With the threat of sanctions, 25% of world production
The sanctions imposed by the West provoked an almost immediate response from Alrosa: the New York office will be closed, and the company will step down from the vice presidency of the Responsible Jewelery Council, the NGO that works to promote the sustainability of the industrial world of jewellery. And other consequences concern the geopolitics of the diamond market: firstly, according to Rapaport, a reference publication for the sector, the sanctions against Russian diamonds could lead to a 25% fall in world production, and this while diamond prices, according to Rapaport, have fallen by 25% since September gone up. A combination that, coupled with the fact that diamond reserves are said to be near depletion to meet the recovery in global demand following the pandemic, some believe could create a perfect storm. Much will depend on how long and how severe the conflict is, Martin Rapaport said in a recent webinar on the subject.
The crucial passage to India
If we turn our gaze from Russia to India, we notice another factor: although Moscow has the primacy in diamond production, the gemstones that are marketed there are raw and go directly to India to be polished and marketed there to become. India processes 92% of the world’s gemstones, Rapaport continues to report. And once cut, even Russian diamonds become a Made in India product and are therefore exempt from all sanctions at the moment. India was among 35 countries to abstain from voting on the resolution condemning the UN Assembly against the Russian invasion, and in a further act of proximity to Moscow, the Indian diamond industry has announced it will accept payments in currencies other than the euro to accept dollars and through banking channels not included in the Swift system. “Alrosa has assured us that they are conducting their activities as usual said Colin Shah, President of the Narendra Modi Government’s Gem and Jewelry Export Promotion Council. They will honor their commitments to their customers around the world ».
The first boycotts of the new blood diamonds
But will customers around the world continue to buy conflict diamonds? Russian diamonds may indeed become the new blood diamonds, the bloody gems that have funded conflicts on the African continent. The first defectors have already emerged: two days after US sanctions began, sustainable jewelery company Brilliant Earth removed all Russian diamond jewelery from its premises. Next, but louder, came the decision by Signet Jewelers, the world’s leading diamond jewelery retailer, to stop buying Russian diamonds. At the same time, the corporate foundation donated $1 million to the Red Cross for activities in Ukraine. As Bloomberg reported, Tiffany & Co., the US brand of the LVMH Group, was the first “big guy” last Friday to announce its intention to stop buying rough diamonds from Russia and those of Russian origin, even if they are found in others countries were ground .
With gemstone traceability a crucial issue in the sustainability strategies of major jewelry brands, will others take the boycott path? And how will consumers react, who are also increasingly mindful of the ethics of their purchases, particularly the younger generations who are driving the global growth of luxury?
The Gokhran, the hidden treasure of Moscow
It will take time to understand whether the sanctions against Moscow diamonds will affect the republic’s finances. But there is another important factor to consider: Moscow could also fund its wartime spending by drawing on the precious treasures stored in what it calls the Gokhran, its treasury, where it also keeps its diamond stash. Its origins date back to 1719, by the will of Tsar Peter the Great, and over time the “Diamond Room”, as it was then known, was enriched until, after the Russian Revolution, it was transformed into Gokhran and became the Treasure of the People.