The economic slowdown that gripped the entire world in the past year has also affected Russia in a big way. Russia’s largest diamond manufacturer that holds a virtual monopoly over the diamond market has lost its sheen due to the global meltdown and is now banking on the Russian government to step in and restore the lost sparkle in its business.

Alrosa produces almost all of Russia’s raw uncut diamonds that are then processed into diamond rings including diamond engagement rings and various other forms of diamond jewelry. It competes with other heavyweights in the engagement rings global diamond market such as De Beers and Rio Tinto. However, the manufacturer along with many other miners all over the globe had to slow down production due to depressed demand of their diamonds during the past year, no thanks to the global slowdown. This was partly to ensure that the prices of diamonds did not crash due to the over supply of diamonds.

However, the result was that Alrosa suffered losses of immense magnitude and thus asked the Russian government to help them out during their dark days. The Russian government, headed by President Vladimir Putin and finance minister Alexei Kudrin have decided that the Russian government would step in with a bailout plan of $1 billion for the beleaguered miner. Plans are also afoot to transform the closed joint stock Alrosa into an open joint stock company although the move is yet to be approved in Yakutia’s parliament, where a majority of Alrosa diamond mines are located.

The open joint stock move if approved would allow the cash-strapped company to raise much-needed funds for further exploration and extraction of diamonds from newly discovered underground diamond fields. This step would also allow Alrosa to become much more attractive for potential financers and new shareholders. The company’s present condition and future will certainly be discussed with concern during the meeting of the 34th World Diamond Congress, which involves 29 different diamond exchanges that together account for around 98% of diamond trade conducted legally around the globe.

The $1 billion bailout will allow Alrosa to service its huge outstanding debt to a large extent even as there are hopes that the economy might recover by 2011. The Russian government would buy off $1 billion of diamonds from Alrosa as part of the deal in a bid to help the company stay afloat and also help its 15000 employees retain their jobs. Alrosa anyway exports most of its mined diamonds to several countries including the United States and a recovery in those countries would boost demand again for their diamonds in the coming days.

With the US itself caught in its own quagmire of economic depression and with jobless rates unwilling to drop dramatically, it would surely be a test of nerves for Alrosa and the Russian government to ensure that the giant diamond company does not stumble and fall under its own debt. Recent scientific studies have uncovered vast diamond fields that could result in billions of dollars of diamonds being unearthed in the near future but if demand remains sluggish then the resultant glut of diamonds in the market would only result in a crash of prices. This problem seems to be affecting other diamond giants such as De Beers too as it tries to cope with decreasing demand for real diamonds while still trying to maintain diamond prices without going under.

Alrosa might be a diamond mining company but the company also performs several social duties in Yakutia and other provinces and this has also resulted in lowering its profit margins to a great extent. These responsibilities too cannot be discarded in a hurry and this would have compelled the Russian government to step in with monetary help to help the giant recover until good times revisit the diamond industry. The past year has seen several industries around the globe buckle under economic depression such as the banking and housing sectors. The diamond industry too has faced several challenges and timely help by the Russian government to its largest diamond miner Alrosa might just be enough to allow the company to remain afloat until demand picks up again.

While diamonds might be forever, the future of diamond mining companies has certainly been put to the test in these troubled times. The World Diamond Congress too will have to think up of new ways to generate healthy sales for its mining companies and survive until bright days arrive again in their respective countries. In the meantime the Russian government too might be hoping that it does not get saddled with $1 billion worth of diamonds if its plans to resuscitate Alrosa do not produce the desired results.

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