New Delhi/Hyderabad : As part of the G7 sanctions, the US Department of Treasury has issued a notification that the country will stop imports of Russian non-industrial diamonds of 1 carat and above from March 1, 2024 and diamonds of 0.5 carat from September 1, 2024. The move will impact the Indian diamond trade that cuts and polishes 9 out of 10 diamonds in the world and create job uncertainty for 10 lakh workers in Surat - the country's diamond hub.
Russia's state-owned Alrosa mine which produces 30 per cent of the world's diamonds was placed under sanctions las year by the United States, which cut it off from its banking system and banned direct sales to the US market after Russia invaded Ukraine.
The G7, a grouping of some of the world’s most developed economies (US, Canada, France, Italy, Germany, UK and Japan), is on the verge of mandating certificates for the sale of polished diamonds to ensure that diamonds mined by Russian state mining company Alrosa do not reach the market. This is to ensure that all external funding to Russia’s war on Ukraine is effectively cut off.
This weekend, the Office of Foreign Assets Control (OFAC) of the US Department of Treasury issued a determination prohibiting the importation of non-industrial diamonds mined or extracted in Russia, notwithstanding whether they have been substantially transformed in a third country, effective beginning on March 1, 2024, for certain categories of diamonds, and expanding on September 1, 2024, to include additional categories.
And secondly, Second, OFAC issued a determination prohibiting the importation of diamond jewellery and unsorted diamonds of Russian Federation origin or exported from the Russian Federation, effective March 1, 2024. These prohibitions are intended to implement the December 2023 G7 commitments to impose phased restrictions on the importation of diamonds mined or extracted in Russia. OFAC intends to issue additional public guidance regarding these determinations.
Diamond exporters, who did not want to be named, said “This is a very sensitive issue. We are in talks with the G7 countries and all the stakeholders. However, if these directives become effective it will be a big blow to Indian diamond exports to the US and Europe.” The US is the biggest importer of diamonds that are cut and polished in India.
The Indian cut and polished diamond exports are already going through a rough phase as the Americans are buying less due to inflationary pressure and economic uncertainty. The exports of cut and polished in the first nine months of FY 24 have gone down significantly.
The overall gross exports of cut & polished diamonds in the period April to December of FY 24 stood at US$ 11926.1 million (Rs. 98638.48 crores) showing a decline of 28.27% (-25.32% Rs. term) as compared to US$ 16625.45 million (Rs. 132075.49 crores) for the same period of previous year.
“The G7 sanctions will also hurt the workers that are engaged in diamond cutting and polishing. If the availability of diamonds comes down, then uncertainty will loom over their jobs, diamond exporters said.
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