12 July 2007
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Johannesburg — IF DE Beers is able to resume selling diamonds from Russian miner Alrosa, the positive effect will be more psychological than material.
De Beers had an agreement to sell about $800m of Alrosa's diamonds, equivalent to about 13% of the Diamond Trading Company's total sales of about $6bn in recent years and, if analysts are correct, at a profit of less than 10%. With the much-reported increasing shortage of diamonds, especially of high-quality gems, the profit margin would have been increasing in dollar terms.
But clearly it was a good deal for Alrosa, or Alrosa would not have appealed against the European Commission's ruling on the issue.
De Beers conceded to the commission's ruling - which was based on the grounds that the agreement between the two producers was anticompetitive - about the time that it was also settling antitrust lawsuits in the U.S.
Countering accusations of antitrust behaviour reflects De Beers group's strategy in the past few years to change its image.
For many decades it was seen as a big, monopolistic and secretive manipulator of world diamond supply and prices.
The image it wants to project now is of a modern company that competes openly and transparently, like any other.
If the European Commission antitrust ruling is essentially ruled to have been unfair by a higher court, it will reinforce De Beers' new image.
Viwe Tlaleane edits The Bottom Line.
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