Alrosa, the world's largest rough diamond producer by output, said previously it was "expedient" for it to buy Kristall when the state-owned company is privatised.

"Kristall will be sold at the market price and, of course, we are talking about the privatisation in favour of Alrosa," Moiseev told reporters in Moscow.

Kristall, along with its smaller local competitors, has been hit by low profit margins in the gem-cutting sector and by strong competition from foreign polishers partially caused by Moscow's decision to cancel an export duty on rough diamonds in 2016.

The deal may happen "significantly earlier than the end of this year," Moiseev said. The government is currently assessing Kristall's value and will make a final decision on its privatisation once this process is done.

State-controlled Alrosa sold almost 40 million carats of rough diamonds in 2017.

(This version of the story refiles to fix headline.)

(Reporting by Diana Asonova; writing by Polina Devitt; editing by Alexandra Hudson)