A newly announced joint venture between Lev Levievs Ruis Diamonds group in Russia and the H.Stern group of Brazil plans to open a chain of up-market diamond jewellery shops in Russia and the neighbouring states, a Leviev group source told PolishedPrices.

The target will be to beat imported foreign-branded diamond jewellery, the source said, rather than to compete with established Russian domestic diamond jewellers, such as the Moscow-based Tsentr Yuvelir group, led by Sergei Alhazov.

At present, Moscow trading accounts for roughly one-quarter to one-third of all retail jewellery sales in Russia. Alhazov has disclosed that in 2003 the average piece of diamond jewellery sold in his shops fetched $400, and is rising rapidly. In 2003, according to Alhazov, his groups retail turnover was $43 million.

The contract between Leviev and H.Stern envisages the opening of 50 outlets by 2010, at a capital cost of about $100 million. Annual turnover is estimated to exceed $50 million after the initial start-up.

A Stern-designed and marketed brand of diamond jewellery, bearing the Leviev name, is also contemplated. "We anticipate going after a share of the above-average value consumer market," a Leviev source said. "The competitors here (Russia) will be mostly not Russian producers, but their major foreign major counterparts.

Viktor Tulupov, director of Yuvelir Dom ("Jewellery House") said: "Leviev is going after a different market segment than we are, so there will be no competition with us. It’s more expensive jewellery they are going to produce.”

Edward Shtribescu, spokesman for Kristall, Russias largest diamond cutter, believes that the Leviev venture may compete against Kristalls line of diamond jewellery.

"They (Leviev and Stern) are locating in the same market segment that we do. And so the rules of the market apply. They have announced big investments so we will have to see who will be more competitive on the market. Big funds take a long time to be earned back usually, especially in the jewellery business.”