The global diamond sector is scrambling to get ahead of a looming G7 ban on Russian gems, as consumers and producers struggle to manage increasingly complex supply chains against a backdrop of sluggish demand.
With direct sales of Russian gems already crippled by US sanctions on Russia’s state-owned diamond miner Alrosa, the G7 is now thrashing out details of a further ban on indirect sales in its member countries, expected by the end of October.
But even before it comes into force, producers say Western customers are shunning gems from Russia, the world’s largest producer of rough diamonds by volume, with 30% of the market.
Tiffany, part of the French luxury group LVMH, said in March last year that it had stopped sourcing rough diamonds from Russia.
Labels owned by Swiss luxury group Richemont, including Van Cleef & Arpels, went further, sending executives to visit suppliers in India and hiring an external auditor to look at the flow of gems in the supply chain.
The proposed G7 ban now risks further complicating supply chains at a time when demand is already under severe pressure.
With various proposals under consideration, the industry is currently debating how a diamond’s country of origin should be verified, where it should be done, and what sizes of stones, rough or polished, should be part of the rule.
“It’s the breadth and interconnectedness of the supply chain that makes this technically difficult,” says diamond analyst Paul Zimnisky.
“The diamond trade spans many countries with many different cultures, religions and levels of economic development.”
Demand for diamond jewellery in the US, which accounts for 55% of global demand, is already suffering from high interest rates, a slow post-pandemic recovery in China and competition from lab-grown diamonds.
India – which cuts and polishes 90% of the world’s rough diamonds – last month asked the world’s miners to stop selling rough to it for two months to manage accumulated stocks. That means diamond miners’ inventories will grow.
“At some point these stocks will have to come to market,” said Richard Chetwode, a diamond industry consultant.
De Beers, the world’s biggest rough diamond producer by value, said in a recent report that while global demand for diamond jewellery would remain above pre-pandemic levels in 2023, the economic landscape was challenging.
“Elevated inflation and higher interest rates continue to impact consumer confidence and discretionary spending in some of the major diamond consuming countries, including the US and Europe,” it said.
According to Richard Chetwode, “retail in China has been hit hard and US retailers are already overstocked ahead of the Christmas season”.
“There are now literally no buyers” for rough diamonds, he said.
