A flurry of diamond sales and revenue claims posted on the Alrosa website have yet to be substantiated by the chief executive, Fyodor Andreyev, or Alrosa's spokesman, Andrei Polyakov.



Andreyev has authorized a series of website releases since he took office, claiming that commercial sales of Alrosa's rough diamonds have been accelerating. In July, Andreyev claimed the value of these sales for that month amounted to $150 million, plus $13 million for a relatively unsuccessful diamond auction of specials which brought in $13 million.



In September, a new announcement authorized by Andreyev claimed the company had booked $651.5 million worth of rough diamonds for the month. But most of that, the company acknowledged, went to the state stockpile agency, Gokhran. According to Polyakov, the company spokesman, commercial sales of rough diamonds in that month amounted to between $190 million and $200 million.



On October 22, Andreyev issued a new claim that for the month of October, Alrosa had sold rough diamonds for a total of $351 million, of which $255 million were commercial sales, and the balance of $96 million sales to Gokhran. This appears to mean that the total sales level was falling month on month, but commercial sales were growing.

The published statement also claimed that in the nine-month period to September 30, “the Alrosa Group sold rough and polished diamonds for a total of $1.730 billion, with nearly $1 billion out of that in the third quarter of 2009.”



Polyakov has given PolishedPrices an additional report for the same period, indicating the aggregate of sales of polished and rough diamonds totaled $1.34 billion, including deliveries to Gokhran.



Andreyev and his spokesman were asked to explain the difference between these conflicting reports. On November 11, Polyakov said in a written statement that Andreyev will not clarify anything until after the Supervisory Board meeting with the state shareholders later this month.



Alrosa’s former chief executive and former head of Gokhran, Valery Rudakov, has hinted at how little has changed inside Alrosa, since Andreyev took over from Vybornov in July this year.

Making a veiled criticism of the lack of improvement in transparency for sales, diamond pricing, and financial performance, he said in an interview with a Russian industry publication, Rough & Polished, this month, that he is "in support of maximum transparency in the diamond market and I believe that any movement in this direction is positive.... In Russia, cancelling of many diamond industry secrets inherited since the Soviet time was favorable for market development. As for diamond pricing, today it is governed by competition. Formerly, prices set by De Beers for their sightholders were actually world prices, being some kind of analogue to the London fixing for gold. No price-list was published, but all the buyers knew the prices. Now any agreement between major diamond miners on some uniform principles in marketing policy or on some kind of uniform price-list appears to be problematic since the market is functioning in a competitive environment. Therefore, promptly published information about price movement for rough diamonds based on real transactions could be a useful reference point for market participants."

In June and July, the then chief executive, Sergei Vybornov, claimed that he had fixed from 6 to 15 sales contracts for a total value of $900 million. The pricing formula, according to Vybornov, was “the price-list of the Ministry of Finance plus 17 %”. Each contract, according to Vybornov, had been for not less than $200 million, and for terms of 3 to 5 years. The buyers, Vybornov claimed, included Tiffany of the US; Dali Diamonds and Diarough of Belgium; and some unidentified Israeli companies.

“We have begun with [the Belgian companies]," Vybornov said publicly, "for the simple reason that the Belgian government declared the granting of guarantees to the diamond banks for a total of $1 billion A bit later, this initiative got the [additional] support of the Flemish authorities, declaring guarantees for $250 million.”



Since taking over from Vybornov, Andreyev appears to be under instruction from Kudrin that, once he's cleaned up the company books, he should get Alrosa ready for conversion into an open stockholding company, with the aim of converting some of its long-term debt and capital shortage into privatization of some of its shares. A commentary this month in Moscow by an industry magazine backed by Alrosa recommended a share sale to the market, and proposed steamrollering over objections from the Sakha region shareholder to accomplish that. "State support cannot be indefinitely used to keep Alrosa alive," wrote Sergei Goryainov for Rough & Polished. The company should have an opportunity to attract funds to the diamond industry and use its significant investment potential."

What this means, Goryainov concedes, is that "the two largest shareholders are required to reconcile their positions. However, there is a resolution of the Yakut Parliament passed in 2005 saying that organizationally and legally preserving Alrosa as a closed joint-stock company meets Yakutia’s [Sakha] state interests." What follows is a blunt attack on Shtirov's administration. “The state interests of Yakutia are in this case only a reflection of the now absolutely irrelevant four-year-old intra-corporate tussle and are very wide of the present crisis realities in the diamond market. But formally, this resolution remains in force and may oblige the shareholder representing the Republic of Yakutia to vote against ALROSA’s transformation into an open join-stock company."

Ever since the collapse of the state economic plan system in 1991, the Sakha region has sought to improve its bargaining position for federal funds and local revenue autonomy through retaining control over the region's principal cash-cow, Alrosa. In the absence of trust in a succession of Kremlin promises and Finance Ministry undertakings, retaining the present shareholding structure of Alrosa has been an obvious, and a strategic necessity for the region's politicians. No Alrosa chief executive has been strong enough to overcome this.

"Taking into account the current debts of Alrosa," argues Goryainov, "the federal authorities and Yakutia most likely do not have any potential objections to raise the level of Alrosa's capitalization by contributing financial assets on the one hand, and material assets on the other. But to assess the necessary scale of additional plough-back, without an objective estimate of the company’s current value, is practically impossible. Alrosa's additional capitalization is necessary to solve the key problem of re-structuring its huge debt liabilities, which consequently means that this company has an unbiased interest in turning 'open'."