Colin Shah, Chairman of the Gem & Jewellery Export Promotion Council, India (GJEPC) commented below the impact of the US sanctions imposed on Russia, which could affect the Indian diamond industry, as per a note sent by the GJEPC to Rough&Polished.
Russia’s partly state-owned diamond mining company ALROSA is one of the world’s biggest diamond producers, accounting for approximately 30% of global diamond output, the note said. India directly imports around 10% of Alrosa’s total rough diamond output, however, most Russian diamonds end up in India for cutting and polishing after passing through trading centres.
According to GJEPC, the Russia-Ukraine conflict has led to US sanctions on Russia, and this might affect the Indian diamond business. Indian diamond companies might face difficulties in making payments for rough diamonds sourced from ALROSA as Russia has been banned from the SWIFT financial network. This impacts the five major Russian banks, including state-backed Sberbank and VTB, the country's two largest lenders. Delayed payments are expected to impact rough supplies by 2-3 weeks, resulting in scarcity of rough from Russian allocations.
However, GJEPC has received a letter from ALROSA dated 28th February stating that ALROSA is ready to address the concerns related to day-to-day operations due to the US restrictions imposed on ALROSA last week.
The letter also states that ALROSA’s settlements with foreign partners continue as usual as there are no restrictions on the Company’s transactions in dollars, euros, or other currencies. Diverse banking partners, allow the company to operate normally without any delays.
ALROSA has assured that they are running their business as usual and they have all the necessary resources to ensure normal operation in the current circumstances. They will be fulfilling all their obligations to their clients in any part of the world.
For remittances to ALROSA, Russia, GJEPC’s advice is to consult bankers and proceed cautiously with their approval only if they are confident that the transfer to ALROSA will go through.
Direct payment in rouble is possible where the clients have relations with Russian banks in India or if their bankers can have an arrangement with those banks (provided they are not on the SWIFT ban list). However, payment in rouble is not a viable option due to volatility and illiquidity in the exchange market.
India’s diamond industry is 100% import-dependent, and any shortage in rough would have a severe impact on manufacturing activity and employment in the sector. This will also have a huge impact on total gem & jewellery exports, as diamonds account for more than 50% of the exports.
Aruna Gaitonde, Editor in Chief of the Asian Bureau, Rough&Polished
