
On February 24, 2022, Russia invaded Ukraine in another wave of an ongoing assault upon their peaceful neighbor, which began in 2014. The result was the largest dislodgment of citizens since World War II – more than a third of Ukraine’s population is said to currently be displaced.
Swift Sanctions
Much of the civilized world was swift to respond via numerous sanctions against Russia in protest of the unjust attacks and to impose financial constraints that would thwart Russia’s war efforts. By early April 2022, news reports claimed that the US was targeting Russian shipbuilding and diamond mining in the latest round of punitive efforts against the Kremlin. And it wasn’t just the US alone. Another 30-some global allies joined to impose sweeping restrictions against Russia for their bloody invasion of Ukraine.
Diamonds Became Verboten
The US Treasury quickly put the kibosh on doing business with Alrosa, partly owned by the Russian government. As the world’s largest diamond mining conglomerate, it accounts for 28% of all global diamond mining. Alrosa is responsible for over 90% of Russia’s diamond mining capacity as one of Russia’s largest corporations. In 2021, Alrosa’s worldwide revenue generated over $4.2B.
Bloomberg News, the global financial analyst, explained (in a May 11, 2022, report) the impact this sanction had upon the diamond trade. Prices for small rough which typically ends up being melee in jewelry, spiked almost 20% since March alone. With Alrosa out of the game, Bloomberg said, the entire pipeline from diamond cutters and polishers to traders experienced difficulty in sourcing stones.

De Beers – the Other Diamond Resource
The other major diamond supplier De Beers, said their supply isn’t expected to increase for a couple more years when their flagship South Africa mine expansion is completed. Meanwhile, they’ve been developing a system to track their goods straight back to the mines.
Keeping Track of Origins
De Beers announced its Code of Origin (COO) program in 2021. They wanted their diamonds to have a straightforward path of transparently identifying the source of goods, in a move to increase value and visibility, it said. When the Russian sanctions took effect in the US, this became even more important. Added after polishing and done in-house on diamonds of 0.3 ct. and up, a unique inscription for each stone is placed invisibly on its table without affecting its clarity. The proprietary process De Beers says, will establish a stone’s provenance and create a ‘pipeline of integrity’ for stones discovered by De Beers in Botswana, Canada, Namibia, or South Africa.
Skirting Sanctions
The lack of universal adherence to sanctioning has raised concerns of Russian goods being passed off as originating from elsewhere – and not Russia. As it stands, diamonds often become mixed together during the process of cutting, polishing, manufacturing, and setting of stones. So ensuring where any one diamond actually originated can be exceedingly difficult.
While US entities have put the brakes on buying Russian mined diamonds, not everyone is taking this stance. Several Indian buyers for instance have said they are still keeping the flow of rough coming from Russia. Today, India is the world’s largest cutting and polishing hub for diamonds. The Jewelers Vigilance Committee has urged companies to exercise extreme caution when importing diamonds. The loophole is unlikely to completely close as that would require a massive international coordination plus huge amounts of money to create a comprehensive mineral tracking system.
Robust Trade in India
The Indian diamond sector is indeed a formidable force. According to the Indian Express, June 10, 2022, making no reference to sanctions imposed elsewhere, “Notwithstanding the deadly second wave of Covid-19, 2021 saw the diamond industry reporting, perhaps, its highest growth in India. While addressing a press conference in Pune on Monday, Sachin Jain, managing director of De Beers India, attributed this to a much bigger budget for spending on jewellery as marriages and travel were restricted due to the pandemic.”

De Beers Keeps Things Clear
De Beers is working to ensure that its goods don’t get caught up in the muddle. For the time being, the process is in flux as the market sorts it all out. But according to Bloomberg’s May 12, 2022, report, “For now, a caveat in US sanctions allows imports that are ‘substantially transformed’ in a country like India, though lawmakers are pushing to close loopholes. But polishers say some clients have started refusing Russian-mined stones, characterizing them as conflict diamonds. With so much uncertainty, India’s traders are preparing to mark the origin of every stone – re-routing Russian ones to friendlier markets in China, Southeast Asia, or the United Arab Emirates.”
India was still exporting Russian diamonds to the US for a while because their existing stock was obtained pre-sanctions. But that supply was due to be depleted by early June, said Vipul Shah, vice chairman of India’s Gem & Jewellery Export Promotion Council.
The True Value of Diamonds
Many – but not all – European countries have yet to restrict the import of Russian luxury goods including diamonds. But the list is growing there, too. Belgium continues to acquire rough from Russia and other countries, a position that may change at some point. Ukrainian president Volodymyr Zelensky challenged the Belgium parliament via video conferencing in late March, “Peace is more important than diamonds.”
What’s Next?
By the end of June, Alrosa had issued scant updates on their production plans. But the mega-diamond producer insisted demand for diamonds remains high. “I think we are on track and so far, despite certain difficulties, we are working exactly according to plan in the first half of the year, somewhere in this range,” Interfax quoted Alrosa CEO Sergey Ivanov as saying. “We do not plan to lower production in the second half of the year.”
And Then There’s Gold
The latest sanction with implications for the jewelry trade is Russia’s gold. According to reports from Washington, DC, Russian-origin gold imports into the US have just been banned. The exception is gold located outside of Russia prior to June 2, 2022. As Russia’s biggest non-energy export, the country produces about 10% of all globally mined gold each year and considers gold to be crucial to their central bank.