The ALROSA-De Beers Memorandum of Understanding
The ALROSA-De Beers Memorandum of Understanding
A series of supply and cooperation agreements between the world's two largest diamond producers
For most of the second half of the twentieth century, ALROSA — the Russian state-controlled diamond producer headquartered in Mirny in the Republic of Sakha (Yakutia) — and De Beers, the Anglo-South African house that had organised the global rough trade since the late nineteenth century, operated within a framework of supply and cooperation arrangements that materially shaped the world rough market. The most significant of these arrangements were memoranda of understanding signed between the two parties, governing the volume, channelling, and pricing of Russian rough sold into De Beers' Central Selling Organisation and its successors.
Background
Diamond production began in commercial volumes in Yakutia in the late 1950s, with the discovery of the Mir, Aikhal, and Udachnaya pipes. By the 1960s, Soviet diamond output had become significant on the world stage. The Soviet Union, lacking a domestic cutting industry of comparable scale and seeking hard currency, agreed in the 1960s to channel a substantial share of its rough through De Beers, which welcomed the centralisation of supply that its single-channel model required.
The arrangement passed through several iterations and was complicated by the dissolution of the Soviet Union in 1991, the privatisation and subsequent state-controlled restructuring of the Russian diamond industry, and the establishment of ALROSA as the principal Russian producer. Successive memoranda of understanding between ALROSA and De Beers governed the supply channelling of Russian rough through the 1990s and into the early 2000s.
The 2002 trade agreement and EU intervention
In 2002 ALROSA and De Beers signed a trade agreement under which ALROSA would supply approximately 800 million US dollars per year of rough to De Beers over a five-year term. The agreement was reviewed by the European Commission under EU competition law. The Commission concluded that the arrangement raised significant concerns about market dominance and approved the deal only conditionally, with a phased reduction of De Beers' purchases from ALROSA, capped at progressively lower volumes in successive years and required to terminate by 2009.
The 2009 termination, when it came, marked the end of the formal supply relationship between the two producers. Both parties have since traded rough independently — ALROSA through its own customer programme of long-term contracts and tender sales, De Beers through Sightholder allocations and Forevermark and Lightbox channels — although informal cooperation on industry matters has continued.
Aftermath and present situation
Since 2009 the two producers have remained the world's largest, with De Beers operating principally in Botswana, Namibia, South Africa, and Canada, and ALROSA operating principally in Russia. They have at various points cooperated on demand-stimulation, including joint financing of generic diamond marketing, but a formal supply arrangement has not been re-established.
The Russian invasion of Ukraine in 2022 introduced further complications. Western sanctions, including measures targeting ALROSA and Russian-origin rough, have restructured the world market and effectively partitioned the Russian and non-Russian rough channels. The G7 import restrictions on Russian-origin diamonds, phased from 2024, have made any future formal cooperation between De Beers and ALROSA commercially and politically improbable for the foreseeable future.
Significance
The historical ALROSA-De Beers MoUs are an important episode in the history of the diamond trade. They illustrate how a single-channel marketing structure can persist across geopolitical transitions when supply and demand interests align, and they show how competition law eventually disciplined the arrangement. For traders studying the present rough market, the MoUs are best understood as the closing chapter of a particular twentieth-century model of supply organisation, rather than as a template for current practice.
In the trade
For working dealers, the legacy of the MoU era is visible in the parallel customer programmes that ALROSA and De Beers each operate today, both of which trace their basic structure to the long-term-contract logic of the single-channel period. The two systems no longer converge, but the discipline of orderly long-term allocation that they share is a direct inheritance from the era of cooperation.