Mirny, August 21: Russian Prime Minister Vladimir Putin pledged on Friday $1 billion in state support for diamond miner Alrosa to help it weather a steep global decline in demand for gemstones.
“The overall level of support for the sector should total 30-35 billion roubles ($949.4-$1.11 billion) this year,” Putin told a meeting of senior officials in Mirny, Eastern Siberia.
“It is difficult to do with the background of the financial-economic crisis, but we shall do it,” Putin said.
The state support, which will include more state purchases of gems, is likely to help state-controlled diamond miner Alrosa service about $3.6 billion in outstanding debt.
Alrosa, a major rival to De Beers, produces about one quarter of the world’s rough diamonds.
“To support the sector, the state has agreed to significantly increase state purchases of diamonds,” Putin said after meeting miners at one of Alrosa’s giant diamond pits.
He said state purchases of diamonds, which are made by the State Precious Metals and Gems Repository (Gokhran), had risen to 14.5 billion roubles from 3.7 billion roubles. He did not say over what period.
Alrosa was seeking to sell Gokhran another $3 billion worth of gems during 2009-2010 to earn enough to service the company’s outstanding debt.
“The support given by the state will allow Alrosa to fulfil its obligations and to finance its investment programme,” a spokesman for the diamond maker said.
Russia’s economy is in the worst recession since the chaotic days of the 1990s and companies are asking the government for hundreds of billions of dollars in state support.
But with the economy on course to decline by half a trillion dollars this year, officials say only major companies — or those with particular social or political importance — are likely to be bailed out.
Diamond sales make up 30 percent of the local government revenue in the remote Eastern Siberian region of Yakutia. Alrosa employs 15,000 people and produces 97 percent of Russia’s rough diamonds.
Putin also ordered ministers to work out a way to give a state guarantee to Alrosa to help it restructure its debts to domestic and foreign creditors.
–Agencies