Editor’s Note
This article reports on the latest U.S. sanctions targeting Russian imports, including diamonds, following the ongoing conflict in Ukraine. The measures reflect continued Western economic pressure on Russia.
Since the outbreak of the Russia-Ukraine conflict, Western countries including the United States and the United Kingdom have repeatedly announced sanctions on Russian imports and exports. According to a CCTV News report, US President Joe Biden announced new sanctions against Russia on the 11th, including a ban on imports of goods such as jewelry from Russia.
According to US Treasury data, Russia accounts for about 30% of global diamond production, making it the world’s largest diamond producer. Approximately 90% of Russia’s diamond output comes from the mining giant Alrosa. Earlier this month, the US had already announced sanctions against Alrosa’s CEO, Sergei Ivanov.
Foreign media reports indicate that the World Diamond Council (WDC) stated that Western sanctions on Alrosa and Ivanov have not actually had a direct impact on global diamond trade. Many industry insiders say that as many global jewelers and diamond companies still rely on diamonds supplied from Russia, the current sanctions are almost “useless” in stopping Russian diamonds from flowing to the West.
On March 11 local time, the White House announced new sanctions on Russian imports and exports on its official website, specifically including a ban on imports of seafood, alcohol, luxury goods, and non-industrial diamonds from Russia. Foreign media reports state that the global diamond industry is worth about $79 billion, with Russia accounting for 30% of production. Alrosa is Russia’s largest diamond mining and processing enterprise, accounting for 90% of the country’s diamond extraction. It is reported that the Russian federal government holds a one-third stake in this mining giant.
It is understood that over the past four years, Alrosa has signed long-term contracts with more than 60 companies. Among them, only one major jeweler, Signet Jewellers, has made a clear statement on whether it will stop sourcing Russian diamonds. Additionally, a small jewelry company, Brilliant Earth, stated last week that it would cancel sales of Russian diamonds. Although some US consumers have called for a “boycott” of Russian diamonds, many large jewelers and diamond companies have remained “silent” on the matter, and their diamond supply still relies on Alrosa’s mining.
Some industry insiders point out that although the US Treasury described the sanctions on Alrosa and Ivanov as “unprecedentedly severe,” they will do little to stop diamonds from Alrosa flowing to the West and have not had a direct impact on global diamond trade. On one hand, the sanctions on Alrosa are limited to prohibiting its debt and equity transactions, so it remains completely legal for US companies to buy and sell diamonds mined in Russia.
On the other hand, despite US sanctions on Russian diamonds, the vast majority of Russia’s diamond exports are unprocessed rough diamonds, most of which are shipped to India for cutting and polishing. Reports indicate that about 90% of the world’s rough diamonds are processed in India. According to US customs regulations, these polished diamonds can be imported as Indian products, not Russian products. Currently, there is no indication that US companies purchasing Russian diamonds through India violates sanctions.
It is reported that Indian government officials stated that Alrosa has written to them indicating that “business will continue as usual” and assuring that Western sanctions will not stop the flow of diamonds.
As the Russia-Ukraine conflict continues and Western economic sanctions escalate, whether to continue buying or selling Russian diamonds is also a dilemma for the industry’s regulators. Foreign media reports suggest that a “comprehensive ban” on Alrosa could hit India’s diamond processing industry or many mines in the Sakha (Yakutia) Republic of Russia. Currently, regulators in the diamond jewelry industry have also largely remained silent on whether trade with Alrosa should continue.
As one of the most prominent institutions in the jewelry industry, the Responsible Jewellery Council (RJC) has a code of practices aimed at promoting trust in the global jewelry supply chain. It is reported that the council’s founders and some board members have been major clients of Alrosa, such as Tiffany & Co. and Leo Schachter. To date, Alrosa is said to have stepped down from the council’s board but still holds its certification. The council’s executive director did not answer in a press release whether Alrosa remains a member or whether members have been told to suspend purchases of Russian diamonds.
The council has issued “guidance” to its members regarding the sanctions. However, Running acknowledged that if members want to continue sourcing diamonds from Alrosa to meet demand, then “it should be up to consumers to decide, up to society to decide if that’s acceptable.”
Foreign media reports also note that besides Alrosa’s diamond mining, Russia has another huge diamond reserve—the Russian State Precious Metals and Gems Repository (Gokhran). This repository has long been used to regulate the diamond market, buying excess diamonds and selling them during shortages. Diamond researcher Moeckert from Belgium stated that Gokhran regularly auctions gems from the Russian state stockpile, holding six auctions in the first half of last year alone. According to Russian Finance Ministry data, revenue from one transaction reached $139.2 million. Moeckert said, “The size of the diamond stockpile is a state secret and an important source of revenue.”
After the White House announced sanctions on Russian diamonds, diamond industry analyst Paul Zimnisky stated that nearly three-quarters of diamond consumption demand comes from Western countries and Japan, with the US accounting for about half of global diamond demand. Reports indicate that in 2021, US diamond jewelry sales saw record growth, rising 51% from the previous year, and sales are expected to surpass the $100 billion mark this year. Zimnisky said that sanctions on Russian diamonds “could snowball” into a shortage of rough diamond supply and lead to rising global diamond prices.
Zimnisky said these issues will ultimately affect the entire supply chain, and there are already rumors that diamonds mined in countries other than Russia are being sold at prices above market rates.