US Sanctions on Russian Diamonds Deal Severe Blow to India's Working Class, Trade Union Says

WASHINGTON (Sputnik) - Western sanctions on rough diamonds have ended up devastating workers in India's polishing industry, where unemployment, wage reductions, and suicide rates are now on the rise, president of Diamond Workers Union Gujarat, Ramesh Zilariya, told Sputnik.

In early April, the Biden administration imposed sanctions on Russian diamond mining company Alrosa, which is responsible for 90% of Russia's diamond mining capacity and is the source of about a third of all diamonds worldwide. Prior to the designation on Alrosa, President Joe Biden issued an executive order to ban US imports of non-industrial diamonds from Russia.

"Western countries, including the United States, said that you must make sure the diamonds you are polishing are not of Russian origin", Zilariya said. "The outcome... has severely affected India's diamond industry, as part of which the Gujarat diamond industry has been forced to cut production".

Gujarat province is home to the city of Surat, known for being one of the world's largest diamond polishing hubs.

Zilariya said the decline of polished diamond supply in the market caused by the sanctions has forced diamond polishing companies to cut their employees' work hours, adding that many workers have also become unemployed or put on 15-day furloughs.

"The policy of cutting production has had a direct impact on the workers in the diamond industry, due to which inflation is increasing on the one hand and on the other hand the wages of those working in the diamond industry are falling, due to which many workers are committing suicide", Zilariya said.

In this handout photo released by the Russian diamond producer Alrosa, a view shows a rare 242-carat rough diamond, which will be offered at the 100th international auction of Alrosa in Dubai on March 22, 2021

© Sputnik / Alrosa

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The Diamond Workers Union in Gujarat recently met the Chief Minister of Gujarat and the Labour Minister to explore options to resolve the crisis and possibly put together an economic aid package to support the industry.

DIAMOND SHORTAGE EXPECTED IN FALL

There is a loophole in the US sanctions that allows rough diamonds from Russia to make their way to the US market if they are polished in a third country. However, several Indian polishers have said clients in the West are refusing to accept Russian-mined diamonds because they consider them conflict diamonds with respect to Moscow's special military operation in Ukraine.

De Beers, the second-largest mining company behind Alrosa, said it will find it very difficult to provide additional supply to the global market.

"At this point, diamond manufacturers everywhere are slowly backing away from Alrosa's diamonds because of consumer pressure and retailers' desire to be able to tell their clients that the diamonds they are offering are not sourced from Russia," veteran diamond industry analyst Edahn Golan told Sputnik. "In addition, banks are refusing to be involved in the trade in Alrosa's goods, even if the transaction takes place in a country not sanctioning Russia. None of the banks is willing to risk their license to operate in the US."

There are currently no shortages in rough diamonds, however, that is expected to change in August when demand will rise and manufacturers will start polishing rough diamonds for the holiday season in November and December, Golan said.

De Beers is working at capacity and no new diamond mines are in sight, Golan added.