Diamond Cartel Holding Steady in Russia : Markets: The specter of chaos in the new republic threatens decades of price-control by De Beers.

The world’s longest-lasting cartel is increasingly anxious over whether chaos in the Commonwealth of Independent States will tarnish its record of control over one of the most precious commodities--diamonds.

De Beers Consolidated Mines Ltd., which for decades has ensured that the price of diamonds has never fallen, has sent executives to Russia, the world’s largest producer of diamonds, to make sure that the cash-strapped republic does not take steps that would upset the cozy arrangement that has governed the market for most of this century.

Sources close to the secretive cartel of diamond producers said that De Beers has been urging Russia not to sell the gems in a way that could upset the world market and cause prices to tumble.

“They (the Russians) have a vested interest in maintaining a market,” one source close to De Beers said of the Russians. By undermining the prices set by De Beers, “they would slit their own throats,” he said.

Gary Ralfe, a director of De Beers and an executive director of De Beers’ London-based marketing arm, the Central Selling Organization, who recently went to Moscow, said, “I’ve made it my business to remind the new establishment where their interests lie.”

De Beers, based in South Africa and Switzerland, sets world wholesale prices for diamonds. The cartel props up prices by guaranteeing the purchase of the gems from producers and by managing large diamond stockpiles worth about $3.5 billion.

Besides Russia, other major diamond producers include Australia, South Africa, Botswana and Zaire.

The cartel has two concerns when it comes to Russia: what the republic does with its current diamond production, worth about $1.5 billion a year, and what it does with any diamond stockpile the former Soviet Union might have built up in past years.

Whether such a diamond hoard exists in Russia and, if so, how big it is remain uncertain. If there is one, it probably lies in the hands of the Russian finance ministry, not in the control of the longtime professionals and technocrats of the state company dealing with diamonds, a diamond industry source said.

So far, Ralfe said, Russian officials of the state diamond company, often the same people who ran the diamond industry under the Soviet system, have not changed their production or marketing practices and continue to make monthly shipments according to previous timetables.

But other sources said that the cartel remains worried that Russia might be polishing rough diamonds and selling them through independent channels.

The former Soviet Union has long marketed the vast bulk of its diamond production through the De Beers cartel, although that arrangement was kept secret so that the Soviet Union was not linked to the apartheid government of South Africa.