ARMENIAN PURCHASE PLAN FOR RUSSIAN ROUGH DIAMONDS STILL ROCKY
Israel Diamond Portal
Sept 9 2008
Israel
Despite optimism in Armenia that Russian rough diamonds will soon be
supplied in greater volumes to the Armenian diamond cutting industry,
the supply position remains uncertain, and volumes restricted.
An announcement from Yerevan, the Armenian capital, recently indicated
that Smolensk Kristall, Russia’s largest polisher, would supply
between 6,000 and 7,000 carats of diamonds by the end of this year.
But additional sources of supply from Russia are doubtful, and Kristall
cannot increase its volume.
Gagik Kocharian, head of Trade Policy and Domestic Market Regulation
at the Armenian Economics Ministry, revealed the Kristall commitment
has been agreed with the Diamond Company of Armenia (DCA). He also
noted that the first consignment of 650 carats of diamonds has been
dispatched.
An inter-government agreement between Moscow and Yerevan used to
provide supply of up to 6,000 carats of diamonds per annum on deferred
payment or tolling-fee terms. Direct sales at prevailing market
prices are very small, because of the limited financial capacity of
the Armenian diamond cutters.
Ararat Evoyan, executive director of the Russian Association of Diamond
Manufacturers, said that, under the regulations in place since 2001,
Russian manufacturers have the right, subject to government licensing
approval, to sell or process by tolling contract up to 15% of their
total rough diamond purchases.
Out-sourcing for stones that are not profitable to cut in the Russian
plants is what the Armenians cutters want. Tolling terms limit their
financial exposure, as the diamonds must be returned to the supplier,
leaving the Armenian cutters with a tolling fee for processing,
and throughput for their production lines.
The Kristall agreement, Evoyan believes, is a tolling arrangement
under the 15% proviso in the regulations.
Alrosa cannot supply Armenia with rough diamonds on tolling contract,
because it is a diamond mining company, not a processing enterprise.
Various alternatives for Alrosa to supply the Armenian diamond cutters
have been in discussion for months, but without concrete outcome.
Evoyan said that the Russian manufacturers would like the government
in Moscow to permit a larger volume of diamonds to be supplied to
Armenia on tolling contracts. "There have been no results, yet,"
he told PolishedPrices.