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By John Helmer in Moscow

Market reports that Smolensk Kristall refused last month to buy rough from Alrosa have been denied by Alrosa.

According to sources in Alrosa, the Russian state diamond company, Kristall proposed a 20% discount on purchases of Alrosa’s current rough price. Alrosa refused to supply, claiming that its pricing is in line with levels reported by De Beers in September transactions.

Instead of a price discount, Alrosa said that Kristall, along with other buyers, may exercise the option not to take 20% of an assortment, if they are unprofitable to cut.

Alrosa also told PolishedPrices that Kristall’s pricing would be loss making for Alrosa.

Kristall’s position is that Alrosa should extend the same discount terms to commercial buyers of rough that are being negotiated with the state stockpile agency Gokhran.

No details of the state backing for Alrosa’s diamond sales have been reported yet.

According to Kristall, Alrosa is trying to defend a commercial level of pricing that is 15% to 20% higher than the prevailing market level, while, at the same time, seeking the Finance Ministry’s support for Gokhran purchases on terms that would either compel the state to accept the risk of loss making in future, when Gokhran sold; or else at a discount not available to commercial cutters and polishers.

A Kristall source told PolishedPrices that Alrosa’s sales to Gokhran are “definitely a non-market measure, as Gokran will be buying at non market prices.” As for the commercial market, the source added: “Now there are just two types of players on the market – those who don’t have any money, and those who have the money but are very reluctant to spend it.”

The chairman of Alrosa’s board, Alexei Kudrin, is the Minister of Finance, and the official in charge of Gokhran.

Last month, Kudrin arranged for a rescue of a St. Petersburg bank, KIT Finance, which has been taken over by the state, through Alrosa and the Russian Railways Company (RZD). Alrosa has been a large depositor in KIT.

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