EU Probes De Beers-Russia Deal

By Rob Bates, Senior Editor -- JCK Online, 12/1/2002 2:00:00 AM

The European Commission is investigating whether a deal between De Beers and Russia violates antitrust rules, the Wall Street Journal recently reported.

When the deal was signed earlier this year, a De Beers statement said it would be reviewed with the European Union. Now it appears the EU doesn't like what it sees. Investigators are concerned that "the Russian contract would continue to send most of Russia's exports into the hands of De Beers, which could hurt competition in the world's diamond trade and keep the prices higher than they otherwise would be," the Journal wrote. The contract calls for approximately half of Russia's production to be sold to De Beers. (See "De Beers and Russia Sign Deal," JCK, March 2002, p. 46)

The WSJ article was followed by Russian press reports that the country will decrease the number of goods it sells to De Beers to meet the EU's objections. Russia is the world's second-largest diamond producer.

De Beers spokeswoman Lynette Hori told JCK that "De Beers and [Russian diamond producer] Alrosa both elected to file the agreement for review by the European Commission in the spring. The Commission is still conducting a review of the agreement. We have not received any definitive indication of the Commission's position, and we are certainly not talking about measures to prohibit or modify the agreement. Everything else is just pure speculation."

An EU spokeswoman did not return a call from JCK, and Russian officials could not be reached for comment. The EU also is examining De Beers' "Supplier of Choice" agreements for sightholders.