This content was first published on IGR – Italian Gemological Review no. 16 in 2023. The information provided here is therefore current as of the original publication date.
The attempt to ban Russian diamonds from international rough trade is founded on the adoption of a new approach that involves imposing economic sanctions on the import of specific goods, including gemstones. Import limitation to currency earning strategic goods is a weapon to respond to the violent massacres of defenseless citizens following a military coup (as in the case of Myanmar rubies) or armed conflicts (the invasion of Ukraine).
Gemstones represent one of Russia’s major non-energy exports by value, with more than $4.5 billion in value last year, according to U.S. government data. For this reason, the White House issued an executive order1 on March 11, 2022 banning the import of Russian non-industrial diamonds into the United States, a direct measure against Russia’s military attack to Ukraine on Feb. 24, 2022.
The EU is on the same wavelength. Nevertheless, on Feb. 24, 2023, a G7 statement provides nothing more than a promise: «given the significant revenues that Russia extracts from the export of diamonds, we will work collectively on further measures on Russian diamonds, including rough and polished ones, working closely to engage key partners».
The move to hit the Russian Diamond industry affects the Kimberley Process too. «Russian diamonds are involved in financing the war of the Russian Federation against Ukraine, which makes these diamonds not just conflict, but bloody», said Vladimir Tatarintsev2, deputy director of the State Gemmological Center of Ukraine and a member of the Kimberley Process.
Are Russian rough diamonds actually being used by “rebel movements or their allies to finance conflicts aimed at undermining legitimate governments”? However illegitimate and disturbing the attack on Ukraine may be, Russia cannot be equated with a “rebel movement”, and therefore the above requirements for banning a country from trading in rough diamonds are not met.
Does the KP indulge in too much abuse? For most observers it does. IGR has revealed how attempts to expand the scope of abuses pursued by the KP have often failed3. Admittedly, as far as the ethical compliance is considered Russia is not a country of illegal mining. It cannot be argued that Russia’s state-owned mining giant Alrosa (4.16 billion in revenues in 2021, with a net profit of $943 million) has not successfully supported efforts to protect the environment. The economy of Yacutia, a large and distant region in the Siberian state of Sakha, is based largely on diamond mining, and recently US$60 million has been allocated for the development of this region4.
Is the isolation of Russian diamonds from international markets a successful strategy? Not really. Fifty percent of all polished diamonds are sold to the United States. While it is not surprising that, in order not to displease Western customers, a number of large companies in India continue to avoid buying Russian rough diamonds, it is also a fact that other companies have not stopped working with Alrosa and are turning to domestic demand and other eastern markets such as China and Japan. These three nations, which account for about 30 percent of world consumption, have not proclaimed any embargo against Russian suppliers of rough diamonds.
Also true is that, in order not to displease Western customers, most of the major Indian cutting companies still refrain from buying Russian rough diamonds. However, there are also doubts regarding the 50% of total processed diamonds that are sold to the United States. Are there, among these products, no gems that have been cut from Russian rough?
Furthermore, as far as specific Blockchains are not yet successfully used by the supply chain, once the gemstones enter market cannot be traced back. Being India the production site where 90 percent of diamonds are cut, it becomes their country of origin and consequently they can be legitimately imported into the US. Small size parcels are frequently remixed multiple times and this make the identification of the rough source quite an impossible mission. «The flow of diamonds from Russia to India to America will continue unabated», Martin Rapaport told the Guardian. «The sanctions are essentially very ineffective. They don’t do anything. This is not going to stop Russian diamonds».
«Alrosa roughs are not ‘conflict diamonds, says India», the Indian investigative journalist Shantanu Guha Ray reports5 and warns that a ban on Russian exports to India would consequently result in shifting the Diamond cutting industry to China. From bad to worse.
Notes
2 https://www.nytimes.com/2022/08/16/climate/russia-conflict-diamonds-kimberley-process.html
4 https://www.igi.org/gemblog/alrosa-to-invest-60m-in-the-social-and-economic-development-of-yakutia
5 https://sundayguardianlive.com/news/alrosa-roughs-not-conflict-diamonds-says-india
Article by Paolo Minieri, published on IGR – Italian Gemological Review #16, Summer 2023.
