Sanctions against one of the world’s biggest diamond suppliers have caused diamond prices to spike worldwide. The global supply of rough diamonds has tightened since the United States imposed sanctions on Alrosa, a Russian-based mining company partially owned by the Russian state.
Alrosa is one of the largest diamond operations in the world, rivaled only by De Beers. According to a statement by the U.S. Treasury Department, Alrosa was responsible for upwards of “28% of global diamond mining” in 2021 before sanctions were imposed.
The sanctions come as part of a coordinated effort to end Russia’s invasion and occupation of Ukraine. The United States and its allies have been increasing the economic pressure on Russia since it invaded on February 24. However, the repercussions of sanctions are affecting global commodity prices.
Although U.S. sanctions against Alrosa allow for a degree of evasion — some countries designate diamonds mined in Russia as imports of whichever country cuts and refines the stones — the company is unable to keep its products flowing into the global diamond market, so much so that diamond cutters, polishers, and traders are struggling to gain access to stones.
This contraction in supply has resulted in soaring diamond prices since March, as much as 20% in some cases. The prices of small rough diamonds and lower-end gems, which Alrosa specializes in, seem to be experiencing the most significant inflation; however, the entire market is affected.
De Beers used to be able to satiate low-supply-high-demand scenarios such as this, but no longer. Decades ago, the London-based mining operation held as much as $5 billion worth of diamonds in its vaults that could have upped supply.
However, like many other industries, De Beers’ production is now strictly tied to market capacity and the company only carries “working inventory stock.” A ramping up of its mining operations is not on the immediate horizon, at least not until the ongoing expansion of its South African facilities is completed in 2024.
Until then, consumers should brace themselves for continued sticker shock at the gas pump, the grocery store, and Tiffany & Co.
