The US announced another economic sanction on Russian companies to "punish" the country for invading Ukraine. The imposition on Russian giant Alrosa, a diamond industry, has already dropped the share prices by more than 17%? since the invasion.
While announcing ¡°blocking sanctions¡± on Alrosa, U.S. Secretary of State Antony Blinken said, ¡°The United States is imposing blocking sanctions on two Russian state-owned enterprises. We will keep raising the cost for President Putin¡¯s unconscionable war and atrocities against Ukraine.¡±
By designating Alrosa, the US expanded the previous sanctions and ordered that American citizens possessing properties of Alrosa are, ¡°blocked and must be reported¡± to the Office of Foreign Assets Control (OFAC) of the Department of the Treasury.?
OFAC stated, "Diamonds are one of Russia's top 10 non-energy exports by value, with exports in 2021 totalling over $4.5 billion.¡±
Alrosa is the world¡¯s biggest diamond mining company which supplies 90% of Russia¡¯s rough diamonds. The U.S. Department of the Treasury recognises it as a state-owned enterprise. The company accounts for approx. Over 30% of global diamond output and majorly exports to Belgium, India, and the United Arab Emirates.
The supply from the company is often described as ¡°conflict diamonds¡± for having alleged links with top Russian officials.?
According to reports, a third of all rough diamonds are produced by Russia. After the sanctions on financial transactions between firms and entities, the industries are facing severe financial losses which might result in unemployment in the sector.?
The mines of the company are in Yakutiya where the climate is harsh and people have limited job options. It employs over 32,000 people and their job is in danger as restrictions are imposed on its ability to raise new debt and equity in the US.
India is the world¡¯s largest exporter of diamonds. It is said that 9 out of every 10 diamonds in the world journey through India as they are cut and polished in the country.
The diamond industry of India is very much dependent on imports of raw materials and? 50% of the country¡¯s total gems & jewellery exports include diamonds only.
The diamond market of India is largely unorganised and is yet to recover from Covid-19 induced lockdown, which forced factories to shut down for several months. A major portion of a total of approx. 4.64 million workers in this sector, are employed in the diamond business.?
Before the Russia-Ukraine war, the gross imports of India¡¯s rough diamonds jumped by 84% between April and January this fiscal to $14.83 billion. Further, a surge of 62% $20.06 billion was also reported through exports of cut and polished diamonds. This was India¡¯s overall merchandise trade, during this period.
Despite sanctions and bans by top jewellery brands including Signet and Tiffany and Co. on using Russian diamonds in their products, an escape has been pointed out. Apparently, despite sanctions, the ¡°substantially transformed¡± goods in a third country are allowed to import.
In an interview with Al Jazeera Paul Zimnisky, an analyst said that ¡°If India banned the import of any diamond of Russian origin, that would in fact send shockwaves through the supply chain.¡±
The direct imports from India are only around 10% of Alrosa's total rough diamond output, but most Russian diamonds end up in India for cutting and polishing after passing through trading centres. The third-largest source of export revenue in India is diamond, which stood up at 16 billion dollar in 2020.?
In 2015, the diamond trade between India and Russia was boosted as a special customs zone was created to manage rough diamonds from Russia. The special zone was created in the Bharat Diamond Bourse in Mumbai.
In Astrakhan province of Russia, the Indian community involved in the diamond trade is living for generations. PM Modi inaugurated the World Diamond Conference in 2014 whose chief guest was Russian president Vladimir Putin.
The supply chain is also disrupted because shipping companies are abstaining from the Black sea, a key transit route from Russia to Asia. The imposed sanctions could cripple Indian industry and exports. Nearly a million people are employed in the diamond cutting and polishing sector in India.
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