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When It Comes to Russian Diamonds, Industry Is Watching, Waiting
The longer Russia’s assault on Ukraine continues, the more complicated the situation becomes for the jewelry industry.
An aerial view of Mir, an open-pit diamond mine in the Sakha Republic operated by Alrosa. Alrosa was one of the companies sanctioned by the U.S. government following Russia’s invasion of Ukraine, a step that could have huge implications for the jewelry industry. (Photo courtesy of Alrosa)
New York—In the week since the United States first levied sanctions on one of the industry’s largest diamond suppliers, one thing has become clear—the situation is complicated, and no one knows quite where the industry goes from here.
Russian diamond miner Alrosa fell under the second round of U.S. sanctions announced last week after Russia launched a deadly, unprovoked assault on Ukraine, creating a humanitarian crisis and drawing criticism from nearly every corner of the globe.
As previously reported, the sanctions are not a total ban on doing business with Alrosa, but the situation is murky.
Russia’s primary banks are sanctioned, which could complicate any financial transactions with Alrosa, as is the company’s CEO, Sergey Ivanov Jr.
Considering the sanctions on Alrosa, the banks and Ivanov, the Jewelers Vigilance Committee recommends companies check the lists of sanctioned companies and individuals, which are available here and here, to ensure they are not doing business with any of them.
Jewelers of America, meanwhile, issued a statement late Monday advising its members to stop buying or selling diamonds, precious metals and gemstones of Russian or Belorussian origin.
It is also a good time for companies to review their anti-money laundering programs, JVC said.
In an interview Tuesday, diamond industry analyst Paul Zimnisky noted the midstream section of the market—cutters and polishers based mainly in India—will be first to feel the effects of the sanctions, as the country’s Gem & Jewellery Export Promotion Council noted in a statement to Rapaport.
Rough diamonds being cut and polished today won’t end up in U.S. retailers’ hands for 3-5 months, and no one can say with any certainty what the situation will be then.
But, what about the diamonds that are already in the United States?
According to JVC, the restrictions placed on Alrosa do not apply to goods obtained from Alrosa or Alrosa USA before Feb. 24, the day the sanctions took effect. And the diamonds are already paid for, meaning they aren’t currently adding to the coffers of the Russian government as it advances in Ukraine.
Zimnisky also pointed out that while the Russian government does own 33 percent of Alrosa, another 33 percent is owned by the government of Sakha (Yakutia), the remote region where Alrosa has most of its mines and where local populations rely on diamonds for their livelihood.
But, from vodka to caviar, there is a groundswell of disdain for Russian products, an irony for Alrosa, which, like the rest of the diamond trade, has spent an extraordinary amount of time and money making sure its stones are traceable from mine to market and can reliably be sold as Russian diamonds.
“Sanctions aside, I think the biggest impact for the industry could be if the Western consumer becomes reluctant to buy Russian diamonds in protest. For many jewelers, one in three or four of the diamonds they hold in inventory are of Russian origin,” Zimnisky said.
“So, this is a big deal for this industry, for sure.”
That fact is not lost on jewelry’s major players, who, so far, have said little to nothing publicly about Russian diamonds.
Signet Jewelers, Tiffany & Co., and Blue Nile did not respond to National Jeweler’s request for comment on how the sanctions will impact their business or their position on Russian diamonds.
As of press time, nothing had been posted to their respective websites or social media accounts addressing the issue.
In fact, the only public reference any of these jewelers have made to the ongoing war and humanitarian crisis in Ukraine came from Signet's Banter by Piercing Pagoda, which posted to Instagram about backing Together Rising in its support of Ukraine, a post that was later removed.
The two retailers that did respond to National Jeweler were Ben Bridge and Helzberg Diamonds, both Berkshire Hathaway-owned companies.
Helzberg said, “Alrosa is not a Helzberg Diamonds business partner,” while Ben Bridge CEO Lisa Bridge said via email they “have not and do not” source directly from Russia.
She added: “At Ben Bridge, we care deeply about protecting both people and the environment in every stage of the supply chain. We have always adhered to the highest ethical and quality standards in the industry to ensure that all of our diamonds and gemstones are mined and sourced responsibly … Today, we stand with the people of Ukraine and keep them in our hearts as they fight for their freedom.”
The sole retailer to speak out publicly so far has been Brilliant Earth, which centers its brand on “responsible sourcing.”
The retailer, which recently went public, posted a tweet over the weekend announcing it had removed all diamonds mined in Russia from its website, though it declined to comment when asked what percentage of its stock consists of Russian goods, citing a quiet period.
At Brilliant Earth, we remain committed to transparency and responsibility, and offering products that meet our high standards. We have removed all Russian mined diamonds from our website. 1/2
— Brilliant Earth (@BrilliantEarth) February 26, 2022
“At Brilliant Earth, we remain committed to transparency and responsibility, and offering products that meet our high standards,” the company wrote on Twitter. “We hope for a peaceful and swift resolution in Ukraine, and, like the rest of the world, are watching the situation there closely.”
Alrosa mined 32.4 million carats of diamonds in 2021, making it the world’s largest diamond producer alongside De Beers (32.3 million carats) and accounting for nearly 30 percent of global supply.
Zimnisky said the potential impact on the diamond industry—which is already grappling with a shortage of rough and rising prices—from a supply standpoint is significant, akin to a disruption in the supply of uranium (which is enriched and used to power nuclear power plants) from Kazakhstan or cobalt (used in batteries for electric cars) from Congo, both of which account for one-third of global supply.
Russia also is a supplier of palladium and gold, with JVC noting Tuesday it is working to determine if there are repercussions for gold coming through Russia.
The longer the invasion of Ukraine and resulting sanctions on Russia continues, the greater the implications for the industry.
“There is hope this is going to be resolved in the near term and, if so, the implications wouldn’t be as great. That is the hope,” Zimnisky said.
But, he concluded, “The longer it goes on, the more complex it gets.”
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