Diamond exporters are now processing payments in euros through German banks in order to avoid problems relating to the sanctions, which were placed on Russia in response to the invasion of Ukraine in February.
Colin Shah, chairman, Gem & Jewellery Export Promotion Council (GJEPC) told The Economic Times, "Orders for these diamonds were placed in early March, according to the sight holding schedule of Alrosa. They are coming now.”
"Exporters are routing payments through various banks that deal with euros or other currencies,” Shah said.
While routing payments via German banks has been known to delay the payment process by a week it provides a temporary fix to continue trading while sanctions are in place.
Exporters are hopeful the Indian government will soon be able to act on the traditional rupee-ruble payment mechanism as a long-term solution when trading diamonds with Russia.
The trading arrangement - which was discontinued years back - allowed India and Russia to directly trade currencies before the implementation of the worldwide financial messaging system known as SWIFT, which has already been blocked from Russia as one of the provisions of the sanctions.
It was reported earlier in Jeweller that the Indian government has expressed an intention to bypass cross-country banking restrictions by reviving its currency trade arrangement with Russia.
“However, for the diamonds that come up for sale in April, the trade would prefer a rupee-rouble mechanism. The concerned authorities are looking into it and something will be worked out," Shah said.
Alrosa is the largest diamond mining company in the world. It accounts for an estimated 95 per cent of diamonds produced in Russia and around 30 per cent of diamonds extracted worldwide. India meanwhile possesses the largest diamond cutting and polishing industry in the world.
A disruption in rough diamond supply would greatly impact India’s diamond industry as a number of major diamond enterprises, managed by Gujarati diamantaires, operate in Russia.
Conflict diamonds debate
While the jewellery industy’s position within the on-going Russia-Ukraine conflict remains murky and complex for most, some have taken a direct stance.
Cristina Villegas, director of the Mines to Markets program, told The Guardian that her organisation views Russian diamonds as conflict diamonds.
“These are objectively conflict diamonds, they’re funding an armed conflict against a peaceful neighbour, by a state actor,” Villegas said.
“The situation with Russian diamonds is that they really became conflict diamonds overnight.
“These things take time to settle on new definitions. But the silence is striking – and it’s hard not to presume it’s because much of the industry is hoping that this goes away or it’s forgotten.”
For another industry insider, the larger question is the nature of the economic sanctions imposed by the West, and just how effective they’ll be.
Under US customs regulations, a polished diamond from India, which started as rough from Russia, has undergone enough physical transformation to be considered a new product. It is therefore eligible to be imported and solid to US consumers.
Martin Rapaport, the founder of RapNet, an online diamond trading network, told The Guardian that the sanctions will do little to impact the relationship between India and Russia.
“The flow of diamonds from Russia to India to America will continue unabated,” Rapaport said.
“The sanctions are essentially very ineffective. They don’t do anything. This is not going to stop Russian diamonds.”
India studies impact of sanctions
India’s finance ministry has announced it is assessing the impacts of the Western-led sanctions while it is in the process of devising alternative payment mechanisms in trading with Russia mainly for rough diamonds, fertilisers, and mineral oils.
"We will await details of any unilateral sanctions. The exact details to examine their impact on our economic exchanges with Russia," finance ministry spokesperson Arindam Bagchi said in a news conference.
To date, India has not imposed any sanctions against Russia.
Britain is disappointed
The UK has openly declared its disappointment over India’s stance regarding the invasion of Ukraine.
India on Saturday abstained from voting on a US-sponsored UN Security Council resolution that objected to Russia’s “aggression” against Ukraine, with Indian representatives stating that dialogue is the only answer to settling disputes.
Addressing the press, Anne-Marie Trevelyan, UK Trade Minister said, "We are very disappointed, but we continue to work with Indian partners and hope that their views will change."
She added that talks remain on-going with the chance to benefit both sides. She also stated that there is still time for India to shift its stance and support calls for sanctions against Russia.
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