As the first indication towards mutual support and cooperation in an increasingly difficult economic world (more so for diamonds), De Beers Centenary AG, the diamond rough major, and Almazy Rossli-Sakha (Alrosa) of Russia announced on November 3, that they extended their earlier one year contract for a further period of three years till 2001. The CSO-Alrosa trade pact was signed in September 1997 after intense negotiations that spread over 20 months.

The global financial crisis has robbed the world off its excessive consumerism witnessed till last year. With blood on the street of the investment banking and financial markets -- the largest earners and therefore, spenders in the developed markets -- the otherwise bubbling diamond industry bigwigs are preparing for a "dull 1998 Christmas".

With every other markets reeling under the year-old financial crisis,the USA was considered to be the only saviour for the jewellery makers the world over. With a dull Christmas ahead, the financially strong US-bastion too is unlikely to give any respite to diamond and jewellery exporters this year."Recently, couple of big US diamond and jewellery firms in the USA have gone bust," said Naveenshankar Pandya, president, The Gems & Jewellery Export Promotion Council. "This (development) therefore, does not promise a good Christmas sales as we had expected."

Looking elsewhere for buyers, some 30 leading Indian jewellery makers last week participated in the 7th Jewellery Arabia '98 exhibition that was held from November 4-7 in Bahrain. Targeted at retailers, private investors and collectors from the Arab Gulf countries, the jewellery market in this region is estimated to be over $50 million.

It remains to be seen how much business could be generated from this exercise after the 14th Indian International Jewellery Show held in September this year did not result in expectedbusiness deals from overseas buyers. Since the past few months, there has been "super concentration" of hopes on the Christmas season of the US and some of the European markets for boosting the sagging sales of the diamond and jewellery industry. This had created a downward pressure on prices, resulting in an increase in unusually extended credit terms of over 200 days.

Little wonder therefore, the once dazzling and uptight diamond industry now appears to be softening its stand. This follows the increasing number of diamond producers challenging the hegemony of De Beers after Argyle opted out of the decades old Central Selling Organisation (CSO) in mid-1996.

Other important diamond producers having contract to sell diamond through De Beers' CSO who are subtly threatening to opt out are: Russia, Angola, Australia, Botswana and Canada (which will come up in the near future). "It is no secret that in recent years there has been a struggle for power and influence," said World Federation of Diamond Boursepresident Eli Izhakoff at the recent conference in HongKong referring to the ups and downs in the CSO-Russia and CSO-Argyle relationships. "Continued cooperation will lead us to a new era of outstanding accomplishment for all of us."

Therefore, after the breaking of CSO-Argyle relationship in mid-1996, all eyes were on the CSO-Russian relationship. Under the September 1997's trade agreement, Russia had agreed to sell its vast pool of diamonds through CSO. Despite this, Russia sold diamond roughs in the open market to get maximum possible foreign exchange to support its teetering economy. Russia's frequent selling of diamonds in the open market not only disturbed CSO's marketing plans, it even further eroded the declining profits of the diamond major.

A joint statement released last week by The Joint Stock Company Alrosa and De Beers Centenary AG rea: The agreement was signed in Moscow by Mr Vyacheslav Shtyrov, president of Alrosa, Mr Nicky Oppenheimer and Mr Gary Ralfe, Chairman and managing directorrespectively of De Beers. "The renewal of the agreement has the full support and endorsement of the government of the Russian Federation. As the world's two major rough diamond producers, De Beers and Alrosa both recognise the need to maintain stability on the diamond market, particularly in the current difficult economic situation. Both parties have been satisfied with the way the contract has been operating and feel sure that their commitment to long-term cooperation will benefit everyone in the worldwide diamond community."