Diamonds: new opportunities for Russian private investors

A special session “Diamonds as an Investment Tool” was held on the sidelines of the Moscow Financial Forum. The discussion participated by the leadership of the Ministry of Finance of the Russian Federation, the Bank of Russia, ALROSA and leading commercial banks continued the main topic of the forum dedicated to the country's financial sovereignty.
In the spring of 2022, Russia saw a pronounced request from private investors for new alternative investment tools. In the face of uncertainty, Russians seek to provide additional protection for capital and diversify assets. Adaptation mechanisms launched by the Ministry of Finance in the new geopolitical conditions have made it possible to form a legislative framework for the development of a segment of investments in physical assets, including diamonds of Russian origin.
“Deposits in dollars and euros are no longer an asset to be invested in, what cannot be said about diamonds. Russia is the largest diamond mining power in the world. Our country also has the largest diamond-cutting facilities in Europe. With the abolition of VAT on their sale to individuals in banks, this opens up new opportunities for creating an effective financial asset for private investors. Diamonds are attractive due to their capital intensity, weak correlation with other financial assets, and pegging to global prices. Their investment potential is due to the depletion of the world's diamond reserves since there are no new deposits with an efficient economy. Along with precious metals, diamonds are traditionally used for long-term investment. The diamond investment market is promising for Russia, and it needs to be developed with the support of the banking community,” said Alexei Moiseev, Deputy Minister of Finance of the Russian Federation.
As part of the session, ALROSA, the world's largest diamond mining company offered to the forum participants an investment proposal based on diamonds, which from October 1, 2022 will replenish the product lines of Russian banks.
It currently provides two products. The first is rare diamonds with the greatest investment potential, that is, especially large stones of exclusive colors with an entry threshold equivalent to $50,000. The second, the so-called “diamond basket”, is a set of diamonds weighing 0.3 carats or more with a total value of $25,000 or more, having a standardized price per carat and the possibility of resale to ALROSA. The purchase is made in rubles. The calculation of the cost of polished diamonds is based on a regularly updated aggregated index, which reflects the dynamics of prices in the international market. Private investors also have the option of storing purchased diamonds at ALROSA, as well as the opportunity to create custom-made jewelry.
“Investment grade diamonds are a unique physical asset of Russian origin. This is one of the few quasi-currency protective assets currently available in the country; they are sold for rubles at prices pegged to global ones. This is a mobile physical asset with the maximum concentration of value per unit of volume and mass, undemanding to the conditions of storage and transportation,” said Dmitry Amelkin, ALROSA Strategy Director.
The session participants also discussed the issues of integrating the investment proposal into the lines of the country's retail banks, as well as the prospects and potential capacity of the domestic diamond investment market, which is equivalent to hundreds of millions of dollars.
Maria Voloshina, Director of the Accounting Regulation Department of the Bank of Russia emphasized that banking legislation currently has all the necessary tools to record diamond transactions in accounting and reporting.

Vladimir Malakhov, Rough&Polished