Kommersant, the Russian business newspaper has published a report on what it says is a secret agreement between the Russian national government and the government of the autonomous Republic of Yakutia to increase the share the former holds in Alrosa, the diamond mining monopoly. The respective stakes are usually given as 37% and 32%, but Russian President Vladimir Putin has been pushing since 2001 to increase the national government’s stake.

According to Kommersant, the secret agreement, which all sides refuse to confirm the existence of, was signed by Minister of Economic Development and Trade German Gref, Minister of Finance Alexei Kudrin, President of the Republic of Sakha (Yakutia) Vyacheslav Shtyrov, Alrosa President Alexander Nichiporuk, and representatives from the Ministry of Finance, Rosimushestvo (the Russian Property Agency) and additional officials from the Ministry of Economic Development and Trade. Russian Prime Minister Mikhail Fradkov is to report to Putin on the success of the plan to federalize Alrosa.
The details are complex. According to the newspaper, Yakutian officials and Alrosa executives are obliged to complete a valuation of the former company Yakutalmaz before February 1, 2006, so that it can become part of Alrosa’s “founding capital” and be split between the national and republican governments.

The republic’s authorities are also ordered to list and place a value on other assets that belong to the republic and could be used to pay for Alrosa shares. The most complex maneuvering involves finding assets to cover the issuing of additional shares in Alrosa for purchase by the national government. A broad range of assets have been proposed to cover the additional share issue, including 100 percent of the equity in Russia’s largest diamond polishing company, Smolensk Kristall. The federal government has also promised to cover the shortfall if Yakutia can no longer collect rent payments from Alrosa, which total some 10 billion rubles a year ($349 million)—60% of the republic’s budget.