Diamond industry struggles after being hit by US sanctions on Russia’s Alrosa

With the United States imposing sanctions on Russian state-owned rough diamond mining company Al Rosa, a major source of rough diamonds for the industry in Surat and Mumbai, the Gems and Jewellery Export Promotion Council (GJEPC) Gujarat chairman Dinesh Navadia sees a payment crisis looming on the industry.

“The US market consumes 70 per cent of polished diamonds and diamond-studded jewellery of India. The diamond industry will be badly affected by such sanctions and it will not only affect the diamond and jewellery businessmen but also the artisans,” Navadia told The Indian Express.

The rough diamonds from the Alrosa mines of Russia are cut and polished in Surat and are exported to the world. Due to the sanctions, there is a shortage of supply of rough diamonds which will eventually result in rising prices of rough diamonds.

Besides, the prices of polished diamonds will also go high, which may result in a recession in the industry, say experts.

The move by international companies to halt their banking transactions with Russia in retaliation for the Ukraine invasion has led to a payment crisis, Surat-based Navadia further said. “The diamond businessmen of Surat were doing financial transactions related to the trade through different banks of Dubai, Belgium and India. Currently, this has stopped due to the war and sanctions laid by the US. The diamond industry businessmen have gone into a critical situation. For the past few days, there were talks that the business transactions between Russia and India should be done in rouble and rupees. But to date, no appropriate decision has been taken,” said Navadia.

He added, “In such circumstances, the rough diamond business between Russia and India will not take place. This critical situation will affect 15 lakh people directly and indirectly associated with the diamond industry of Surat and Saurashtra. If such a situation continues for a longer period, then it will also impact the state economy. Gujarat will witness assembly elections by the year-end and the state government should come out with an amicable solution to these crises.”

On Monday, the official website of GJEPC posted, “The US Department of the Treasury’s Office of Foreign Assets Control (OFAC) last week “designated Al Rosa” with the aim of cutting off additional sources of support and revenue for the Russian Government to wage its unprovoked war against Ukraine. Diamonds are one of Russia’s top ten non-energy exports by value, with exports in 2021 totalling over $4.5 billion. On 24th February 2022, OFAC identified Alrosa as subject to prohibitions pursuant to Directive 3 under E.O. 14024, Prohibitions Related to New Debt and Equity of Certain Russia-related Entities” (Russia-related Entities Directive),” the GJEPC website quoted the US Treasury Department as saying.

Courtesy: Indian Express