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By John Helmer in Moscow

In the last three months of 2009, according to the federal Ministry of Finance in Moscow, Russia exported about 250,000 carats of rough diamonds, produced by Alrosa, to the west African republic of Guinea. There is no known diamond cutting or polishing facility in Guinea, and Russia has never exported diamonds to Guinea before. However, illicit sales of diamonds (aka blood diamonds, conflict diamonds) have been reported as using Guinea as a transit point between the mines in Africa and the markets in Israel, Europe, the US, or elsewhere.

The Finance Ministry in Moscow supervises the diamond sector and the state stockpile; its minister, Alexei Kudrin, is chairman of the board of Alrosa. The ministry is also in charge of monitoring compliance with the Kimberley Process for certificating diamond trading that does not involve diamonds mined illegally. As part of Russia’s compliance, the ministry issues regular reports on Russian exports.

The latest report covers 2009. It indicates that a total of 14.708 million carats were exported, for a declared value of $1.229 billion. Almost all of these stones were sold by Alrosa. Alrosa also sold 14 million carats of its production to the state stockpile agency, Gokhran, during the year.

The impact of the autumn 2008 global financial crisis shows in the near-halt of diamond exports from Russia in the first quarter. Just 135,597 carats were exported, according to the Finance Ministry report, worth $724,000. Compared to the same quarter of 2008, when shipments of 6,649,000 carats were recorded, in volume terms the export flow fell 49 times.

In the second quarter of 2009, Russia reports exporting 2,713,000 carats, at a value of almost $30 million. Most of the trade went to Belgium (2,016,000 carats), followed by Israel (253,658 carats).

In the third quarter, as Alrosa’s marketing found new buyers, growing demand, and rising prices, the exports reached 5,334,000 carats, worth $540.9 million. In the fourth quarter, the export volume rose again to 6,525,000 carats, at a value of 656 million. Belgium accounted for 73% of the goods; India for 19%.

Chart 1 – volume in carats
Chart 2 – value in US Dollars
Blue = Q1, red = Q2, green = Q3, violet = Q4
Countries, left to right: Armenia, Belarus, Belgium, UK, Guinea, Israel, India, China, UAE

According to the information released by the Finance Ministry, Guinea was the reported destination for shipments of rough in the fourth quarter; the charts show volume of about 250,000 carats for a value of $50 million.

Ararat Evoyan, head of the Russian Association of Diamond Manufacturers, told PolishedPrices.com, the reported trade is difficult to explain. “It sounds very strange. Maybe someone in Guinea buys Russian diamonds to mix them with their production and export further. Maybe Guinea is just a mid-way point for exports. I don’t really know, and it’s difficult to say that for sure.”

Another well-known Russian diamantaire said he suspects a recording or reporting mistake. “I would explain the Guinean exports as a technical Customs mistake or the effect of company registration particulars. A buyer could be registered in Guinea, but actually be located in India, for example. I don’t think the issue of re-export could be involved, because the re-exporter would have to pay the 6.5% tax, and nobody wants that.”

The Finance Ministry and Alrosa were asked to clarify the details of the Guinean sale. The Ministry said: “The data on diamond sales to Guinea are a commercial secret”. Alrosa responded: “We have never exported diamonds to Guinea”.

Guinea’s Minister of Mining, Mahmoud Thiam, said: “It’s the first time I hear of this [Russian] diamond business and it does not make much sense to me. Diamond exports from Guinea are free and happen on a regular basis. All the exporters need to do is have their stones inspected, valued and certified by the Central Bank, pay their 3% tax, and they are free to sell. The government does not mine or sell itself. So there is very little room for games.”

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