How is the opulent Russian diamond industry the West is targeting with its new sanctions?

The multi-billion dollar diamond industry is again in the crosshairs of the historic sanctions that the West is imposing against Russia from the start of the invasion Ukraine.

LOOK: The United States imposes new sanctions on some 300 companies and individuals over the war in Ukraine

During the last meeting of the G7, last weekend, the government of British Prime Minister Rishi Sunak announced that it will ban exports of those precious stones from Russia, a measure that will also apply to trade in copper, aluminum and nickel.

This new sanction deals a certain blow against the already weakened Russian economy, since the Eurasian giant is the main global producer of diamonds, responsible for 30% of the total extraction of these precious stones.

This industry also imports 0.2% of Russian GDP

Russia controls 30% of global diamond production. (ALEXANDER NEMENOV / AFP /)

But the British weren’t the only ones targeting precious Russian diamonds. On Thursday the 18th, one day before the meeting of the seven richest democracies on the planet began in Hiroshima, Japan, officials from the European Union (EU) had announced that they planned to discuss this type of sanctions during the summit.

At the end of the first day of the summit, the Group of Seven released a statement announcing new restrictions on “key sectors” of the Russian economy, such as construction, transportation and business.

It is estimated that this blow was even more hurtful for Russia, since Belgium is one of its main markets in the diamond industry. A list completed by the United States, the United Arab Emirates, China and India.

Washington, for its part, announced new sanctions against 300 individuals, entities, ships and planes that are helping Russia evade Western vetoes.

Among the new sanctions is the gold-producing company Polysus and its Russian subsidiary Polimetall AO -it should be noted that the international company Polymetal International PLC, located on the island of Jersey, was not included.

The state company Alrosa controls 90% of the diamond business in Russia. (ALEXANDER NEMENOV / AFP /)

In charge of 90% of the production of Russian diamonds, Alrosa is undoubtedly one of the characteristic mega-companies that sustain the convoluted economic structure of the Eurasian giant.

With its operations center in Moscow and some 100,000 workers among its ranks, Alrosa has a monopoly within its field, taking care not only of production but also of the extraction and polishing of diamonds.

Among the main owners of this company regulated by the Ministry of Natural Resources and Environment, is Russian President Vladimir Putin, who owns 33% of shares, while the Russian public company Sakha owns another 33%.

Since 2009, when Russia replaced Botswana as the world’s No. 1 diamond producer, Alrosa’s earnings have shown steady growth over the years. In 2000, the company reported $1.2 billion in profit. In 2009 these rose to US$2.6 billion.

By 2015, Alrosa was already posting US$3.8 billion in annual profits. And in 2021 the benefits were estimated at US$4.2 billion, according to the reports issued by the company for its investors.

Although the data corresponding to 2022 have not yet been published, various analysts have estimated that a drop of up to 25% could be registered due to Western sanctions.

These losses, it is feared, would mainly impact Alrosa’s workforce, increasing the number of layoffs. On the other hand, it is believed that, like what happened with gas and oil, Moscow would turn its gaze towards its main Asian partners, now offering its precious diamonds.

“The global market is fluid and rich in alternative destinations,” said Kremlin spokesman Dmitry Peskov, when asked about the new sanctions.

Source: Elcomercio