With economic sanctions mounting against Russia, diamond retailers are increasing efforts to trace where the gems come from. That could help Canada’s mining industry.
In response to Russia’s invasion of Ukraine, the Canadian government in February issued sanctions against Alrosa, a giant Russian diamond mining company, and its chief executive.
The US government followed suit in April, joining the UK, New Zealand and the Bahamas in sanctioning the company to cut off support to Russia.
Boycotting Alrosa could have consequences far beyond the Kremlin.
Alrosa, which is partially state-owned, accounts for the vast majority of Russia’s diamond output. It’s also the world’s largest diamond mining company, responsible for about a third of global production of rough diamonds.
As a result of the sanctions, Bloomberg News reported, prices for some diamonds are “spiking.” The price of small rough diamonds has jumped about 20 percent since the start of March, Bloomberg reported this month, and other diamond companies are struggling to fill the demand.
Paul Zimnisky, a diamond industry analyst based in New York City, was more cautious in his assessment.
“Right now there hasn’t been a parabolic upward move in diamond prices like we saw with, say, oil or wheat,” he told Cabin Radio.
“Diamond prices haven’t moved as much as you would think since this happened.”
Zimnisky said that’s because the diamond trade is seasonal, with March, April and May typically being slower months for the industry. He said things usually pick up in July, when retailers begin buying diamonds for the holiday season.
“Once the industry starts to get back into gear and prepare for the upcoming holiday season, [that’s] when the impact of this is going to really start to be felt,” he said.
Zimnisky said there could be shortages of certain types of diamonds, as Russia predominantly produces smaller and medium-sized stones.
Yet Zimnisky said a potential surge in diamond prices could be tempered by demand as 2021 was a record year for diamond jewellery sales and the global economy is slowing.
So far, the sanctions against Alrosa are having the biggest impact on manufacturers in India, where 90 percent of the world’s diamonds are cut and polished. There, Zimnisky said, there have been supply shortages of rough diamonds and work has slowed.
Benefits for Canada
Tiffany Stevens, chief executive of the Jewelers Vigilance Committee, added polishers in India are “in an unenviable position” as they’re facing demand from US buyers to not use stones of Russian origin.
While US rules allow the import of Russian diamonds as long as they were processed elsewhere, many jewellers have agreed to stop using any gems that come from Russia. This comes following years of increased pressure to track diamonds along the supply chain and for retailers to inform consumers of a diamond’s origin.
“It’s been a really big thing to adjust to,” Stevens told Cabin Radio. “What we’re seeing on the ground and in the industry is a real hunger to comply with the sanctions and to even go beyond what the sanctions are currently requiring.”
Zimnisky said that appetite could benefit other countries.
“Anybody that is producing non-Russian diamonds is probably positioned well for this,” he said. “The industry is going to need new sources of non-Russian diamonds to cater to that western market and I think that could benefit jurisdictions like Canada.”
Kevin Vantyghem, vice president of Vantyghem Diamonds and a director of the Canadian Jewellers Association, agreed.
“People are looking for more diamonds that are tracked and traced,” he said, noting Canada already has those tracking systems in place.
“We’re seeing that the end consumer is more inquisitive and more concerned as to: where did this diamond originate?” added Gail Golberg, chair of the association.