Putin’s war on Ukraine passed its dreadful one year anniversary on February 24, 2023. While many global leaders were swift to enact sanctions against Russia, today increased pressure on their diamond trade seems likely.

According to published reports quoting US Ambassador James C. O’Brien, “We’re looking to find any pockets of revenue that are available to Russia. We know [Russian diamond miner] Alrosa is deeply integrated into the power structures in Russia, and last year there was money siphoned from Alrosa to subsidize certain military events.”

Alrosa Mine

Putting More Squeeze on Russia

The Group of Seven (G-7) nations led by the US Administration’s Office of Sanctions, aims to increase the embargo on Russian diamonds. Russia produces about 27% of the world's rough diamonds. Still diamonds are a little fish in Russia’s War Chest. And those little fish usually pass right through the net and disappear. Granted, a $4B annual diamond revenue is big money to anyone’s thinking, but putting more squeeze on their diamonds will not change Russia’s attitude.

Plans to block the entry of Alrosa rough into the US and European market is easier said than done.

Leaders of the bloc seek to have a plan in place by mid-May. The Kremlin which holds a stake in Alrosa, has deep roots to the power structure of Russia. “Our government wants to make sure its revenue is not available for them to raid,” O’Brien explained.

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Will it work?

This is how it plays out. Alrosa sells most of its rough output for polishing in India, Dubai or in Antwerp. The Russian rough can be mixed together with African rough and be re-certified as African rough.

Then it gets polished where the diamonds completely lose their origin, becoming washed and Kosher.

If the Administration demands a Certificate of Origin, companies with expertise in these matters can provide any certificate you want for a price - like a Kimberley Certificate.

A pair of LEIBISH 5.14 carat, Fancy Yellow Diamonds

What it Takes to Win

The US is trying to win the war for Ukraine against Russia. But it cannot be won with small diamonds --- it has to be with large rockets. America needs to have a strong arm in this battle because cosmetic measures like the diamond embargo just won’t do it.

Alrosa has plenty of escape routes throughout Asia. The biggest market for jewelry and watches was China with revenue of about $81.2B US In 2022. India’s jewelry revenue came in second at approximately $72.6B US, and the US ranking at about $65B US—giving Alrosa several options.

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My Predictions

While I would not bet against America, I may bet that the next big player is China with Alrosa overtaking a greater De Beers market share in China and elsewhere. It would not surprise me if—when the Ukraine war ends, that Russia loses face big-time. Because we know, “Diamonds are Forever.”

Alrosa will make a fast recovery to become an independent player away from Russia and also in Africa-----and it may eat a De Beers sandwich in Botswana too.

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Russian Roulette