Russians accused of breaking diamond agreement

THE CENTRAL Selling Organisation, the De Beers-owned group that controls nearly 90 per cent of the world's diamond sales, has accused Russia of breaching its agreement with the CSO to sell all Russia's gem quality diamonds.

The move could end the joint selling agreement and lead to a dramatic fall in world diamond prices.

Russia, which produces about 15 per cent of the world's diamonds measured by value, has been known to be selling rough diamonds in the market for a while to bolster its foreign exchange reserves.

However, these have been mostly lower quality industrial diamonds, which are among the 5 per cent of Russian output not covered by the five-year agreement between De Beers and Alkmazy Rossii Sakha, the Russian diamond corporation.

De Beers spoke yesterday of recent signs that gem quality diamonds from Russia were being sold in Antwerp, the main outlet for diamonds not sold through the CSO.

'We believe the leakage is mostly from the state treasury stockpile in contravention of our agreement,' said Roger van Eeghen, a spokesman for De Beers. 'We have made representations to the Russian authorities.'

The CSO has had a problem with Russia since the break-up of the Soviet Union. There are many critics of the agreement within Russia.

Earlier this year Yevgeny Bychkov, head of the Russian state committee on precious stones, said Russia wanted to sell up to a fifth of the diamonds it produced.

Mr van Eeghen said that the Russian sales had not yet hit prices but they had caused a certain upset in the market, particularly at the cheaper end.

The Russian problem threatens to overshadow a strong recovery in the diamond market. Yesterday the CSO released 1993 figures showing rough diamond sales up 28 per cent at a record dollars 4.37bn ( pounds 2.94bn).

De Beers said that restocking by the US jewellery trade had bolstered the market and retail sales of diamonds were still fairly soft thanks world economic conditions. In particular Japan, the second-largest market for gems, was still suffering from recession.

The CSO also took heart from the fact that the flow of diamonds mined illegally in Angola had dried up due to the intensifying civil war.