Alrosa, from Siberia to African diamonds

Everything started at the heart of Russia, in the immense and frozen Siberia where for years, under the Soviet Union’s domination, secret cities with no names sprung, remaining invisible on maps in order to hide the industrial, chemical and nuclear experimentations that took place. The Yakutia region in Siberia also hides other important secrets, one of the most precious ones for the Kremlin, a well-kept secret within its frozen grounds, where the temperature can reach -60°: its diamond stocks. Beneath the permafrost are hidden hundreds of mines which make the Russian mining giant Alrosa the most powerful company in diamond extraction worldwide.

Indeed, 90% of Russian diamonds and 28% of global production are extracted from these fields. The biggest Russian diamond ever discovered, named “26th Congress of the Soviet Union’s Communist Party” and weighing 342 carats was extracted from the Mir mine in 1980. One third of Alrosa belongs to the Kremlin while another third belongs to the regional government of Yakutia. The head of the company is Sergei Ivanov, whose father has been close to Putin since the time they both served KGB. Last year, Alrosa produced 32.4 million carats, for sales valued over 4 billion dollars and a net profit of 91 billion rubles. Last year alone, the city of Antwerp in Belgium, famous for its diamond cooperatives, imported over 1.8 billion dollars in rough diamonds from Russia. This represents about a quarter of imported gems. With sanctions that have followed Ukraine’s invasion and the atrocities committed by the Russian army on Ukrainian civilians, the tables have suddenly turned for the Russian mining giant.

Alrosa’s New York headquarters shut its doors and the company retracted from the Responsible Jewellery Council, the organ surveilling ethical, societal and environmental impact of international diamond trades. According to the Italian business newspaper Il Sole 24 Ore, these sanctions could generate a drop of 25% in worldwide diamond production. If one considers that in parallel, diamond prices have increased by 25% since last September and that global stocks are almost empty, all these factors could determine a major crisis in the sector.

For the time being, the market is flawed by the ambiguous role played by India in the precious stone market.Most rough diamonds produced in Russia do indeed go through this country to be polished and cut. India holds a primate: 92% of diamonds worldwide are reworked here. Which means among other things, that once they enter Delhi or Mumbai laboratories, Russian diamonds lose their “nationality” and automatically become Indian. They consequentially become free from sanctions that are now imposed on Russian products.The economic interests of India in this sector are major, as the country is part of the ones that did not vote for the resolution adopted by the UN condemning Ukraine’s invasion by Russia. The Asian country is trying to maintain its commercial ties with Putin’s government, by accepting payments in currencies other than euros and dollars and through banking networks beyond the Swift system.