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Putin’s Price Hike? In the Diamond World It’s Putin’s Price Cut.

So unless you’ve been living under a rock for the past six months, you would know that Russia invaded Ukraine in late February 2022. This sparked a lot of western nations to impose various degrees of sanctions on Russian produced goods. Theoretically, this meant that rough diamonds (plus everything else including oil and gas) originating from Russia would be banned, Putin and Russia would go bankrupt and the invasion would be over in a few weeks.

However, things haven’t turned out that way.

Putin Sad
A very concerned Vladimir Putin


Like a lot of others in the industry, in late February and early March of this year, I expected polished diamond prices to go up. Heck, polished diamond prices had seen astronomically growth in the six months prior, and this would be the icing on the pudding for those that stood to gain from polished diamond prices increasing. However, this expected increase in polished diamond prices has simply failed to materialise. The Rapaport Price List, which whilst not a great indicator of how much a diamond is worth, but is a good indicator of diamond price movements, has barely moved since the first week of March. In fact, the only price movement has been one slight increase in price of round diamonds below one carat.

So Why Didn’t The Sanctions Work and Prices Go Up?

Whilst there are many reasons sanctions didn’t work and prices didn’t go up, the main reason is that 90+ percent of white polished diamonds are manufactured in India. Unlike many western nations, India did not impose sanctions on Russia. Therefore, rough diamond imports into India and other non-western nations were not affected. As a Business Insider article explains, once a rough diamond is cut and polished it becomes a different commodity and essentially becomes an “Indian diamond”. This is of course completely reasonable, as we don’t label cars manufactured in Japan with Australian iron ore as “Australian cars”.

In the same Business Insider article, Martin Rapaport, who is somewhat of a godfather of the diamond industry, explains there are three different types of diamonds:

  • Good diamonds – Those known to be mined outside of Russia.
  • Bad Diamonds – Those known to be mined in Russia
  • Unknown diamonds – Everything else.

Martin Rapaport
Above: Martin Rapaport

Whilst what Rapaport says is true, the problem occurs in the fact that the diamond industry is so fragmented and in some respects, very insular. With so many players, from manufacturers, dealers, wholesalers and retailers, some with thousands of employees, some being sole traders, it is impossible to police and label the origin of every single diamond produced and sold. Therefore, whilst many western nations have sanctions on Russia, these sanctions have simply done little to nothing at all in respect to the diamond industry.

The Piecemeal Approach to Banning Russian Diamonds

So in March, diamond jewellery retailer Tiffany banned Russian diamonds. As Tiffany has their own manufacturing facilities with direct links to diamond miners, this would have been as easy as not buying rough from Russia or other unknown sources. So long as Tiffany only sell diamonds they produce and the diamonds are sourced from known sources, this would be 100% effective in stopping the sale of Russian diamonds.

However, 99% of the diamond industry are not Tiffany, and hence source diamonds from the same market as everyone else. Again, this marketplace is dominated by Indian firms. One retailer, Brilliant Earth, proudly proclaimed that they weren’t going to sell anymore Russian mined diamonds. However, how would they enforce this? They are buying from the same manufacturers that every other diamond dealer buys from, and whilst a lot of manufacturers label the rough origin source, this is certainly not audited or checked by any third party.

The aforementioned Martin Rapaport also banned Russian diamonds from his Rapnet diamond trading platform. However, as of writing, it seems almost none of the diamond listed on Rapnet have a rough origin listed. Therefore, these fit into Mr Rapaport’s “unknown diamonds” category.

Another initiative recently launched by the GIA involves somehow verifying the rough diamond source. Again, this relies on diamond manufacturers telling the truth, and not “accidentally” putting Russian rough diamonds into the box with African rough diamonds.

It is also worth noting that many countries, including Australia have, or have in the past banned diamonds originating from The Ivory Coast. When importing diamonds, we used to have to answer if the diamonds we were importing were from The Ivory Coast. Of course the answer was always “No”, but how were we to know?

Rough Diamond Sorting
Diamond sorting – the diamonds don’t scream “I’m Russian” or “I’m African”

The Solution: Let the Market Decide

At the end of the day, it is incredibly difficult to trace the origin of every diamond sold. There are no gemmological or chemical tests that can be done to trace the rough origin of a diamond, and proper tracing would involve an enormous amount of effort and a fundamental shift in the way the diamond industry works.

The solution is to let the consumer decide, whilst still making a “best effort” approach to tracing rough diamond origin.

As Tom Neys of Antwerp World Diamond Centre states:

“The consumer should be informed. That’s absolutely true. I’m constantly saying, we should make more efforts to let the consumer know where diamonds come from.

But the consumer needs to know the value of this [information]. A good example of how quickly you can change an industry is in Europe. At a certain point, every washing machine had to have a little [energy label]. Is it an A, grade, B grade, C grade? Within a year, this whole industry completely changed. Because consumers had an easy way to know whether a washing machine is good for the environment. So, if I buy an E washing machine, it will be cheaper, but when I sell it secondhand, I will get no money for it. And it’s going to swallow more electricity and consume much more water than a higher-rated washing machine.

Within a year, there was total change. Just by informing the consumer in an independent way, where he could have information, he changed his behavior. I think that’s the way we need to go.“

Whether or not consumers are willing to pay 15, 30 or 50 percent more for guaranteed country of origin diamonds remain to be seen. My suspicion is that many consumers will not. Given that inflation has skyrocketed in 2022, whilst polished diamond prices have not, meaning real diamond prices have gone down, I think I am right.

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