India, historically one of the largest buyers of Russian diamonds, has significantly scaled back its imports from the country. According to recent data, India’s import volume from Russia plummeted to $1.5 million in September 2024, a stark contrast to the $112 million recorded in the same month the previous year. This 25-fold reduction is attributed to sanctions imposed by the Group of Seven (G7) members, which have reshaped the global diamond trade and compelled India to shift its sourcing strategies.
G7 Sanctions and Their Impact on Russian Diamond Exports
The G7 countries, a coalition of the world’s most advanced economies, have incrementally tightened their sanctions on Russia since the escalation of hostilities in Ukraine. In 2024, the G7 extended their sanctions to include a full ban on Russian diamond imports. Initially, these restrictions targeted unprocessed rough diamonds, but they were subsequently broadened to cover processed stones as well, including those manufactured in third-party countries. This development significantly hampered Russia’s ability to maintain its position within the global diamond trade.
Russia, which historically exported diamonds primarily through Alrosa, one of the world’s largest diamond mining companies, is particularly vulnerable to these sanctions. Alrosa has traditionally supplied the global market, including India, with substantial volumes of diamonds. However, with G7 sanctions in full effect, Russian diamonds have seen a major reduction in demand from traditional markets, particularly in India, one of the largest diamond-cutting and trading hubs globally.
India’s New Sources: Belgium, Hong Kong, and the UAE
In response to the restrictions on Russian diamonds, India has diversified its sources. Belgium, Hong Kong, and the United Arab Emirates (UAE) have emerged as India’s primary diamond suppliers, with each maintaining robust trading relationships with India’s extensive diamond industry. In September 2024 alone, India imported $186 million worth of diamonds from Belgium, $448 million from Hong Kong, and $581 million from the UAE, figures that far eclipse imports from Russia in the same period. This shift shows how the G7 sanctions have forced a rapid reorientation in global diamond flows, as market players adjust to the new regulatory landscape.
India’s reliance on Belgium, Hong Kong, and the UAE is likely motivated by both economic and logistical factors. The diamond sectors in these regions are well-developed, providing India with stable and uninterrupted supplies. Moreover, each of these new suppliers operates within regulatory frameworks that are aligned with the G7’s restrictions, ensuring that Indian importers can source diamonds without risking contravention of the sanctions.
Global Diamond Market and Falling Prices
This substantial reordering of diamond trade routes has occurred against a backdrop of declining prices within the global diamond market. Since the start of 2024, diamond prices have reached multi-year lows, with the index for 1-carat diamonds falling by approximately 23%. This price drop has been attributed to multiple factors, including reduced consumer demand in key markets, economic uncertainties, and shifting consumer preferences.
The decline in diamond prices presents both challenges and opportunities for India’s diamond industry. While falling prices may compress profit margins for companies dependent on diamond processing and trade, they may also spur demand from consumers who are attracted by the prospect of more affordable diamonds. However, the overall impact of these price dynamics remains uncertain, as market trends continue to evolve in response to global economic conditions.
Consequences for the Russian Diamond Industry
For Russia, the sharp decline in exports to India and other key markets represents a substantial economic setback. The diamond sector has traditionally been a vital contributor to Russia’s economy, and the current sanctions have effectively cut off Russian companies from many of their largest customers. This isolation could prompt Russia to seek alternative trading partners outside the G7 sphere, possibly in regions less influenced by Western sanctions. However, the lack of access to India’s substantial diamond market will likely pose a long-term challenge for Russian diamond exporters, who may find it difficult to replace such a significant buyer.
