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Alrosa diamonds mine

Mining diamonds at at Alrosa mine in Yakutia. (Photo courtesy of Alrosa.)



One of the most intriguing mysteries of the past year is the actual state of the Russia’s diamond mining sector, which prior to the country’s invasion of neighboring Ukraine starting in February last year was the world’s largest producer in terms of volume, and second largest after De Beers in terms of value.

A primary reason for it being a mystery is a Russian decision, taken relatively soon after the start of the conflict, to shut down coverage of what was happening its diamond sector, where the overwhelmingly dominant rough diamond producer, Alrosa, is effectively controlled by the central government.

Although Alrosa’s shares are publicly traded on the Moscow Stock Exchange, and thus one ordinarily would expect it would be required to report openly about its sales and production results, since the start of the war the Russia’s mining company has released very data.

Sanctions on Russian rough diamond imports were imposed by the U.S. government, but notably were not by the European Union, India, Israel, the United Arab Emirates or China, meaning that on paper at least most paths to the market remain open. But the fact that most diamond companies are concerned about drawing the attention U.S. authorities, not to mention it today being difficult to transfer funds to Russia in U.S. dollars or euro through the establishment payment channels, is is not clear how much trade is actually taking place.

In discreet discussions clearly meant to leak publicly, the Russians have intimated that, despite the sanctions regime, business continues as before. But there are indications that this is not the case. For one, while prices are soft in the higher end of the diamond market, where Russia is less dominant, at the lower end prices are considerably more solid, suggesting that Russian supply of melee may not be meeting demand.

Sorting rough diamonds at a Alrosa facility

Sorting rough diamonds at a Alrosa facility. (Photo courtesy of Alrosa.)


In the meantime, pressure seems to be building once again for additional sanctions on Russia’s diamond mining industry, with calls from Polish and Lithuanian representatives that harsher measures be instituted by the EU before a EU-Ukraine summit that is scheduled to take place in

” The value of diamond exports to the Russian budget is estimated at €4.5 billion,” said Andrzej Sadosz, a Polish representative to the EU, speaking to Polska Agencja Prasowa. “This is a considerable amount.”

“The work has really accelerated. Poland in a group of like-minded countries is now suggesting further sanctions. Strengthening the existing restrictions is also an ongoing process,” Sadosz said.

Leading the charge against EU sanction on the Russian diamond industry is the Antwerp World Diamond Center (AWDC), the umbrella body representing all players in the Belgian industry. It has contended that a ban on Russian rough imports could result in 10,000 jobs being lost in Belgium, which during the year before the war accounted for about 36 percent of Alrosa’s revenues.


While Antwerp has been the dominant conduit through which much Russian rough diamond have passed, India is where the overwhelming majority of them are cut and polished. And according to that country’s Gem & Jewellery Export Promotion Council, supplies of rough from Russia to India have fallen 40 percent since April.

And it is not for a lack of trying. In July last year a special facility was created to allow the trade between Russia and India to be conducted in rupees, rather than U.S. dollars. It has not been used to date.

“Nobody is willing to take the exchange risk and volatility,” said GJEPC Chairman Vipul Shah, speaking to the media. “The Russians are not comfortable with the rupee invoicing as far as the gems and jewelry sector is concerned.”

“The supply situation has not improved as no payments are going into Russia,” Shah added. “We are in constant dialog with the Russian government, the Indian government and Russian miners.”

Shah said that  GJEPC had even approach the Indian government to investigate the possibility of  importing Russian diamonds directly, but this still has not happened.

Rough diamonds sourced in Russia

Rough diamonds sourced  in Russia. (Photo courtesy of Alrosa.)

In the meantime, the Indian industry is feeling the squeeze, with diamond exports down 7.7 percent to $16.6 billion percent year-on-year during April-December. This largely is a result of weaker demand from the United States and China, India’s two most important markets, but “once we start seeing the demand picking up, then [rough] supply will be a real pain for us,” Shah said.