Indian jewelers shun Russian diamonds
Speaking at the St. Petersburg International Economic Forum in June, Sergei Ivanov, chairman and chief executive of Russian diamond mining company Alrosa, announced that the company was maintaining its originally planned production of 34-35 million carats in 2022. , above its 2021 production of 32.4 million carats. .
It comes despite Western jewelry brands pledging after Russia invaded Ukraine to stop sourcing from Alrosa – which until 2021 provided a third of the annual total world of 116 million rough diamonds. It also highlights the challenges faced by suppliers and traders under pressure to keep Russian stones at bay.
Caught in the middle are the million-dollar cutters and polishers of the 4,000 companies based in India, a country that processes more than 70% of all diamonds and whose political elite has long courted close ties with Russia. .
“There is a huge loophole, like once a diamond in the rough [the sole object of sanction] has been polished in places like India, depending on the sanctions, it has been transformed enough to become of Indian descent,” notes Tobias Kormind, Managing Director of 77diamonds.com. It refers to the principle of “substantial transformation” which makes it possible to change the place of origin of the goods to the place where they were transformed.
Nevertheless, some Indian polishers and cutters serving Western jewelers have been keen to back the brands’ promises that no Russian stones will tarnish their customers’ jewellery.
“We adhere to global sanctions and make our sourcing decisions accordingly,” says Devansh Shah, partner at Venus Jewel, a company specializing in cutting and polishing diamonds from 1 to 30 carats and above. “Each of our diamonds is individually tagged and tracked throughout its journey, from the time we receive them as rough stones to the final polished diamond.”
Piyush Patel of Dharmanandan Diamonds, another Indian factory specializing in large diamonds, praises the industry’s computer prowess in tracing the provenance of stones.
The foundations for such a system were laid in the early 2000s, when concerns over conflict ‘blood’ diamonds led to the implementation of the Kimberley Process certification scheme. This requires miners to export rough stones in numbered, sealed, tamper-proof containers, along with government-issued documents of origin.
Additionally, prominent jewelers have taken it upon themselves to address consumer concerns by participating in various industry-backed certification programs and trying out technological solutions, such as blockchain.
For example, De Beers has started tracking diamonds weighing 1 carat or more from mine to market using Tracr, a blockchain and artificial intelligence-based system.
Once extracted, a rough diamond is scanned, photographed, appraised and then registered on the Tracr platform. As the diamond is cut, polished and graded, more images and information are added to its digital identity. Last year, De Beers presented a collection of eight fully traceable rings weighing over 5 carats.
While it’s easier to imagine how large stones can be separated, the task seems daunting for the tiny melee diamonds used in pavé settings, which are typically interchanged in bulk rather than individually.
Yet in shopping malls like Antwerp, rough diamonds arrive in sealed batches sorted by size and bearing details of the mine of origin. Thus, granular traceability does not decrease with the size of the diamonds when cutters and polishers buy directly from these locations.
Dimexon, an Indian cutter and polisher specializing in scrimmage diamonds, is among the companies buying directly from miners. In addition to a database system that tracks all of its diamonds, Dimexon issues written confirmations of the non-Russian origin of its stones.
“Ironically, we had a low single-digit percentage of supply from Russia, and as such, we were never too dependent on Russian supplies,” says Vishal Mehta, director of Dimexon. But he expects the sanctions to put pressure on prices. “We are facing increased competition, within our suppliers, from manufacturers who were heavily dependent on Russia and are looking for alternative sources.”
Tailors and polishers agree that, if prices have not risen dramatically so far, it is thanks to subdued demand from China, mired in its zero-Covid policy and which does not hasn’t reopened yet. But diamond analyst Paul Zimnisky estimates there will be supply shortages of non-Russian diamonds over the next 12 months, with consequent pressure on prices, as the West and Japan account for around three-quarters of the global demand for diamonds.
Meanwhile, some jewelers, like London-based Moussaieff, have had to adjust to the limited supply. “There are fewer goods available at higher prices,” says owner Alisa Moussaieff. “Some colors that are mainly mined in Russia are extremely rare.” As a result, she was forced to look elsewhere for new suppliers who have different sources.
Zimnisky says, “What ultimately happens is the. . . the supply chain will become bifurcated between non-Russian diamonds and Russian diamonds. Once industry adjusts, non-Russian goods will flow to Western consumer markets and Russian goods. . . to the rest of the world. »
Eddie LeVian, managing director of American jewelry brand Le Vian, agrees – adding that “the Chinese are able to absorb this (Russian) supply even in their current hectic environment.”
The challenge will therefore shift to the traceability of Russian secondary market diamonds.