MOSCOW - Three candidates have emerged as the contenders for the soon to be vacant post of chief executive of Russia's dominant diamond miner Alrosa, the largest diamond producer in the world after De Beers. But the real contest is a two-horse race, in which the Sakha Republic, where the diamonds are, is pitting its man against the candidate of the federal government in Moscow, where the money is kept. The outcome is thus a fresh test of the long simmering conflict inside Alrosa over who will control the company's $1.9 billion annual cashflow, and the future of the Russian diamond mining industry, when and if shares of Alrosa are privatized.

Yegor Borisov is the candidate representing the local region. Handpicked by regional president Vyacheslav Shtirov as prime minister of the Sakha

republic, and an ethnic Yakut, Borisov formerly headed the regional ministry of agriculture. If he succeeds to the Alrosa post, he will be following in the footsteps of his patron Shtirov, who also graduated from the prime ministry of Sakha to the CEO's post at Alrosa, when Mikhail Nikolaev was president of Sakha.

However, that was in the days when Nikolaev exercised considerable influence over the federal president Boris Yeltsin, and Yeltsin traded support for himself at presidential election time in exchange for turning a blind eye to Nikolaev's administration of both the diamond miner, and the region. Nikolaev used his autonomy to advance his fellow ethnic Yakuts in the republican administration and in Alrosa, purging Russians, Ukrainians, and other Siberian tribesmen, such as the Tunguz. Since the fall of the Soviet Union, the Yakuts have campaigned strongly for retaining their control over diamond and gold resources in the republic, arguing that they were severely discriminated against by Soviet policy.

Since Yeltsin's departure at the end of 1999, the Putin administration has been trying to reassert control over Alrosa. It has expanded its shareholding to 37%, while the regional government's stake has remained at 32%. It has captured the top spot, Chairman of the Supervisory Board of the company -- equivalent to the board of directors -- for a federal appointee, Finance Minister Alexei Kudrin. And it has placed two, possibly more federal officers in key executive posts, where they have been trying to uncover and stamp out corruption and diversion of cash. At present, the Alrosa management controls a 26% shareholding stake in the company.

The Kremlin's candidate for the Alrosa CEO post is Alexander Nichiporuk. He is a federal government loyalist, and he has been the chief operating officer for more than a year now. He is favoured to replace Vladimir Kalitin, whose promotion from Chief Engineer to CEO at Alrosa took place in 2002. At that time, Kalitin was a compromise candidate between the regional and federal factions. Since then he has tired of trying to arbitrate their infighting. He is stepping out of operational control of the company, and will be Deputy Chairman of the Supervisory Council.

A third candidate is being spoken of as a senior official from the Finance Ministry.

Through the changes in shareholding supervision and management, the Kremlin, the Sakha republic and the management of Alrosa are also positioning themselves for possible privatization of Alrosa, though the Kremlin, which must authorize that, has given no hint that it will occur soon. But when it does, it is already obvious that most of the world's major diamond-miners have an interest, including De Beers, Israel's Lev Leviev, BHP Billiton, and at least one major Indian diamantaire.

The latest financial data released by Alrosa, according to International Accounting Standards, show 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.