A Russian businessman has been scouting the Island as a site for a diamond cutting and polishing operation.

But Mr. Andrey Kozoenok, who was leasing Sea Crest in Tucker's Town from July of 1994 to February of this year and had an option to buy the multi-million-dollar home from Mr. Alan Marshall, may have abandoned his plans for Bermuda.

Mr. Kozoenok, president of Golden ADA in San Francisco, California, has looked at both Dockyard and the US Naval Air Station as possible sites to cut and polish rough diamonds, sources told The Royal Gazette .

One of his employees, Mr. Willis Garriott, who left the Island on Monday, said he was in Bermuda to retrieve "some personal effects'' which Mr. Kozoenok wanted returned to the United States.

"He was intending to buy (Sea Crest), but I think it's fair to say that for reasons that are personal to both parties, the transactions are not going to proceed,'' said Mr. Michael McCabe of Conyers, Dill & Pearman, one of two Bermuda law firms which have been acting for Mr. Kozoenok.

CD&P still represents two exempt companies Mr. Kozoenok has set up in Bermuda, Mr. McCabe said.

Mr. Garriott could not say whether Mr. Kozoenok had abandoned plans to set up a diamond operation in Bermuda. "I know he likes Bermuda,'' Mr. Garriott said. "He thinks it's quite lovely. I don't know what his intentions are.'' Lawyer Mr. Luke Mackenzie of Moniz & George, who acts for Mr. Kozoenok in relation to the Dockyard proposal, declined comment.

Mr. Kozoenok did not return a telephone call from the Gazette .

Mr. Ed Williams, development manager for the West End Development Corporation, said Wedco was first approached by Mr. Kozoenok late last year and last corresponded with a local law firm for the prospective investor early this year.

"They approached us about looking at a couple of buildings up here,'' Mr.

Williams said. Mr. Kozoenok "had pretty much decided that this was an area where he would like to set up'', and Wedco was "awaiting further information''.

The Russian businessman "liked the character of the area'', and liked the fact that Dockyard was a freeport area and a visitor attraction, Mr. Williams said. "He liked the whole ambience.'' However, "we hadn't finalised any details'', and "I haven't heard anything recent about it at all'', Mr. Williams said. "I don't get very optimistic when I don't hear about things for a while.'' The last he heard, "they mentioned they were having discussions with Government''.

Last summer, Golden ADA executive Mr. David Shagirian was fined $2,000 after he tried to enter Bermuda with a semi-automatic handgun. At that time, the company was said to be looking at the US Naval Air Station as a site for the diamond operation. Mr. Shagirian is no longer with Golden ADA, a spokesman said.

Management and Technology Minister the Hon. Grant Gibbons, the main Cabinet Minister responsible for the Bases, could not be reached for comment yesterday.

Local jewellers said they have heard about Mr. Kozoenok's proposal and reacted cautiously.

"It's hard to really understand fully what's behind it all,'' said Mr. Thomas Dickinson of jewellers Astwood-Dickinson Co.

High labour costs in Bermuda would appear to work against such a proposal, but Mr. Dickinson said he would need more information to assess that.

Operating from a duty free area, "obviously, they would not be able to do anything in the local market'', Mr. Dickinson said.

"I've met (Mr. Kozoenok) on a number of occasions,'' through common friends and found him to be "a very nice man'', and "very astute'', Mr. Dickinson said.

"When we are together we do talk diamonds, but ... only in general terms,'' he said. "Now, I did hear that another jewellery company in Bermuda wrote Government with regard to the danger of allowing this person and this company in.'' Mr. Dickinson would not identify the company.

Mr. Peter Crisson, vice-president of H.S. & J.E. Crisson Ltd. Jewellers, said his company has made no such representations.

He understood the proposal was to bring rough Russian diamonds to Bermuda to be cut, and "if he can do it successfully, that's fine'', Mr. Crisson said.

But he was sceptical about how it would work, with Bermuda's high labour costs and a lack of resident labour skilled in diamond cutting.

Also, "I think it would be very difficult to do business without a connection with the Central Selling Organisation'' for diamonds.

Mr. Crisson said he would oppose the scheme if if was accompanied by any requirement to buy locally. "I'm for free trade,'' he said. "We have to be able to buy all over the world, for the highest quality at the most competitive price.'' Diamond giant De Beers controls the Central Selling Organisation. While De Beers has the capacity to supply 50 percent of the world's diamonds, Russia can supply 25 percent, analysts say.

De Beers has a long-term agreement under which it buys ten percent of Russia's diamond production, but Russia holds substantial stockpiles of diamonds and is considered likely to step up sales because of the need for hard currency.

The existing contract between Russia and De Beers expires at the end of 1995 and talks are under way to replace it.