The seemingly unending face-off between the West and Russia triggered by the Ukraine conflict will soon impact Indian diamond houses. Sources told The Economic Times that the G7 countries are mulling harsher sanctions on diamonds originating from Russia, a majority of which are cut and polished in India before being exported to the West.
Rough stones sourced from Russia come to factories in Surat, where they are polished and then sent to luxury stores and dealers in Paris, New York and Tokyo. Indian diamond cut and polish 90 per cent of all stones mined in the world, the ET report stated. This will soon change.
Presently, India can freely export rough stones coming from Russia to the US and other G7 countries as long as they undergo “substantial transformation” through Indian skilled diamond makers and jewelers, with accentuated colour, carat, cut and clarity. Transforming the stone in this way also changes its harmonized system (HS) code, a six-digit number used to identify goods in cross-border trade.
Now, if G7 plans to bring Russia down, Indian diamond makers will no longer be able to sell these finished diamonds in the western markets even after transforming them.
“Preparations are on to impose tougher sanctions on diamonds originating from Russia and being sold in the US and other G7 countries. They want to formalize sanctions by the end of May,” Vipul Shah, chairman of the Gems & Jewelery Export Promotion Council, told ET.
Shah added that there is no technology yet which can help trace the origin of the stone, and any changes should be introduced gradually. The industry stands to lose a lot as the US is its largest market, he said.
In a meeting, the G7 had said that Russia generates significant revenue from the export of diamonds and that they would work on measures to restrict the circulation of Russian diamonds, including rough ones and polished ones.
Traders suggest that an actual number cannot be put on rough stones brought from Russia. Direct imports are 10 per cent of total rough sourcing but the real number is much more as Russian roughs also enter India through the UAE and Belgium.