Russia-Ukraine conflict
The United States’ decision to impose stricter sanctions on Alrosa of Russia, a major player in India’s gems and jewellery industry, was being evaluated, sources in the industry said on Friday.
The “blocking sanctions” on the largest diamond mining company of the world was announced by U.S. Secretary of State Antony Blinken on Friday. “The United States is imposing blocking sanctions on two Russian state-owned enterprises. We will keep raising the cost for President Putin’s unconscionable war and atrocities against Ukraine,” he said.
Diamond has been a major component of India-Russia trade in recent years and the sector also received attention at the top political level.
Biggest supplier
The latest sanctions on the major supplier of Russian rough diamonds to India, came hours after India and the United States announced the April 11 “2+2” ministerial meeting where Mr. Blinken and Defence Secretary Lloyd Austin will engage External Affairs Minister S. Jaishankar and Defence Minister Rajnath Singh.
Alrosa which has been recognised as a state-owned enterprise (SOE) by the U.S. Department of the Treasury was targeted by the U.S. authorities during the beginning of the conflict in Ukraine. The Department of the Treasury described Alrosa as the “world’s largest diamond mining company”, which supplies “90%” of Russia’s rough diamonds. Western capitals have described Alrosa’s supplies as “conflict diamonds” because of its perceived links with top Russian officials. Alrosa’s supplies to India had paused briefly earlier this year but resumed last month even as the Indian gems and jewellery sector grappled with the challenges of making payments through German banks.
Alrosa Chief Executive sanctioned
Soon after the beginning of the Russian military campaign, the Chief Executive of Alrosa, Sergei Sergeevich Ivanov, was sanctioned by the U.S. Treasury. He is the son of Sergey B Ivanov, one of the closest officials of President Vladimir Putin.
Friday’s U.S. announcement said, the latest measures are “expanding previous sanctions by designating Alrosa”. The order says that all properties of Alrosa that are in possession of American citizens are “blocked and must be reported” to the Office of Foreign Assets Control (OFAC) of the Department of the Treasury. Therefore, all India-Russia diamond trade that have participation of U.S. citizens are likely to be affected.
The Department of the Treasury further tightened the sanction by declaring “... any entities that are owned, directly or indirectly, 50 percent or more by one or more blocked persons are also blocked. All transactions by U.S. persons or within (or transiting) the United States that involve any property or interests in property of designated or otherwise blocked persons are prohibited unless authorized by a general or specific license issued by OFAC, or otherwise exempt”
Special customs zone in Mumbai
Diamond trade between India and Russia found a renewed impetus in 2015, when a special customs zone was created in the Bharat Diamond Bourse in Mumbai to handle rough diamonds from Russia. During this time, India also displayed keen interest in reaching out to Russia’s Astrakhan province, which is a base for the Indian community that has been active in diamond trade for generations. Mr. Putin was the chief guest at the World Diamond Conference on December 12, 2014 that was inaugurated by Prime Minister Modi.
The gems and jewellery sector in India has a large workforce that has suffered during the pandemic. Out of the total of approximately 4.64 million workers in this sector, a major portion is employed in the diamond business. India’s diamond trade is heavily dependent on imported rough diamonds and restrictions on supply of rough diamonds can create serious problems for the gems and jewellery sector.
