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Russia’s Alrosa (MCX: ALRS), the world’s top diamond miner by output, suspended on Friday its membership in the Natural Diamond Council (NDC), a market alliance of the world’s leading producers of precious stones.
The move comes only a day after the company, which was placed on the US sanctions list, decided to step down from its position as vice chair of the Responsible Jewellery Council (RJC), a global business standard-setting organization for the jewellery and watch industry.
The Mirny, Sakha-based miner qualified the economic implications of Russia’s ongoing invasion of Ukraine as “unprecedented,” noting that the company would do “everything” needed to mitigate the outcomes of the armed conflict in the interests of its clients and partners.
“The company continues to monitor and analyze repercussions it might have for the industry and relationships that have been built over decades across the world,” it said in an emailed statement.
Alrosa was included on the US Department of the Treasury sanctions list released last week, along with chief executive Sergei S. Ivanov, who is also a board member of Gazprombank.
David Kellie, chief executive of NDC, said the council understood and respected Alrosa’s decision, given the current geopolitical situation.
“For dozens of years Alrosa has been investing billions of dollars into building and supporting communities around its operations, Kellie said. “We wish the company the quickest resolution of all the difficulties encountered.”
The NDC explained that, in suspending its membership, Alrosa had stepped down from the board and will cease all financial contributions.
Data from the US Treasury shows Alrosa is responsible for 90% of Russia’s diamond production and 28% of global supply. The Russian government owns 33% of the company and another 33% is owned by Sakha, the Russian Republic where the company is headquartered.
Alrosa mined 32.4 million carats last year, with sales topping $4 billion thanks largely due to consumer demand from the US.
While the full effects of the sanctions on the already undersupplied global rough diamonds market are not yet clear, the Antwerp World Diamond Centre (AWDC) has said there was a chance the restrictions could prove counterproductive.
“It is a blow that should hurt Russia but there is a chance that we do more damage to ourselves,” spokesman Tom Neys told Belgian newspaper Gazet van Antwerpen. “The Russians can easily trade their diamonds with non-EU countries and outside the US.”
The diamond jewelry industry is going into the year with diamond supply at historically low levels, estimated by Bain & Company at 29 million carats in 2021. “Upstream inventories declined ~40%, driven by high demand and slow production recovery, and are near the minimal technical level,” the report stated.
