ALROSA initiated bankruptcy proceedings against one of its subsidiaries, Alrosa-Yakutia, the company stated November 15, 2006.

An ALROSA spokesman said that the move was due to "severe violations" made by Alrosa-Yakutias management. Alrosa-Yakutia has failed to meet its financial targets and to repay its debt to ALROSA, according to the company.

ALROSA produces 99 percent of the uncut diamonds in Russia. The federal government is currently in the middle of a deal to raise its ALROSA stake to 50 percent plus one share from 37 percent.

The government of the constituent republic of Yakutia (Sakha) holds 32 percent in ALROSA, while several Yakutia districts hold a combined stake of 8 percent. The region is expected to retain its stake after the federal governments stake increases, according to government officials.