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WHILE THE DEPTH OF RUSSIAN SANCTIONS REMAINS UNCLEAR,
INDUSTRY IS STEPPING UP SUPPORT FOR UKRAINE

 

Like all other business sectors, the diamond industry continues to feel the aftershocks of the Russian invasion of Ukraine on February 24, and the imposition of a steadily escalating series of economic sanctions against Moscow, imposed both governments and voluntarily by private companies.

The company most often in the crosshairs is Alrosa, the world’s largest rough diamond producer, which is 33 percent owned by the government of Russia and has been specifically named by the Office of Foreign Assets Control (OFAC) of the U.S. Treasury Department. To date, however, it does not feature among the sanctioned organizations listed by the European Union, nor those of the United Kingdom.

But. even the U.S. sanctions against Alrosa are equivocal, not applying to diamonds purchased before February 24, and thereafter only prohibiting 14-days debt and equity transactions. This means that, on paper at least, it’s still legal for U.S. companies to purchase and sell diamonds mined in Russia.

But whether they are doing so is another matter. As public pressure mounts, and newspaper articles talk about restaurants and bars removing Russian vodka from their menus, most of the larger jewelry retailers have chosen to say little. An exception to the rule was the online jewelry company Brilliant Earth, which ordinarily claims that it only sells “ethically sourced” diamonds. In a statement released less than two days after the invasion, the company declared that it had removed all Russian-mined diamonds from its website.

“Taking this proactive step was the right thing to do, as a company and for our industry,” said said Beth Gerstein, Brilliant Earth’s co-founder and CEO, speaking to the Insider website. “We stand with the people of Ukraine and hope for a peaceful and swift resolution. We hope others in our industry will join us.”

In a statement released on March 1, the trade association Jewelers of America cautioned its members about buying Russian products. “While the U.S. has not, for the most part, directly ‘sanctioned’ diamonds, precious metals or precious gemstones from Russia or Belorussia, the current sanctions and continuing Anti-Money Laundering (AML) requirements effectively prevent U.S. companies from legally – and responsibly – sourcing materials from those countries,” it stated.

both the United States and the European Union have prohibited certain Russian banks from accessing the SWIFT financial messaging system, which is the most widely used facilitator of global banking transactions.

WILL INDIA BOLT SWIFT?

The logical destination for most Russian rough diamonds is India, whose industry today cuts and polishes more nine out of every 10 polished diamonds processed. To date its government has tried to straddle the fence, deliberately reluctant to openly criticize the Russian military campaign.

Indian diamond companies may be able to obtain an ongoing supply of rough from Russia, but can they pay for it. Here the answer is less clear.

On March 6 it was reported that India’s second-largest financial institution, Punjab National Bank (PNB), was still awaiting an advisory from the Finance Ministry and the Reserve Bank regarding SWIFT-related transactions with Russian entities.

As one should recall, both the United States and the European Union have prohibited certain Russian banks from accessing the SWIFT financial messaging system, which is the most widely used facilitator of global banking transactions.

At the same time, however, India’s largest financial institution, the State Bank of India, said that it was no longer processing transactions of Russian entities that have been sanctioned by the West, stating that it is concerned that any such move would invite punitive sanctions on its own operations.

Some suggested that China’s Cross-Border Interbank Payment System may be used as an alternative to SWIFT.  Launched in 2015, CIPS is part of that country’s efforts to increase global use of its yuan currency, reducing the reliance on U.S. dollars for global transactions.

Realistically, however, CIPS is still not a viable alternative, having managed to attract only 672 participating banks indirectly – including Russia – as of February, and only 76 direct participants, which predominantly are overseas subsidiaries or branches of Chinese banks. In contrast, the Belgium-based SWIFT is used by more than 11,000 companies and organizations around the world.

INDUSTRY IN SUPPORT OF UKRAINE

While much of the industry has been circumspect when it comes to boycotting Russian goods, there has been considerably more open support for the Ukrainian people and their struggle.

For its part the De Beers Group announced it would be donating $1 million in aid to organizations helping victims of war in Ukraine.

“De Beers Group has been shocked by the violence in Ukraine and inspired by the bravery of its people,” the company noted in a statement.

A foundation operated by De Beers parent company, Anglo American, said it would match donations made by its employees to Ukrainian charities, up to £1,000 per person per year.

Kering, the luxury group that owns Gucci, Alexander McQueen, Balenciaga, Bottega Veneta and Saint Laurent, announced on Instagram that it would be making a “significant donation” to the United Nations Refugees Agency. “We hope for a peaceful resolution of this conflict.”

Not to be outdone, the world’s largest luxury brand, LVMH said it would be donating €5 million to the International Committee of the Red Cross (ICRC) to help victims of the crisis. It also would launch a fundraising campaign among employees at its 76 fashion houses in support of ICRC’s activity in the war-struck country.

Luxury group Kering announced on Instagram that it would be making a “significant donation” to the United Nations Refugees Agency to aid Ukraine.

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