Sunday, September 10, 2006

South Africa’s Economic Alliance with Russia

Putin Forges New Economic Alliance With South Africa

South Africa and Russia entered into an economic alliance on September 6. In accordance with this new alliance several deals between the two countries were forged. Russian tycoon Victor Vekselberg has agreed to invest a billion dollars in a South African magnesium plant and a Russian firm may build an aluminum smelter in South Africa.

In addition, De Beers, the world’s largest diamond producer has agreed to join forces with Russia’s Alrosa in exploring for diamonds in Russia and other regions. Collectively, De Beers and Alrosa account for 75% of the global diamond market. This joint venture will give De Beers access to potentially massive diamond reserves in Russia and will allow Alrosa to benefit from De Beers’ long-established connections in Africa.

President Vladimir Putin believes that these deals have a potential worth of billions of dollars. However, both he and South African President Thabo Mbeki agreed that political relations between the two countries are further along than their economic links, as trade between the two totaled less than $200 million in 2005. Mbeki noted the importance of each country providing support to the other so that further economic progress can be achieved.

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