MOSCOW - Alrosa, Russia's dominant diamond miner, may be about to see a change of its top management, as the Kremlin intensifies its control of the company, reducing the influence of the Sakha republic government. A well-informed industry source told The Russia Journal that Vladimir Kalitin, the CEO and Chairman for the past two and a half years, will occupy the Deputy Chairman's seat on the shareholding board, and that he will be replaced as chief executive by Alexander Nichiporuk.

Kalitin was elected Deputy Chairman of the Supervisory Council, as the Alrosa board is known, at its meeting on August 5. The Chairman of the Council is the federal Minister of Finance, Alexei Kudrin, whose preeminence reflects the fact that the federal government holds 37-percent of Alrosa's shares, clawing back an additional 5-percent last year. The Sakha republic holds 32-percent, the management 23-percent, the Sakha regions 8-percent. The tussle between Moscow and Yakutsk, the Sakha capital, has been evident from the way in which the two top Supervisory Council posts have seesawed between senior officials of the federal and regional governments. Kalitin's election as Vice Chairman means that for the first time, a Sakha government officeholder does not occupy either of the two top council posts.

The shareholders have been positioning themselves for possible privatization of Alrosa, in which most of the world's major diamond-miners have an interest, including De Beers, Israel's Lev Leviev, and BHP Billiton. However, a new presidential decree, signed on August 4, includes Alrosa on a list of "strategic" Russian companies whose privatization cannot be launched without presidential approval. This does not mean that privatization of the diamond miner has been blocked, according to Arkady Dvorkovich, head of the Kremlin's Department of Experts. However, transactions involving these companies' shares would need to be approved by the president," he is reported as saying.

Although not unexpected by the international diamond industry, this presidential move hints that foreign companies will find it difficult to acquire substantial stakes in Alrosa, when and if its shares are put up for sale. To prepare the company's management, cashflow operations, and balance-sheet for that eventuality, it now appears that the Kremlin wants its own man in charge.

Kalitin is a company veteran, who was Alrosa's chief engineer when he was promoted to the CEO post. This followed a campaign in 2001 by the Kremlin to force major political changes in Sakha, where Alrosa mines most of its diamonds, and where it is the republic's principal source of wealth. President Mikhail Nikolaev was obliged to abandon a run for a third term, and in his place Alrosa's CEO, Vyacheslav Shtirov -- an ex-prime minister of the region -- was elected instead. As the new Alrosa CEO Kalitin was a compromise candidate acceptable to both the Moscow and Yakutsk groups. Since then, two federal government appointments have followed in the senior management -- Yury Ionov, in charge of legal affairs, and Alexander Nichiporuk, First Vice President. Nichiporuk is reported to be the Kremlin's choice for CEO.

Alrosa has responded, telling The Russia Journal: "We have no information that Nichiporuk will replace Kalitin."

According to the latest financial data released by Alrosa, according to International Accounting Standards, the company has declared an after-tax profit for 2003 of $218 million, a gain of 155-percent over 2002. With international diamond prices rising, and market supply tight, Alrosa says it expects to increase the value of its output this year. but the 5-percent firming of the rouble against the dollar in the first half has made the company sensitive to rising costs.