De Beers Signs Diamond Deal With Soviets

De Beers tightened its grip on the global diamond market Wednesday with an exclusive five-year deal to sell the Soviet Union’s rough diamond output, which could total more than $5 billion.

The financially strained Soviet Union, among the world’s biggest gem diamond producers, will get a $1-billion advance against future diamond sales.

De Beers’ London-based marketing arm, the Central Selling Organization, will strengthen its position as the world’s dominant diamond seller. It already markets 80% of global rough diamond production of some 100 million carats.

The Soviets do not disclose their output.

The nation reached the deal because it wanted to sell a huge stockpile of diamonds without disrupting the stable world diamond market, De Beers said.

The Soviet Union had refused to deal directly with the South African-based company because of its home country’s policies of racial separation, but now is willing to do business openly with De Beers’ new Swiss arm, De Beers Centenary AG.

De Beers Consolidated Mines Ltd. established the publicly held Swiss company in May to head the non-South African businesses of De Beers, which is controlled by the wealthy Oppenheimer family of South Africa.

De Beers Centenary said in a statement released in Lucerne, Switzerland, and made available in London that it reached the agreement with Glavalmazzoloto of the Soviet Union for the exclusive export and sale of the U.S.S.R. diamond production.

Glavalmazzoloto is the main administration for precious metals and diamonds under the Soviet Union’s council of ministers, De Beers said.

De Beers’ Luxembourg-based subsidiary, Centenary Holdings SA, has agreed to advance Glavalmazzoloto $1 billion against future diamond deliveries. Repayment would be made over five years beginning in November.

The Soviet diamond stockpile will be held at De Beers’ marketing arm as collateral for the advance, De Beers said.