US sanctions on Russia's giant diamond miner are causing chaos through the industry, leaving traders and manufacturers hunting for workarounds to keep tapping one of the world's main sources of precious gems.
Buyers across the big trading centres in Antwerp and Dubai and manufacturing hubs in India have spent the past two weeks consulting lawyers to determine what the US sanctions on Alrosa mean and how they can continue to buy, according to people familiar with the matter.
In the meanwhile, diamonds have stopped flowing from Russian mines to Surat — the world's diamond-cutting epicentre — because Indian banks are unable or unwilling to process payments.
A delegation from Alrosa visited India earlier this week and held meetings with customers and trade groups to discuss how to facilitate sales, people familiar with the matter said. The disruption is already being felt in diamond prices, as the cost of the smaller stones that Alrosa specializes in has started to rise in the past week.
Alrosa is effectively state controlled: the federal government owns 33% and another 25% is held by local authorities. Losing its supply over a longer period would be seismic for the diamond world — the company accounts for about a third of global supply of rough stones, about the same level as De Beers, which had a monopoly until the start of this century.
Alrosa was scheduled to hold its next sale this coming week — one of the 10 it holds each year — but it's unlikely it'll be able to sell any stones because banks are unable to process payments, according to the people.
Yet as western governments levy sanctions on Russia and companies pull away from the country, many in India's diamond industry still want to keep buying, according to people familiar with the matter. And while big-name US jewelers Tiffany & Co. and Signet Jewelers have said they will stop buying new diamonds mined in Russia, retailers in places like China, India and the Middle East have not followed suit.
Alrosa's meetings in India this week included discussions on how to allow Indian manufacturers and traders to pay for Alrosa's diamonds, the people said. While the discussions included paying in rubles or rupees, no firm arrangements were made. Any deal will need the support of the Indian government, which was not involved in the discussions.
Alrosa declined to comment.