LONDON, JULY 25 -- De Beers tightened its grip on the global diamond market today with an exclusive five-year deal to sell the Soviet Union's rough diamond output, which could total more than $5 billion.
The financially strained Soviet Union, among the world's biggest gem diamond producers, will get a $1 billion advance against future diamond sales.
De Beers' London-based marketing arm, the Central Selling Organization, will strengthen its position as the world's dominant diamond seller. It already markets 80 percent of global rough diamond production of some 100 million carats.
The Soviets do not disclose their output.
The nation reached the deal because it wanted to sell a huge stockpile of diamonds without disrupting the stable world diamond market, De Beers said.
The Soviet Union had refused to deal directly with the South African-based company because of its home country's policies of racial separation, but now is willing to do business openly with De Beers's new Swiss arm, De Beers Centenary AG.
De Beers Consolidated Mines Ltd. established the publicly-held Swiss company in May to head the non-South African businesses of De Beers, which is controlled by the wealthy Oppenheimer family of South Africa.
De Beers Centenary said in a statement released in Lucerne, Switzerland, and made available in London that it reached the agreement with Glavalmazzoloto of the Soviet Union for the exclusive export and sale of the USSR diamond production.
Glavalmazzoloto is the main administration for precious metals and diamonds under the Soviet Union's council of ministers, De Beers said.
De Beers's Luxembourg-based subsidiary, Centenary Holdings SA, has agreed to advance Glavalmazzoloto $1 billion against future diamond deliveries. Repayment would be made over five years beginning in November.
The Soviet diamond stockpile will be held at De Beers' London-based marketing arm, the Central Selling Organization, as collateral for the advance, De Beers said.
The organization, a 57-year-old cartel, has the financial resources to hold large stocks of diamonds, which is how it keeps the market stable.
Although De Beers said it had had no direct contact with the Soviet Union since 1963, diamond experts say De Beers already sells most of the Soviet Union's West-bound diamonds.
All the world's major diamond producers, including Botswana, Australia, Tanzania, Zaire and Namibia, have sales contracts with De Beers Centenary. The Central Selling Organization had sales of $4.09 billion last year.
Julian Ogilvie Thompson, De Beers chairman, said the deal would bring ''continued stability and prosperity of the international diamond industry.''
Nicholas Oppenheimer, deputy chairman of De Beers Centenary, said the Soviet Union, at a time of ''considerable financial strain,'' was able to raise a $1 billion loan while signing a contract assuring it of ''a steady flow of funds from diamonds'' over the next five years.
Large-scale diamond mining began in the Soviet Union in the 1950s and is concentrated in the Yakutia region of North Eastern Siberia, De Beers said.