Russian Diamonds and the Effect of International Sanctions

The world has watched in horror as Vladimir Putin launched an unprovoked invasion of neighboring Ukraine. The human costs are staggering in the wake of massive destruction creating the greatest refugee crisis since WWII. While the Ukrainian military is defending the nation heroically against this unprovoked attack, and has the broad support of the international community, the military options for intervention are constrained by the real possibility of unintended consequences and the escalation of the conflict throughout Europe. But the international community is not sitting idly by. The United States in concert with the European Union have imposed multiple rounds of economic sanctions on Russia to try to isolate Putin and his oligarchs, cutting off sources of funding and directly targeting the assets of his most powerful supporters. The goal is to make the costs so high for Putin that he will cease his assault and remove his forces from Ukraine.
Diamond Rough
The latest round of sanctions target diamonds, among other valuable assets. Russia produces an estimated 25-30% of the world’s rough gem diamonds. The new sanctions ban imports of Russian diamonds, ensuring that neither businesses nor consumers contribute to Putin’s war through trade in diamonds. Although this is highly disruptive to the diamond industry overall and punishes many people and companies who are likewise against Putin’s aggression, most companies such as Whiteflash support the action as necessary to help bring about a resolution to the conflict and a withdrawal of Russian forces from Ukraine.
Ban U.S. Import of Goods from Several Signature Sectors of Russia’s Economy. President Biden’s E.O. will also prohibit the import of goods from several signature sectors of Russia’s economy – including seafood, spirits/vodka, and non-industrial diamonds. This will deny Russia more than $1 billion in export revenues and ensure U.S. citizens are not underwriting Putin’s war. The United States retains the authority to impose additional import bans as appropriate.
The new banking restrictions that prevent Russia from accessing key international payment systems coupled with the outright ban on importing Russian diamonds, has essentially halted the trade in Russian diamonds. This is an evolving situation that could be impacted by the unwillingness of India and China to fully condemn Russia and impose serious consequences. It is also possible that Russia may negotiate a withdrawal from Ukraine in return for sanctions relief. Much of the world is praying for this outcome.
Whiteflash is deeply concerned about the situation in Ukraine. First, from a strictly humanitarian perspective we are appalled at the suffering being inflicted on civilians in an illegal assault on a sovereign country. From an economic perspective Putin’s action threatens the stability and prosperity that has been achieved over 70 years since the end of WWII. And we are a much more interconnected world today making this a truly global economic threat. From a business standpoint, we obviously regret the necessity of the sanctions as they hurt innocent businesses that contribute to their communities and to the overall economy. Taking such a large portion of the supply of diamond rough off the market results in significantly increased prices for polished diamonds, making it harder for consumers to afford natural Earth-mined diamonds. There will almost certainly be companies that go out of business altogether as a result of the sanctions on Russian diamonds, especially if the situation is protracted.
At Whiteflash our position is clear. Despite the negative impacts on our industry or on our own company, we fully support the ban on Russian diamonds. Since the invasion of Ukraine Whiteflash has not purchased any diamonds known to have been sourced from Russia, nor will we do so until Russia complies with the international community and withdraws its forces and the ban is lifted. And we are requiring the same assurances from our suppliers.
The combination of economic sanctions, the outright ban on trading Russian diamonds, and financial constraints on payment transfers into and out of Russia, effectively protects consumers against unknowingly buying diamonds that contribute to this conflict. The world community will need to keep a close eye on the situation to make sure these safeguards remain in place. Whiteflash intends to remain vigilant.
Diamond Rough

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