ARMENIAN PURCHASE PLAN FOR RUSSIAN ROUGH STILL ROCKY
by John Helmer

RusData Dialine – Russian Press Digest
September 10, 2008 Wednesday

Despite optimism in Armenia that Russian rough will soon be supplied
in greater volumes to the Armenian 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 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
despatched.

An inter-government agreement between Moscow and Yerevan used to
provide supply of up to 6,000 carats 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
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 purchases.

Out-sourcing for stones that are not profitable to cut in the Russian
plants is what the Armenians cutters want. Tolling terms limits their
financial exposure, as the stones 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 on tolling contract, because it is a mining company, not
a processing enterprise. Various alternatives for Alrosa to supply
the Armenian 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 stones to be supplied to
Armenia on tolling contracts. "There have been no results, yet,"
he told PolishedPrices.