The beginning of 2009 was a period of further expansion of crisis phenomena which brought about a well-marked devaluation of the Russian rouble towards the U.S. dollar. The raw-material priority in the national economy due to a ten-time decrease in oil prices as well as due to a sharp drop in demand for primary goods resulted in a deep crisis in many industries. In late 2008 and early 2009 the Russian diamond complex was also affected by a slump in demand for rough diamonds. The Russian key diamond miner, ALROSA, in the first half of 2009 virtually ceased its rough sales on the international market selling only to the Gokhran Agency of the Russian Federation. However, it managed to maintain its output of rough diamonds at previous levels (Fig. 1).
Source: Annual Reports of ZAO AK ALROSA in 2000 – 2009
According to the company’s report in 2008, its annual output of rough diamonds actually remained at its previous level. The company’s sales of rough diamonds in U.S. dollar terms were up 1.4% at the annual average rouble/dollar rate down 2.8% (Table 1).
Although the company’s capital investments were to a certain extent lower, its profit went down four times and its net profit dropped nine times. The decrease in demand on the global diamond market in late 2008 made the company to curtail its diamond sales on the international market by 30% and sell a large batch of rough diamonds worth around $300 million to the Gokhran Agency of the Russian Federation.
Last June, Gokhran bought 12 billion roubles ($384 million) worth of rough from ALROSA, although according to the tree-year plan for 2008 – 2009 it was supposed to allocate annually 3.69 billion roubles ($119 million) to purchase rough and polished diamonds. However, it should be admitted that the company has virtually left the international market and its coming back will mean considerable efforts and probably losses in its future rough sales.
Yuri Danilov, Senior Research Fellow, Department of Rough and Polished Diamonds Complex Economy, Institute for Regional Economics of the North (Federal State Scientific Entity)
