Putin pledges $1bn for diamon miner

       Russian Prime Minister Vladimir Putin pledged yesterday $1 billion in state support for the diamond miner Alrosa this year to help it ride out a steep global decline in demand for gemstones.
       "The overall level of support for the sector should total 30-35 billion roubles ($949.4 million-$1.11 billion) this year,"Putin told a meeting of senior officials after visiting Alrosa's giant Mir diamond mine in eastern Siberia.
       "This is difficult to do with the background of the financial-economic crisis,but we shall do it," Putin said.
       The state support, which will include more state purchases of gems, is likely to help state-controlled diamond miner Alrosa service about $3.6 billion in outstanding debt.
       Two sources who declined to be identified said the $1 billion would be used by the State Precious Metals and Gems Repository (Gokhran) to buy diamonds from Alrosa.
       Alrosa, the main rival to De Beers,produces one quarter of the world's rough diamonds and is one of the main sources of income for Russia's Yakutia region,home to 950,000 people.
       "We understand that this sector, which gives serious revenues to the federal budget and regional budget, is in a difficult situation and needs support due to the global market situation," Putin said."To support the sector, the state has agreed to significantly increase state purchases of diamonds."
       He said the state purchases by Gokhran had risen to 14.5 billion roubles from 3.7 billion roubles, but gave no details about purchases planned for 2010.
       Diamond producers across the globe have been badly hit by weak demand.The world's largest diamond producer,De Beers, which is 45%-owned by mining group Anglo American Plc, has said demand should pick up in the second half.
       Alrosa president Fyodor Andreyev said yesterday that he expected diamond demand would recover by 2011 as long as there were no second wave to the financial crisis.
       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.
       Diamond sales make up 30% of the local government's revenue in Yakutia,which covers an area about one-third the size of the United States.
       Alrosa, which traces its history to the diamond mines set up the Soviet Union in Yakutia in the 1950s, employs 15,000 people and produces 97% of Russia's rough diamonds.
       "In recent years,$17.5 billion of diamonds have been found here (in Mirny)and about $80 billion in the republic as a whole, but when you work out how much has actually been invested here in the republic, in its infrastructure, the figures are really not very significant,"Putin said."The problems come from this and have been mounting for decades."