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diamond market and for regulating the market itself.
 
It seems that in the diamond industry power struggle ARS has won
the first round. (END/IPS/JMP/RJ/96)
 
 
Origin: Amsterdam/RUSSIA/
                              ----
 
       [c] 1995, InterPress Third World News Agency (IPS)
                     All rights reserved
 
  May not be reproduced, reprinted or posted to any system or
  service outside  of  the  APC  networks,  without  specific
  permission from IPS.  This limitation includes distribution
  via  Usenet News,  bulletin board  systems, mailing  lists,
  print media  and broadcast.   For information about  cross-
  posting, send  a  message  to  <ips-info@igc.apc.org>.  For
  information  about  print or  broadcast reproduction please
  contact the IPS coordinator at <ipsrom@gn.apc.org>.
 
 
Conf: (i)ndex (u)nread (w)rite (c)apture (v)isit (g)o e(x)it (q)uit (?)
Conf?
Conf?  4
 
 
Topic 4 RUSSIA: Diamond Industry Chief Fire
newsdesk        The Inter Press Service in English       2:34 PM  Feb 28, 1996
 
       Copyright 1995 InterPress Service, all rights reserved.
          Worldwide distribution via the APC networks.
 
                      *** 25-Feb-96 ***
 
Title: RUSSIA: Diamond Industry Chief Fired As De Beers Wrangle Goes On
 
By Andrei Ivanov
 
MOSCOW, Feb 25 (IPS) - The dismissal by presidential decree of
Russian diamond industry chief official Yevgeny Bychkov is only
the latest twist in Russia's tortuous talks to ease the grip of
South African trading giant De Beers on the sale of Russian
diamonds.
 
Russia refuses to renew its old agreement with De Beers which
expired at the end of 1995, which gave the CSO control over 95
percent of Russia's uncut diamonds. Talks led by Bychkov, head of
the State Committee for Precious Metals and Stones
(Roskomdragmet), have rumbled on for over a year with no
conclusion.
 
His dismissal on Wednesday came on the day of the scheduled
opening of a third round of talks with De Beers. Bychkov's place
at the talks is being taken by Finance Minister Vladimir Panskov.
 
Speculation is rising within the industry that the Bychkov was
fired to ease De Beers' frustration and clear the way to a quick
resolution to the negotiations; London sources say chaos reigns
within the Russian industry and that Bychkov was clearly unable to
bring this massive hard currency earner into line.
 
President Boris Yeltsin's press office said Bychkov ''lacked
personal discipline in carrying out the president's and
government's instructions''.
 
Aside from the inconclusive talks process, the industry is being
rocked by corruption claims, bilateral deals, varying pricing
scales and bitter rivalry between the different sectors of the
industry, some of whom are challenging Roskomdragmet hard.
 
There were further corruption allegations relating to 88 million
dollars of uncut diamonds supplied last year to the U.S. firm
Golden Ardour. The uncut stones were sent to the firm's cutting
factory in San Francisco but the payement allegedly never reached
Roskomdragmet.
 
Bychkov admits to making mistakes but points out that legal
proceedings have been started against the U.S. firm. He denies any
corruption and says his removal is purely political.
 
Panskov has been unable to deny outright that Bychkov's dismissal
was linked to the negotiations. ''It's difficult for me to talk
about it,'' he says. ''It may simply be a coincidence.''
 
He said Russia is still taking a firm line with De Beers on its
aim to build up the Russian diamond cutting sector. ''We are
insisting strongly that Russia should export not uncut diamonds
but cut diamonds,'' said Panskov. ''If the gentlemen from De Beers
don't agree to our conditions we won't continue the talks. That's
our position.''
 
Estimates by Roskomdragmet experts quoted by the daily
Nezavisimaya Gazeta suggest that the expansion of the country's
diamond-cutting sector would create over 14,000 new jobs and
provide add nearly 2.4 billion dollars to the federal budget.
 
