03 Mar 2022

Stinging economic sanctions imposed by most major economies against Russia are likely to affect diamond trading, trigger shortage of materials, increase costs, and heighten demand volatility and capacity constraints. 

“With Russia’s Alrosa being one of the largest international mining companies and among those targeted by the expansive sanctions, the diamond trading industry should expect a tumultuous period as the sanctions are likely to affect worldwide supply and trading of diamonds in both the long and short term basis,” Okavango Diamond Company, chief executive officer Mr Mmetla Masire said in an interview. 

He explained, Alrosa was the world’s largest diamond producer by volume, and its placing on sanctions may lead to over 25 percent slash of rough diamond supply. 

However, Mr Masire said the impact of the sanctions on the diamond market could not be weighed immediately, as some of Alrosa’s rough diamonds may already be on the market. 

“So, it will take some time for the impact of the sanctions to be felt downstream,” he said. 

That will inevitably result in higher prices for diamonds and diamond jewelry. That would not arguer well for the industry that is recovering from a battering by COVID-19 and was likely to put its post-pandemic recovery on hold, if not turn back the clock, he said. 

“It is worth noting that six per cent of rough diamonds come from Russia. A large part of this is from Alrosa. If the war continues for a long time, supply of rough goods will stop and the price of polished diamonds will likely go up,” he said. 

Another major disruption that could be critical for the international diamond industry, 

Mr Masire said, was the war’s impact on worldwide supply chains, which could worsen the shortage situation. 

There are already reports that diamond cutting and polishing operations in Surat, India, have ground to a halt following the Ukraine invasion, stoking fears of uncertainty for diamond traders. 

Surat is the largest diamond cutting and polishing centre in the world. 

The mining sector accounts for about 35 per cent Botswana’s GDP, with diamonds contributing about 94 percent of the total mining share. 

Botswana is the world’s largest gem diamond producer by value, representing about 40 per cent of the total world output and any adjustment in the diamond price is bound to impact the countries’ GDP in the long run, said Mr Masire. BOPA