Surat diamond industry stares at crisis as US bans import of Russian roughs - Hindustan Times
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Surat diamond industry stares at crisis as US bans import of Russian roughs

Feb 14, 2024 01:17 PM IST

The new sanctions by US are in lines with a commitment made by G7 nations in September last year to impose phased restrictions on the import of diamonds mined or extracted in Russia.

The Surat diamond industry in Gujarat is staring at another crisis after the 2022 Russia-Ukraine war as the US government has further tightened restrictions on polished diamonds made from Russian rough stones, people familiar with the matter said.

India directly exports over a third of its polished diamonds to the US and EU countries. (File)
India directly exports over a third of its polished diamonds to the US and EU countries. (File)

The US Office of Foreign Assets Control (OFAC) on February 8 announced that starting from March 1, rough diamonds weighing 1.0 carats or more will be banned, and from September 1, those weighing 0.5 carats or more will also be prohibited. OFAC has banned their import regardless of whether they were processed in Russia or substantially transformed in a third country.

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The new sanctions are in lines with a commitment made by Group of Seven (G7) nations in September last year to impose phased restrictions on the import of diamonds mined or extracted in Russia.

The decision will adversely impact the diamond industry of Surat which heavily depends on imports of roughs from Russia that are polished and processed here, according to industry experts.

“As per the latest move by the US to prohibit Russian diamonds, a diamond processor in India will have to mention in the invoice where the roughs have been sourced from, including the exact location of the mine. The tracking and verification of the sourcing of the roughs will be monitored from Antwerp. This will give a major blow to the Surat diamond industry as nearly one third of the diamonds that are polished in Surat are from Russia,” said Dinesh Navadiya, a diamond baron and regional chairman of Gems and Jewellery Export Promotion Council (GJEPC).

Navadiya said while Surat imports 4% of the diamonds directly from Russia, the remaining 29% makes its way to Surat through other countries that are also now under sanctions.

The United States is the last G7 country to announce its adoption of the international commitment, with European Union (EU) countries also agreeing to ban Russian diamond imports in December 2023. These measures came into force on January 1. The G7, comprised of Canada, France, Germany, Italy, Japan, the US, and the UK, collectively hold sway over 70% of the global diamond market.

Included in the latest US ban are the import of diamond jewelry and unsorted diamonds exported from Russia, the world’s largest diamond producer that earned around $4 billion from the diamond trade last year.

While India directly exports over a third of its polished diamonds to the US and EU countries, more than half of the processed diamonds are exported to Hong Kong and China. According to the Gem & Jewellery Export Promotion Council (GJEPC) data, the overall gross exports of cut and polished diamonds in the financial year 2022-23 marked a 2.97% decline from 1.82 lakh crore to 1.76 lakh crore compared to the previous year.

Global challenges affected the demand for diamonds in India’s primary markets, such as the USA and China, while certain regions in Europe and Southeast Asia saw more stable performance, according to industry officials.

India encountered hurdles due to irregularities in the supply of Russian rough diamonds and difficulties with beneficiation processes. Additionally, countries like Namibia, Botswana, and Angola choosing to process their rough diamonds domestically added to India’s challenges in the diamond industry, officials said.

A diamond baron from Surat who did not wish to be named said that the industry has made representations to the Indian government about the new US rules.

The diamond hub of Surat employs close to 800,000 people and is a major contributor to India’s gems and jewellery exports of about Rs.3 lakh crore. Gujarat contributes to 80% of India’s diamond exports, with 90% of the state’s diamonds cut and polished in Surat.

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