US sanctions begin to bite Surat diamond traders

American merchants are demanding a declaration from Surat diamond traders saying the polished material is not from Russia.
US sanctions begin to bite Surat diamond traders

AHMEDABAD: American merchants are demanding a declaration from Surat diamond traders saying the polished material is not from Russia. The American clients have threatened to “ban” traders who sell them polished stones that originate from Russia. About 30% of all imported raw, or rough diamonds imported into India come from Russia, with a lion’s share coming to Surat for further processing.

Following US sanctions on Russia over the latter’s invasion of Ukraine, the diamond-polishing sector is taking a massive hit. Naimesh Pachhigar, a diamond trader, said, “The US government has issued a circular to local American traders asking them to check the origin of diamonds before buying or selling them. The circular states that if the origin of the diamonds is Russia, then don’t accept them.” This has led to panic in the diamond market.

Rough diamonds were originally provided by Russian company Alrosa, which accounts for 28% of the global diamond mining. “Alrosa is the world’s largest diamond mining company, and is the source of the metal for traders in Gujarat. “Every diamond trader in India will be affected as there is a shortage of rough diamonds after the war,” Pachhigar said.

A media statement from the US Department of the Treasury’s Office of Foreign Assets Control (OFAC) said the OFAC has designated Alrosa, a Russian state-owned enterprise (SOE) and the world’s largest diamond mining company, which is also responsible for 90% of Russia’s diamond mining capacity. The Department of State also re-designated joint stock company United Shipbuilding Corporation, as well as its subsidiaries and board members.

The USC is a Russian SOE that develops and constructs a majority of the Russian military’s warships, likely including many of those used to bombard Ukraine’s cities and harm Ukraine’s citizens. Through these designations, the Treasury is “cutting off additional sources of support and revenue for the government of the Russian Federation to wage its unprovoked war against Ukraine.”

“These sanctions will continue to apply pressure to key entities that enable and fund Russia’s unprovoked war against Ukraine,” said Brian Nelson, Under Secretary of the Treasury for Terrorism and Financial Intelligence. “American buyers have refused to buy finished diamonds that started as raw ones mined in Russia,” said Dinesh Navadiya, Gujarat Region chairman of Gem Jewellery Export Promotion Council.

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