2003

EC Investigates De Beers, Russia Deal

Feb. 2003

Around the same time it finally gave approval to Supplier of Choice (see page one), the European Commission issued objections to De Beers’ deal with Russia’s ALROSA, saying in a statement that "by entering into the agreement, De Beers has abused its dominant position in the rough diamonds market."

De Beers managing director Gary Ralfe and sales director Garreth Penny said they hope to modify the deal to meet the E.C.’s objections. Alrosa issued a pro forma statement, following De Beers's lead in welcoming negotiations with the E.C.

The Russian industry feels it has nothing to lose either if the trade continues on the current, willing-buyer, willing-seller basis.

The agreement provides for the sale by Alrosa of up to US$4 billion in rough diamonds to De Beers' Diamond Trading Company over a five-year period, with the proviso that $500 million of each year's deliveries should be run-of-mine, and with the allowance for lesser deliveries in the last two years of the agreement.

Since then, President Vladimir Putin has signed into effect a decree allowing greater flexibility for Russian diamond exports outside the De Beers marketing channel.