Diamond sanctions will have a modest impact on Russia

Significance

The ban will be extended by the end of the year to include diamonds polished in third countries, lab-grown diamonds, as well as jewellery and watches containing diamonds. The new restrictions are intended to disrupt Russia’s diamond exports worth over USD4bn and to reduce revenues that flow to the federal budget. State-owned Alrosa is the main target of the ban.

Impacts

• The tightening of the sanctions regime discourages foreign investment in Russia’s top exporters.
• Long and complicated diamond supply chains will make monitoring difficult and costly.
• The exclusion of diamonds weighing less than 0.5 carats will partially mitigate the impact on Indian jewellers.