The US, European Union and the G7 forum leaders have collectively announced stiffer sanctions to be imposed on Russia by banning – among others – the importation of diamonds and jewellery to “further isolate Russia from the global financial system”.
The enhanced sanctions took effect on 11 March which is intended to exert more pressure on Russian President Vladimir Putin amid the ongoing invasion of Ukraine.
The G7 – also known as the Group of Seven – is an international political and leadership forum composed of the US, UK, France, Canada, Italy, Japan, and Germany.
A statement from The White House noted, “These actions will collectively ramp up pressure on Putin and build on the unprecedented package of economic sanctions and export controls the United States and over 30 countries have already imposed on Russia.”
Among the major actions covered in the expanded measures include the denial of benefits of Russia’s World Trade Organisation membership and revoking its most-favoured-nation importation status with the US, and the denial of borrowing privileges with international multilateral financial institutions such as the World Bank and the International Monetary Fund.
US President Joe Biden issued an executive order reinforcing the expanded sanctions that ban the exportation of luxury items such as watches, jewellery, automobiles, apparel, alcohol, and other products “frequently purchased by Russian elites.”
The order also prohibits the US importation of similar goods from Russia and imposed full-blocking sanctions to additional Russian elites and their families, restricting travel to the US and freezing any asset being held in the US.
With the new measures in place “this collective action by more than half of the global economy will deliver another serious economic blow to Russia,” the order stated.
It’s just a matter of time
While the initial round of sanctions issued by the US Department of Treasury which included Russian partially state-owned diamond mine Alrosa did not directly impact the trade of diamonds in the market, it’s just a matter of time before Russia starts to feel the damaging repercussions.
Diamond industry analyst Paul Zimnisky, told Business Insider, “It will be at least three to four months before the rough diamonds being bought today end up with polished diamond wholesalers and retailers.
“The longer this plays out, the more complicated and problematic it becomes for the industry.”
With the expanded measures expected to make transactions with Russian companies more difficult and prohibitive, the suspension of transport and logistics services by UPS, Fed-Ex and DHL, among others, could cause supply shortages and increase prices.
Several high-profile jewellery and luxury brands have pulled out of Russia and Belarus amid calls to boycott Russian-made products.
The Louis Vuitton Moët Hennessy Group – which owns Bulgari, Chaumet, Fred, Zenith, and Hublot – has stopped store operations in Russia together with Richemont, Hermes, Chanel and Kering Group in light of the ongoing Russian invasion of Ukraine.
The decisions came after Swatch Group – which owns Omega, Longines, Tissot, and Breguet – suspended exports and trading operations after economic sanction measures were imposed on Russia.
Luxury Brands Exiting Russia
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“If consumers protest buying Russian diamonds I think it would definitely reverberate through the supply chain,” Ziminsky said, adding that “at the end of the day, I think the consumer is ultimately going to determine where this goes.”
As reported in Jeweller, the US government has named Alrosa as one of the companies facing “expansive economic measures” which is expected to impact the worldwide supply and trading of diamonds.
Alrosa is one of the largest international mining companies headquartered in Russia. It accounts for an estimated 95 per cent of diamonds produced in the country and around 30 per cent of diamonds extracted worldwide.
The US Department of Treasury issued the sanction measures citing Russia’s invasion of Ukraine, prohibiting US-based companies from pursuing all new financial activities and transactions with companies identified in the directive.
The action was taken “in coordination with allies and partners” to hold Russia accountable for the invasion of Ukraine and mitigate potential impacts to the US and its allied countries.
Alrosa keeps distance
With the ongoing economic sanctions imposed on Russia, Alrosa USA- President Rebecca Foerster has resigned from the worldwide non-profit trading organisation Diamonds Do Good as its president and board member.
Foerster’s predecessor, immediate past president Anna Martin, has assumed the role stating, “I look forward to continuing the good work of Diamonds Do Good which has never been more important than it is today.”
Formerly known as the Diamond Empowerment Fund, Diamonds Do Good was established in 2006 to support initiatives that “develop and empower people in diamond communities worldwide.”
Alrosa has suspended its membership from the Natural Diamond Council (NDC) and ‘temporarily’ stepped down as the vice-chairman of the Responsible Jewellery Council (RJC) in light of the Russo-Ukraine conflict.
Rapaport Webinar: Politics, Economics, and Diamond Prices
This Rapaport webinar was held on March 7, 2022 where the impact of the Russian invasion and sanctions were analysed by Martin Rapaport (chairman, Rapaport), Sara Yood (senior general counsel, Jewelers Vigilance Committee) and Avi Krawitz (senior analyst and news editor, Rapaport).
Yood explains the legal implications of the US sanctions while Krawitz discusses the impact of the sanctions on rough supply. Rapaport curates the discussion and provides a strategic overview of how the new economic warfare will impact inflation, interest rates and diamond prices.
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