Editor’s Note
This article highlights the severe human and economic toll of Western sanctions on Russia, which have disproportionately impacted Gujarat’s diamond industry and its workers. The selective nature of these measures raises critical questions about their real-world consequences and underlying geopolitical motives.
The Gujarat diamond polishing centers employ over 8 lakh (800,000) workers, and as many as 25 lakh (2.5 million) are indirectly involved in ancillary industries. Thousands of workers have been thrown out on the streets as units closed. The human cost has been staggering.
It’s double speak at its best. The imposition of Western sanctions, part of the Russia ‘punishment’ package, has been selective. On the one hand, the ban on export of Russian diamonds destined for India has been tightly observed, creating havoc in Surat’s cutting and polishing industry. On the other hand, Russian crude oil has had a free run, benefiting some local and Western stakeholders. What is sauce for the goose, is not sauce for the gander.
India does not produce rough diamonds. It is, however, the world’s largest hub for cutting and polishing roughs, which it exports as polished stones and jewellery. Over the last few years, the vibrant industry, concentrated mainly around Surat and Mumbai, has seen a sharp slowdown with falling international orders and increasing competition from laboratory-grown diamonds.
A trade think tank, Global Trade Research Initiative (GTRI), says there has been a perceptible fall of 24.5 percent in rough diamond imports from $18.5 billion in 2021-22 to $14 billion in 2023-24, triggering defaults, factory closures and widespread job losses in Surat and other centres.
To worsen the situation, since December 2023, the G-7 countries first nudged the European Union to stop all imports of Russian diamonds, and then from February this year turned the screws on India too. When the going was good, Surat, Navsari, Amreli and other centres for cutting and polishing diamonds had built up huge facilities, employing thousands of workers and creating a huge inventory of imported roughs.
The largest supplier of roughs for Indian units has been the Russian state-owned giant, Alrosa, that accounts for over 31 million carats of diamonds and 31 percent of the world’s production. With respect to India, Alrosa accounted for nearly 27 percent of roughs supply by volume—the largest source for Indian companies.
With every export consignment needing a ‘source certificate’, the Gujarat diamantaires sank with rejected and cancelled orders. Thousands of workers have been thrown out on the streets as units closed. Anecdotal evidence showed about 70 of them had died by suicide. The Gujarat diamond polishing centres employ over 8 lakh workers and as many as 25 lakh are indirectly involved in ancillary industries. The human cost has been staggering.
It’s been a different story for India’s crude oil imports from Russia. Before 2021 and prior to the start of Russia’s Ukraine war, India imported 4.2 million barrels per day (mmbd) of crude—most of it from Iraq (24 percent), Saudi Arabia (16 percent) and US (10 percent). Russia then accounted for only 2 percent. After the Ukraine sanctions were imposed, Russian crude was offered at a discount and India grabbed the opportunity.
By the end of July this year, India overtook China as the world’s biggest importer of Russian oil. India’s overall imports for August showed Russian crude accounted for a record 44% of the country’s imports, rising to 2.07 mmbpd. The ban on import of Russian crude and petroleum products via the maritime route by third countries did not seem to exist for India.
The G-7 nations had imposed a price cap of $60 per barrel on Russian crude with the fiat that no country could buy oil from Russia above the rate. This was a December 2022 measure when the West found crude oil sanctions were being universally flouted. By imposing a cap, the G-7 thought it would push down profit margins for Russia. For the West, keeping Russian crude flowing was a sleight-of-hand to avoid an oil shortage and the resultant spike in prices.
The $60/barrel cap never worked. It merely helped India, and perhaps other buyers too, negotiate a better rate with Russian companies, estimated at about $5/b below the market rate. Interestingly, the biggest beneficiaries of Russian crude imports were the petroleum refiners in India and the Western companies importing the petroleum products.
In FY 2023, India exported $86.28 billion in petroleum, oil and lubricants (POL) products, making it the world’s second-largest exporter. And the chief beneficiary has been the Mukesh Ambani-promoted Reliance Industries and its refinery complex at Jamnagar, Gujarat. The other refiner who has benefited from cheap Russian imports is Nayara Energy, in which Russian state oil giant Rosneft has a 49.1 percent stake. Nayara operates a refinery at Vadinar, Gujarat, near the Reliance complex.
Most of these POL products were exported to the European Union, UK and the United States.
It is estimated that in FY2023, the US imported $63 million worth of POL products refined in Vadinar, where half the crude refined was of Russian origin.