In a recent article on Solitaire, an B2B gem and jewelry magazine published by India’s Gem and Jewellery Export Promotion Council (GJEPC), diamond analyst Paul Zimnisky discusses Western sanctions targeting Russian diamonds, and how these might shape the industry in the near future.
According to Zimnisky, throughout 2024, the scope of Western sanctions targeting Russian diamonds is expected to expand, potentially impacting diamonds as small as 0.5 carat starting from September 2024. However, Zimnisky projects that nearly 40% of Russia’s diamond output may evade the G7 sanctions by that time, owing to either their smaller size or industrial quality.
Thus far, the extensive G7 and EU sanctions, which built on US-specific measures from 2022, have not significantly affected the global diamond supply. Several factors contribute to this, including an oversupplied market at the start of 2024, the industry’s preparation time, and the fact that the current sanctions primarily target medium and larger diamonds, while Russia predominantly produces smaller stones.
Russia, the largest producer of natural diamonds by volume and contributing over a quarter of global supply by value, has about 45% of its diamonds meeting or exceeding the 1-carat sanction threshold implemented in March. This figure will rise to about 60% under the new 0.5-carat threshold in September, leaving roughly 40% of Russian diamonds unaffected due to their smaller size or industrial quality. With an estimated $15.5 billion in global rough diamond production forecast for 2025, around $12.5 billion worth will be available to Western markets, excluding sanctioned Russian diamonds.
Alrosa’s, Russia’s leading diamond producer, has indicated it will maintain production levels despite the sanctions. In May, CEO Pavel Marinychev stated that sanctions were “not a reason not to work.” In April, the Gokhran, Russia’s precious metal and stone reserve, purchased all of Alrosa’s March production, a support measure not seen since the 2008 Global Financial Crisis.
Alrosa is estimated to have produced 33-35 million carats annually over the past two years, compared to 30 million carats during the 2020 pandemic and 37-40 million carats in pre-pandemic years.
Given Russia’s significant diamond output, sanctions will likely lead to supply shortages or bottlenecks eventually , especially after current excess stock is depleted. The diamond industry will then need to adapt, potentially by increasing non-Russian natural diamond production, using lab-grown diamonds, or adjusting prices to reflect the new supply levels.
Read the full analysis here.
