More problems for the Russian diamond industry; stricter import and export bans
The leaders of the United States, the European Union and the G7 forum collectively announced that tougher sanctions would be imposed on Russia by banning – among other things – the import of diamonds and jewelry to “further isolate Russia of the global financial system”.
The enhanced sanctions came into force on March 11, aimed at putting 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 made up of the United States, United Kingdom, France, Canada, Italy, Japan and Germany.
A White House statement noted: “These actions will collectively increase pressure on Putin and build on the unprecedented set of economic sanctions and export controls that the United States and more than 30 countries have already imposed. to Russia.
Among the main actions covered by the expanded measures are the denial of the benefits of Russia’s membership in the World Trade Organization and the revocation of its most favored nation import status with the United States, as well as as the denial of borrowing privileges from international multilateral financial institutions such as the World Bank. and the International Monetary Fund.
US President Joe Biden has issued an executive order strengthening expanded sanctions that prohibit the export of luxury items such as watches, jewelry, automobiles, clothing, alcohol and other products “frequently purchased by Russian elites”.
The order also bans the United States’ importation of similar goods from Russia and imposes full lockdown sanctions on other Russian elites and their families, restricting travel to the United States and freezing any assets held. in the USA.
With the new measures in place, “this collective action by more than half of the global economy will deliver another blow to Russia,” the order said.
It’s just a matter of time
Although the first set of sanctions issued by the US Department of the Treasury, which included the partly state-owned Russian diamond mine Alrosa, did not have a direct impact on the diamond trade in the market, this It is only a matter of time before Russia begins to feel the negative repercussions.
Diamond industry analyst Paul Zimnisky said Business Intern“It will take at least three to four months before the rough diamonds purchased today reach polished diamond wholesalers and retailers.
“The longer it goes on, the more complicated and problematic it becomes for the industry.”
With the expanded measures expected to make dealing with Russian businesses more difficult and prohibitive, the suspension of transportation and logistics services by UPS, Fed-Ex and DHL, among others, could lead to supply shortages and increased price.
Several high-profile jewelry 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 halted store operations in Russia with Richemont, Hermes, Chanel and the Kering group in light of the ongoing Russian invasion of the Ukraine.
The decisions came after Swatch Group – which owns Omega, Longines, Tissot and Breguet – suspended exports and trade operations after economic sanctions measures were imposed on Russia.
Luxury brands are leaving Russia
» Feb 24 -Audemars Piguet
“If consumers protest against buying Russian diamonds, I think that will definitely ripple through the supply chain,” Ziminsky said, adding that “ultimately, I think the consumer will ultimately determine where this goes”.
As reported in Jewelerthe US government has named Alrosa as one of the companies facing “expansive economic measures” that are expected to impact the global diamond supply and trade.
Alrosa is one of the largest international mining companies headquartered in Russia. It represents about 95% of the diamonds produced in the country and about 30% of the diamonds mined in the world.
The US Treasury Department issued the sanctions measures citing Russia’s invasion of Ukraine, prohibiting US-based companies from pursuing all new business and financial transactions with the 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 on the United States and its allied nations.
Alrosa keeps his distance
With the ongoing economic sanctions imposed on Russia, Alrosa USA President Rebecca Foerster has resigned from the nonprofit global trade organization Diamonds Do Good as president and board member.
Foerster’s predecessor, outgoing President Anna Martin, assumed the role saying, “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 members of diamond communities around the world”.
Alrosa suspended his membership in the Natural Diamond Council (NDC) and “temporarily” resigned as vice-president of the Responsible Jewelery Council (RJC) in light of the Russian-Ukrainian conflict.
Rapaport Webinar: Politics, Economics and Diamond Prices
This Rapaport webinar took place on March 7, 2022 where the impact of the Russian invasion and sanctions was analyzed by Martin Rapaport (Chairman, Rapaport), Sara Yood (Senior General Counsel, Jewelers Vigilance Committee) and Avi Krawitz (Analyst principal and editor, Rapaport).
Yood explains the legal implications of US sanctions while Krawitz discusses the impact of sanctions on crude supply. Rapaport organizes the discussion and provides strategic insight into the impact of the new economic war on inflation, interest rates and diamond prices.
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