Soviet-South Africa Ties Sparkle In Diamond Deal

THE $5 billion diamond marketing deal between the South African conglomerate De Beers and the Soviet Union is likely to have far-reaching consequences for both countries. It is sure to hasten a trade-driven rapprochement between Pretoria and Moscow that has been gaining momentum in recent months, political and industry analysts say.

It also represents a setback for the African National Congress (ANC) in its efforts to maintain international sanctions against South Africa.

``What this means is that the ANC no longer determines the trade policy of the Soviet Union toward South Africa,'' says Philip Nel, director of the Institute for Soviet Studies at the University of Stellenbosch.

The Soviets have been loyal backers of the ANC for three decades and have been at pains not to offend the ANC.

But a growing mutual need for trade and ongoing contact with Pretoria over Namibian independence has fostered a closer Soviet relationship. Dr. Nel says the Soviets still maintain a cautious attitude toward establishing diplomatic links with South Africa, but had lost all inhibitions regarding trade.

``On the diplomatic front, the Soviets are likely to opt for a discreet South African presence in Moscow at first,'' Nel says.

Yuri Yukalov, chief of the Soviet Foreign Ministry's Africa section, said in a recent interview with Moscow News that the most realistic date for a Soviet Embassy in Pretoria is 1995. ``Everything will depend on the pace of the dismantling of apartheid,'' he said. ``But we will not wait for the total completion of this process.''

Since President Mikhail Gorbachev opted in 1986 to pursue a negotiated settlement in South Africa, rather than a revolutionary takeover, the ANC has been fighting a rear-guard action to discourage closer ties between Pretoria and Moscow.

The growing links between the two countries have been underlined by proposed cultural exchanges and increased Soviet interest in emigration to South Africa. When Foreign Minister Roelof Botha visited Budapest in February, the ANC issued a stinging condemnation of the Hungarian government.

But there was no official ANC reaction when Trade and Industry Minister Kent Durr visited Moscow this month to advance a deal for a consortium of South African firms to assist in the Chernobyl cleanup. Pretoria did consult the ANC about that visit.

In Budapest, Mr. Durr signed a formal Hungarian-South African trade pact that marks the lifting of all trade and financial sanctions against South Africa - something no Western country has yet done.

This act of defiance by the Hungarians has not drawn public criticism from the ANC. But the De Beers-Soviet deal is a harder one for the ANC to swallow. ``[ANC Deputy President Nelson] Mandela has traveled the world urging Western countries not to relax sanctions,'' says one ANC official. ``And then the Soviets come and accept a billion-dollar loan from a South African company.'' The ANC has refrained from official comment, noting that Mr. Mandela is due to visit the Soviet Union before the end of the year.

The deal includes an immediate loan of $1 billion to the Soviets that will have a stabilizing effect on the international diamond market that had become jittery over growing instability in the Soviet Union. De Beers has exclusive rights to sell all Soviet rough diamond exports for the next five years.

The agreement was struck two weeks ago between De Beers's Swiss-registered twin, De Beers Centenary, and Glavalmazzoloto, the Soviet precious metals and diamonds administration, after only three months of talks.

De Beers analysts were concerned that the Soviets might be forced by foreign-exchange needs to dump large quantities of gems on the world market and thus precipitate a sharp drop in diamond prices.

De Beers was also anxious that the Soviets might break ranks with their cartel, the Central Selling Organization. For the past two decades, the CSO has quietly marketed at least 80 percent of Soviet rough diamonds that account for about 25 percent of annual world production.

Mining industry sources say the Soviets have approached their South African counterparts about possible transfers of technology, expertise, and capital.

A declaration last Friday by the parliament of the Russian Republic that sought to nullify the Soviet-De Beers deal is seen by industry analysts primarily as an internal Soviet issue, and is not expected to scuttle the deal. SOUTH AFRICA'S RELATIONS WITH COMMUNIST BLOC 1950 - Pretoria passes Suppression of Communism Act 1956 - Pretoria cuts diplomatic ties with Soviet Union 1964 - Soviets deliver arms to African National Congress military camps in Tanzania 1986 - Gorbachev endorses a negotiated settlement in South Africa 1988 - Soviets support US-brokered accords leading to independence for Namibia February, 1990 - South African Foreign Minister Roelof Botha visits Hungary March, 1990 - Soviet Foreign Minister Eduard Shevardnadze meets with De Klerk May, 1990 - Pretoria opens permanent mission in Budapest; Poland and S. Africa strengthen trade ties July, 1990 - De Beers advances $1 billion to Soviets August, 1990 - Trade and Industry Minister Kent Durr visits Soviet Union