Why possible ban on Russian diamonds by G7 matters to India

The Group of Seven (G7) countries are ready to announce an import ban on Russian diamonds in the coming weeks. But before that, Western nations will reportedly be sending representatives to India, where 90 per cent of the world’s diamonds are cut and polished. The step comes as the G7 bloc, comprising Canada, France, Germany, Italy, Japan, the United Kingdom, the United States and the European Union, aim to prevent funds from flowing into Russia’s coffers to finance its war against Ukraine. What measures have already been taken against Russia’s diamond industry? What to expect from the G7 ban and how will it affect India? Let’s understand. Sanctions on Russian diamonds Russia is the world’s biggest diamond exporter by volume, followed by African nations. State-owned company Alrosa commands Russian diamond mining, making it the world’s largest producer of the gemstone. Moscow earned over $4.5 billion from the sale of its diamonds last year, as per Reuters. After Russia’s invasion of Ukraine last February, the Joe Biden administration imposed sanctions on Alrosa and stopped the import of non-industrial diamonds of Russian origin in the US. In May, the UK announced it would ban Russian diamond imports . So far, the EU has neither banned imports of Russian diamonds nor blacklisted Alrosa. Belgium, which is home to Antwerp city – the world’s leading diamond trading hub, has been blocking any EU sanctions on Russian diamonds. [caption id=“attachment_13158232” align=“alignnone” width=“640”] Russia is the biggest diamond exporter by volume. Reuters File Photo[/caption] The EU purchased about $1.5 billion worth of Russian diamonds last year, noted Reuters. What to expect from the G7 ban As per BBC, people in G7 nations buy about 70 per cent of the world’s diamonds. If a ban comes into place, G7 nations will no longer accept diamonds from Russia. Diamond analyst Paul Zimnisky told Reuters that the Russian diamonds cut and polished outside Russia are considered originating from the country that “transformed” them. To counter this loophole, the G7 bloc could prohibit the import of diamonds mined in Russia, including those cut and polished in other countries, reported the New York Times (NYT). The grouping is also working on a tracing system that would help it block imports of gemstones mined in Russia. These sanctions are likely to come into effect in January next year. ALSO READ: Secret’s Out: The science of how pink diamonds get their colour, explained Why it matters to India India will play a key role in the success of a potential ban on Russian diamonds by the G7 bloc. The US sanctions on Russian miner Alrosa have already hit the diamond industry in Surat. Alrosa, which produces 34-35 million carats of diamonds per year, is a top supplier of the gemstone in Surat. As per Economic Times (ET), a delegation from Gem & Jewellery Export Promotion Council (GJEPC), India’s leading trade body, met a senior official of the US State Department in July to raise concerns about the impact of America’s sanctions on Russian diamonds on the trade in Surat, which accounts for 80 per cent of the world’s polished diamonds. Before the sanctions, India bought around 10 per cent of the total rough diamonds produced by Alrosa. However, after the US’ new rules, diamond processing units in Surat had to downsize operations and thousands of workers lost their jobs due to a shortage of rough diamonds, reported ET. Zimnisky, the diamond industry analyst based in the New York City area, told NYT in August: “The current US sanctions only covered rough Russian diamonds or those cut and polished inside Russia. Given 90 per cent of diamonds are cut and polished in India, and can therefore be classed as Indian gems, the current regulations aren’t as strict as you might think.” Now, as the world’s richest economies prepare to announce a ban, they would need India’s help for its implementation. [caption id=“attachment_13158242” align=“alignnone” width=“640”] A worker pictured at a diamond cutting and polishing factory in Surat in 2009. Reuters File Photo[/caption] A senior US government official told news agency Reuters this week, “There’s a trip next week to India, a number of countries are going to sort of verify certain elements of implementation. I think that will be really important to people’s decisions”. Representatives from the US and other members of the G7 group, along with Belgium, will travel to Mumbai and Surat to discuss any likely impact of the ban on India’s diamond trade, the news agency reported citing another American official. As per The Wire report, the G7 ban is expected to let India cut and polish diamonds despite their origin but may require Russian diamonds to be specifically identified and separated. “Industry representatives have been quite actively included in this discussion and thus the government officials are being cognisant of and trying to limit the negative impact this will have on centres that are neutral to the issue like India and Africa,” Zimnisky told Reuters. Belgium has said it does not want consumers and jewellers to bear the brunt of a ban on Russian diamonds or limit the gemstones for Indian trade. “The Indian polishers can polish whatever they want but (Russian gems) need to be segregated … At the point when the polished diamond is offered for export, the reference will be made to the original rough, again using a combination of physical inspection and traceability data,” a Belgian official was quoted as saying by Reuters. With inputs from agencies