attracts less than two buyers.
“This year, proceeds from diamond sales may help the Ministry of Finance to reduce the budget deficit at least a little bit,” Sergey Goryainov noted. However, with equal ease the sale proceeds may be used to replenish the State Repository with more liquid valuables, gold and platinum, as precious metals have always been a sheet anchor in time of emergency.
Incidentally, while selling diamonds from the State Repository in the domestic market, Russia is also exporting diamonds on a large scale. Being engaged in export activities, diamond miners felt in full the impact of the crisis in their industry last year. According to the data published by the Ministry of Finance, rough exports dropped by 17.6% to 20.38 million carats. And these were the numbers for the first 9 months only.
That said, it should be noted that Belgium remained to be the leader among Russia’s largest diamond buyers. In the first nine months of 2015, Belgium bought more than 15.4 million carats worth over $ 1.6 billion. The second-largest buyer was India, which purchased about 4.4 million carats of diamonds paying $ 418 million. Russian diamonds were also eagerly bought by the United Stated and United Arab Emirates.
