Russian Government to expand its share in Alrosa and then privatize it

The Russian government will expand its share in the Alrosa diamond monopoly—and then will start to privatize it, and may offer foreigners a chance for a piece of the lucrative producer, a top Cabinet official said in an interview published Monday.

Deputy Prime Minister Alexei Kudrin, who also holds the rank of finance minister, said that the government would turn Alrosa—the world’s second-largest diamond producer after South Africa’s De Beers—from a closed stock company to an open one as required by law before any of its shares can be sold on the open market, the Associated Press reported.

“The preparatory work is already being done,” Kudrin said in an interview published in the daily Izvestia.

Kudrin, who was recently appointed chairman of Alrosa’s monitoring council, refused to give any specific timeframe for the sale of government shares in the company, the AP reported.

Kudrin reportedly said that foreigners could be allowed to buy Alrosa’s stock in the future. “I don’t see a problem in foreign participants coming in,” he reportedly said.

The government may try to further increase its share in the company before some of its stock is offered for sale at open market, but won’t necessarily seek a controlling interest in Alrosa, Kudrin reportedly said.

“First, we must figure out whether we want Alrosa to remain under state control in the long-term perspective,” Kudrin was quoted as saying. “Or, we may gradually sell the company’s stock proceeding from the goal of maximizing our earnings by regulating tax mechanisms and through rent.”

Last December, Alrosa signed a new five-year, $4 billion trade agreement with De Beers that provided it guaranteed sales for five years—and the opportunity to expand Russia’s domestic market.

Under a previous deal, Alrosa was selling 98% of its rough diamonds to the London-based Central Selling Organization, controlled by De Beers. The new deal brought the figure down to no more than 50%, while roughly the same amount would go to the Russian market, the AP reported.