Putin Doubles Gokhran’s Diamond Purchasing Budget
August 23, 09
Russia’s subsidy of the country’s diamond sector should stand at RUB 30-35 billion ($950 million to $1.1 billion) in 2009, according to Prime Minister Vladimir Putin. The support is understood to be in the form of an increased purchasing budget for the Russian repository Gokhran, according to a Reuters report.
In July, Gokhran had a an enlarged budget of 14.46 billion rubles ($457 million) to purchase rough and cut diamonds from diamond producers in 2009. Most of this budget, 12 billion rubles ($379 million), was earmarked to purchase diamonds from Alrosa. 
The Mir diamond mine
Putin, speaking during a visit to Alrosa’s Mir diamond mine in the Sakha (Yakutia) republic, said the overall level of support for the diamond sector should total RUB 30 - 35 billion rubles, adding, “This is difficult to do given the financial-economic crisis, but we shall do it.”
Alrosa is struggling with a series of mistakes made at the onset of the financial crisis. The company stopped selling goods in November 2008 but continued mining. When Alrosa tried to renew diamond sales, it insisted on maintaining pre-crises high prices, which prevented sales and a much needed cash flow.
The company was practically forced to stop selling goods in November after it was turned down by clients that claimed diamond pricing was out of line of market prices.
“We understand that this sector, which gives serious revenues to the federal budget and regional budget, is in a difficult situation and needs support because of the global market situation," said Putin. Alrosa has a high level of debt, and a declining credit rating.
According to the Reuters report, Putin also ordered officials to work out a way to give a state guarantee to Alrosa to help it restructure its debts to domestic and foreign creditors.
Putin said Gokhran's purchases had risen to 14.5 billion rubles from 3.7 billion rubles.
The premier criticized the level of investment in infrastructure in the republic, which produced about $80 billion in diamonds. “The problems come from this and have been mounting for decades,” Putin said.