By David Brough
Concerns that Russian-mined diamonds may be seen as “conflict diamonds” in the minds of consumers, will become a big issue for the industry.
Sweeping international sanctions are being implemented to hobble the Russian financial system following the horrific Kremlin-led invasion of Ukraine.
Many consumers will not want to be associated with diamonds exported from Russia, which will boost state coffers.
Yet consumers around the world often do not know where the diamonds in their jewellery come from.
Russia is a major exporter of rough natural diamonds.
The industry will need to review the definition of “conflict diamonds” in light of the Russian invasion and the huge suffering it has unleashed on the Ukrainian population.
Non-reaction by the industry risks eroding diamond jewellery demand.
Consumers could turn away from diamond jewellery if they do not know the origin of their diamonds and if they suspect diamonds may be contributing to financing warfare.
Millennial consumers of diamond jewellery have proven to be stringent in their desire for the highest ethical standards in the production of diamond jewellery, and will object to the Russian invasion of a democratically-elected sovereign state.
A senior executive of state-backed Russian miner ALROSA, a leading supplier of rough natural diamonds, said, “ALROSA is carefully studying the new working conditions in connection with the imposed sanctions. We are doing our best to guarantee the integrity of our operations, trading activities and interaction with clients. The company intends to continue its work normally.
“We hope that the industry markets will stay strong during this global turbulence, and we will stay closely connected with our businesses throughout the whole world, based on the relationships that were strengthened over decades and through a lot of crises.
“We encourage our partners and industry colleagues to support the global diamond trade and to keep it out of politics and preserve the integrity of the diamond pipeline.”
If international sanctions are developed against the Russian state-backed diamond industry, the need for efficient scrutiny of the supply chain using tools such as blockchain will grow.
Blockchain service providers will be commissioned to track diamonds from origin to consumer, to enforce implementation of any sanctions.
If Russian diamond supplies to the global market are ultimately eroded, consequences may include:
* higher prices of rough diamonds due to tighter supplies;
* and a stronger market position for miners who can provenance other than Russian origin.
We could eventually see the beginning of a differentiation in the value of rough diamonds depending on their origin.
This could evolve into premiums for values of rough diamonds from producing areas where miners support local communities, impacting also on consumer prices of finished diamond jewellery.
The Indian diamond manufacturing industry will need to ponder very carefully what the Russian invasion of Ukraine may mean for future imports of Russian rough diamonds under an evolving sanctions regime.
What is clear is that the framework for rough diamonds trading and the marketing of diamond jewellery to ethically minded consumers will have to respond to a rapidly changing world order against the backdrop of the ongoing Russian invasion of Ukraine.
(Disclaimer: Any opinions expressed in this article are solely those of the author.)