By John Meyer, consultant in financial markets, for Eurasia Business News, April 12, 2023
The G7 countries are likely to impose sanctions on ALROSA diamonds weighing 1 carat, reported the Indian edition of The Economic Times, citing leaders of the Indian diamond cutting industry. According to the publication, sanctions may be imposed during a meeting on May 19-21 in Japan ahead of the jewelry exhibition in Las Vegas, which will be held in the first week of June.
The Economic Times refers in particular to the Chairman of the Indian Council for the Promotion of the Export of Precious Stones and Jewellery (GJEPC) Vipul Shah. “We have heard from various sources that there will be new sanctions, and they will start with large diamonds,” he said, adding that he had no information about the form in which sanctions would be imposed.
In March, officials of the US State Department and European Union (EU) would have alerted leading diamantaires and jewellers in Mumbai that plans were underway for harsher sanctions on diamonds originating from Russia,
Once the G7 sanctions take effect, there will be uncertainty about the employment of nearly three million workers in Surat, India’s diamond hub where nine out of ten diamonds in the world are cut.
Industry executives who are in talks with G7 officials said the issue needs to be reconsidered, given the significant number of rough diamond cutting workers in India, reported our local sources in India.
Currently, India is free to export polished diamonds produced from Russian rough diamonds to the US and G7 countries if they undergo substantial processing in the Indian diamond cutting and polishing industry. It also changes the system code of the stone – a six-digit number used to identify goods in cross-border trade.
Previous attempts by the EU to impose sanctions on Russian diamonds have met with resistance from a number of important stakeholders in the diamond market, primarily Belgium. The argument was that such sanctions would hit the interests of market players in an important industry for Belgium (Antwerp is home to one of the world’s largest diamond trading centers). Also, Belgian officials noted that in the absence of a tracking mechanism, transactions will simply move to trade centers outside the EU. In order to limit the trade in Russian diamonds, representatives of the G7 and the EU are discussing the creation of a system for global tracking of diamond turnover.
The United States in March 2022 banned the import of diamonds and polished diamonds from Russia, and in April the Russian diamond miner ALROSA was included in the U.S. sanction list. However, US sanctions do not prevent the supply of diamonds to India, where 95% of the world’s diamonds are produced.
Most of the stones of ALROSA are sent to jewellery producers in India. There they are cut and polished, turning into products ready for use in earrings and wedding rings. According to sources, ALROSA sold diamonds to buyers in India and Europe mainly in exchange for rupees.
Based in Moscow, the Public Joint Stock Company ALROSA is targeted by OFAC sanctions since February 24, 2022 (effective on March 24, 2022). All transactions with it are prohibited by the U.S. Treasury.
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