Russia’s invasion of Ukraine has affected several industries with business in Russia. The latest? The diamond industry.
Prices for small rough diamonds, which would typically end up clustered around a ring’s solitaire, have increased almost 20 percent since the start of March, according to a Bloomberg report. The rise is a result of US sanctions on the Russian mining company Alrosa, which makes up about a third of global diamond production. With Alrosa out of the game, diamond cutters, polishers and traders are having difficulty sourcing gems.
Previously, De Beers, the other major player in the diamond market, would have been able to up supply using its stockpiles. Just two decades ago, the company’s safes in London reportedly held $5 billion in diamonds. But now the company carries only working inventory stocks.
“It’s very difficult to see us bringing on any new production,” De Beers’s CEO Bruce Cleaver told Bloomberg. “Thirty percent of supply being removed isn’t sustainable.”
De Beers’s supply likely won’t increase greatly until 2024, when an expansion at its flagship South African mine will be finished. Even then, the company doesn’t produce many of the smaller diamonds Alrosa is known for.
Some entities, such as Tiffany & Co. and Signet Jewelers, have said they’ll stop buying new diamonds mined in Russia, but others have not taken the same steps. Bloomberg noted that several people in India’s diamond industry are still interested in buying from Russia.
This has raised concerns that Russian diamonds will begin to be passed off as originating elsewhere in the world. Already, diamonds are mixed up during the process of cutting, polishing, manufacturing and setting the stones, so ensuring where any one diamond came from is hard enough.
De Beers is trying to figure out a way to ensure that its diamonds don’t get caught up in this jumble. “They have to show us that our production is not being mixed,” Cleaver said about the company’s customers.
It remains unclear when Alrosa might be able to return to business as usual.