One of Bychkov's last acts as Chairman was to sign a memorandum
of understanding with Botswana, intended to promote direct
cooperation between diamond producers and traders and bypassing De
Beers.
 
The two sides agreed to exchange information on a regular basis
''for the purpose of harmonising methods of selling diamonds in
order to ensure equitable sharing of the market''.
 
They also agreed to ''explore the feasibility and viability of
creating an appropriate forum to promote liaison and cooperation
between all major producers of diamonds''.
 
But the new player in the Russian industry developments is the
diamond company Almazy Rossii-Sakha (ARS) which has been in
dispute with Roskomdragmet recently over the respective roles of
the two organisations and national pricing policy.
 
ARS first vice president Lev Safonov says Bychkov's departure
will not affect the course of the talks with De Beers. Safonov
says a special commission, chaired by prime minister Viktor
Chernomyrdin, has worked out ''a common Russian approach'' and
denies there is any difference of opinion among the commission
members.
 
He supports the general principle that Russia should keep more
uncut diamonds in the country to develop its own cutting and
jewellery industry. ARS, based in the Yakut Republic in Siberia,
has however made it clear that it intends to develop and expand
its own role in the industry.
 
This is the main source of tension with Roskomdragmet. ''ARS is
against creating a structure which would monopolise the sale of
rough diamonds,'' says Safonov. ''We are flatly against extractors
being obliged to give its products to somebody else, which has
been the practice over the past few decades.''
 
ARS is Russia's biggest diamond producer and regularly holds
fourth or fifth place in the world in the sale of rough diamonds.
Admitting that the differences with Roskomdragmet, Safonov says
some state officials want to deprive the company of the right to
own its products.
 
He believes that the Russian Rosalmaz selling organisation should
represent the state and work with the diamond stocks in the state
depository. He wants a single pricing policy on the Russian market
for rough diamonds and says the company will sell its products to
Rosalmaz, but only at world prices.
 
Meanwhile ARS plans to set up a London subsidiary, Diamonds of
Russia-Sakha UK, with an authorised capital of 10 million dollars.
The company aims to attract a billion dollars in investment in the
next five years, according to company vice president Semen
Zelberg.
 
He says annual investment will mostly be channelled into mining.
ARS spent around 109 billion roubles (24.2 million dollars) of its
total profits on mining and around 485 billion roubles (107.7
million dollars) on compnay staff welfare provision last year.
 
Capital investments totalled about 800 billion (177.7 million
dollars). Preliminary estimates for 1995 put ARS's total revenue
at 5,360 billion roubles (1.19 billion dollars), with sales profit
totalling 3,300 billion roubles (733 million dollars).
 
The company hopes to process 100 million dollars worth of
diamonds in 1996, says company managing director Sergey Ulin.
''ARS has a stable raw materials base across Yakutia, with diamond
stocks that will last until at least 2050.''
 
He explains that, while production targets had been the company's
priority in the past, the cost-effectiveness of individual diamond
fields is now taking precedence.
 
''Relations between ARS and the De Beers corporation are not
antagonistic,'' he stresses, adding that there are numerous means
of achieving a balance between supply and demand on the world
diamond market and for regulating the market itself.
 
It seems that in the diamond industry power struggle ARS has won
the first round. (END/IPS/JMP/RJ/96)
 
 
Origin: Amsterdam/RUSSIA/
                              ----
 
       [c] 1995, InterPress Third World News Agency (IPS)
                     All rights reserved
 
  May not be reproduced, reprinted or posted to any system or
  service outside  of  the  APC  networks,  without  specific
  permission from IPS.  This limitation includes distribution
  via  Usenet News,  bulletin board  systems, mailing  lists,
  print media  and broadcast.   For information about  cross-
  posting, send  a  message  to  <ips-info@igc.apc.org>.  For
  information  about  print or  broadcast reproduction please
  contact the IPS coordinator at <ipsrom@gn.apc.org>.
 
 
Conf: (i)ndex (u)nread (w)rite (c)apture (v)isit (g)o e(x)it (q)uit (?)
Conf?

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