Today, an appeals court overturned a ruling by the European Commission anti-trust division that prevented Russian diamond producer Alrosa from selling diamonds to De Beers. (Press release here.) Alrosa is the world’s second largest seller of diamonds, with an estimated 25% of world production; two weeks ago, we looked at what the diamond world would be like if it were completely independent.

So with the Commisson’s ruling null and void, will Alrosa get back together with De Beers? Not necessarily:

– The days of Russia selling all, or virtually all, its production to De Beers are almost certainly a thing of the part. Alrosa had proposed selling $275 million a year to De Beers after 2010. That’s a fraction of Alrosa’s annual output (its sales topped $3 billion in 2005.)

The press release announcing the reversal notes that “the complete prohibition of all commercial relations between the two parties [requires] only exceptional circumstances, such as, in particular, the existence of a possible collective dominant position.” The implication is that Alrosa selling $275 million to De Beers does not create a “dominant position.”

– Alrosa really led the fight against the E.C. prohibition; De Beers didn’t seem interested and was more focussed on securing E.C. approval for “Supplier of Choice.” De Beers now says it is examining the decision.

– The E.C. has a right to appeal this ruling, and they are apparently looking at that option.

Alrosa vice president Sergey Oulin had told me in Amsterdam: “We believe the [initial] decision by the Commission violates our rights … We are challenging our rights in principle, regardless of what we are going to do.” Still, it would be hard to believe that they would go through all this time and expense and then not take advantage of this unequivocal legal victory. 

Some think this could have an impact on other E.C. decisions, like its rulings on Supplier of Choice or the DTC Ombudsman. For the last few years, so much of what has gone on in this industry has been dictated by lawyers. Anything that redraws the legal map could have a huge impact.

Personally, while I admit that $275 million one way or another probably won’t make a huge difference, I had grown comfortable and happy with the idea that this industry was in a “post-cartel” phase. Granted, we are long way from going back to that point, but I do think competition among producers is a good thing for the industry overall.

More commentary from Mineweb here.

Rob Bates

JCK News Director