How sanctions on Russia will change the diamond trade (The Economist – January 4, 2024)

New rules add up to the biggest shakeup of the industry in decades

Russia’s diamond industry is under pressure. On January 1st the g7, a group of rich countries, and the European Union banned imports of rough diamonds mined in Russia—a third of the total extracted worldwide in 2022. On January 3rd the eu added Russia’s state mining company, and its chief executive, to its sanctions list.

This is the first phase of a comprehensive sanctions scheme: in March the g7 and eu will ban Russian gems that have been cut and polished abroad. In September they will introduce a certification scheme to verify where diamonds were mined. These measures add up to the biggest change to the business in decades. Why has it taken so long to impose sanctions on Russia’s diamond industry—and what impact will they have?

Russian diamond miners generate about $4.5bn in revenue each year. That is peanuts compared with the revenue from Russia’s oil and gas exports, which, despite sanctions, was a record $384bn in 2022. Diamond sanctions are as much symbolic as they are practical.

Nearly all the industry’s revenues come from the vast Siberian operations of Alrosa, a state-controlled monopoly. Anton Siluanov, Russia’s finance minister, chairs its supervisory board. Under a sponsorship deal with the Russian navy, a submarine in the Black Sea Fleet bears the company’s name.

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