Russia war fallout may hurt Indian diamond exports



The G7 nations, an informal bloc of advanced democracies led by the US, is threatening to halt the imports of certain grades of polished diamonds from India that use rough diamonds indirectly sourced from Russia.

MUMBAI : The Indian diamond trade, which produces nine out of 10 of the world’s polished diamonds and employs over 4 million, could face collateral damage from the Russian war.

The Group of Seven (G7) nations, an informal bloc of advanced democracies led by the US, is threatening to halt the imports of certain grades of polished diamonds from India that use rough diamonds indirectly sourced from Russia.

Though the G7 hasn’t yet sanctioned Russian diamonds cut and polished outside that country, the bloc is working on restricting their use to cut Russian revenues.

The action forms part of the punitive economic sanctions imposed by the bloc against Russia, which invaded Ukraine in February last year.

Representatives from the bloc have been negotiating with officials from apex trade body and commerce ministry sponsored Gem & Jewellery Export Promotion Council (GJEPC), Bharat Diamond Bourse (BDB) and Surat Diamond Bourse, among others, for the past three months on the issue.

The Indian side is urging the G7 to prevent any such ban, given the deleterious impact it could have on over 4 million people directly employed in India’s diamond cutting and polishing trade. However, a top trade source, who has been part of the negotiations, told Mint that the G7 could consider a ban on exports of stones of one carat and above, to begin with.

“If there is a ban on imports into the G7, we are hoping it is only on polished diamonds of 1 carat and above and not on smaller stones over which India enjoys a monopoly on cutting and polishing, as that could have a direct bearing on smaller diamantaires and the labour they employ for processing roughs," the source said, requesting anonymity. He added, however, that consignments in the pipeline would not be impacted as they would be “grandfathered," in the event a decision is taken to ban. That means the ban would take prospective effect.

Vipul Shah, chairman of GJEPC, declined comment on the ground that no decision on the issue had yet been arrived at.

“I have no comment on this," Shah said.

Anoop Mehta, BDB chairman, said, “The talks with the G7 reps, which began about three months back, are still in progress, but we are hopeful of resolving the issue as the bloc is aware of Indian concerns over the impact of any potential ban on the vast labour force it employs."

India sources rough diamonds mined by De Beers, which is part of global mining giant Anglo American, and Russian diamonds through the UAE, post the sanctions, according to a trade source. Russia’s Alrosa, the world’s largest producer of diamonds by volumes, has been sanctioned by the G7.

Together, both these companies account for 60-65% of the worldwide market share of rough diamonds, with Alrosa leading by volumes and De Beers by value.

Indian diamantaires normally import the roughs through Mumbai , have them cut and polished at their factories in Surat and export them back from Mumbai to US , China , and Europe. However, with the opening of the Surat Diamond Bourse, the bulk of activity could shift to that city.

The Indian diamond trade is seasonal and labour is of two types — one on the company’s rolls and the other temps. The latter, based out of Surat, have suffered job losses recently due to poor demand of diamonds from US and China, India’s biggest markets accounting for around two-thirds of its exports, according to market sources.

Indian exports of polished diamonds plunged 39% in July to $1.17 billion from a year ago due to the fall in demand from a sputtering Chinese economy and from the US which has hiked interest rates from near zero in March last year to 5.25% through July this year. Exports slowed by 31% year on year in dollar terms to a provisional $5.67bn in the fiscal year through July .

In FY23, Indian imported roughs worth $17.3 billion and exported polished diamonds worth a provisional $22 billion, GJEPC data shows.

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