Indian diamond traders are setting sights on newer markets as demand in traditional strongholds – the US and China – cools off.
Vietnam, Cambodia, and Thailand are rapidly emerging as promising destinations for Indian diamond exports, reshaping the landscape of trade in the precious stones that is being influenced by macroeconomic factors, inflation rates, and political undertones, including potential restrictions on diamonds suspected of originating from Russian mines.
The Times of India reported this week that the US may soon halt imports of diamonds of 1 carat and above from India amid concerns that the stones may have been sourced from Russia’s Alrosa mines.
If these restrictions take shape, they could come as soon as September.
This development comes even as traders are seeing a decline in demand for cut and polished diamonds, Gems and Jewellery Export Promotion Council (GJEPC) chairman Vipul Shah said.
Indian traders exported $1.38 billion worth of cut and polished diamonds in June, down 31.50% from last year, GJEPC data showed.
The context of the current situation extends beyond mere economics.
The US Office of Foreign Asset Control (OFAC) froze about $26 million in fund transfers of overseas entities of Indian jewelers over the alleged import of rough diamonds mined in Russia, The Economic Times reported this week.
Most entities that have been directly impacted by the move are the UAE-based subsidiaries of Indian diamond houses.
Members of GJEPC and officials in the ministry of commerce and the Indian embassy in UAE have taken up this issue and are holding talks with their US counterparts, Shah said.
The US banning Indian diamonds suspecting their origin to be in Russia is only a possibility, and no official notification or communication has been issued, Shah added.
The international maneuvering comes against the backdrop of the Group of 7, or G7, countries, comprising the UK, Canada, France, Germany, Italy, Japan, and the US, planning a ban on diamonds originating from Russia, the BBC reported in May.
Russia’s diamond trade is worth about $4 billion per year and makes up a small proportion of its overall exports, while oil and gas contribute to half of that country’s overall exports, the report said.
India imported $885 million worth of raw and uncut diamonds from Russia, the BBC report said, adding that most Russian diamonds are mined by Alrosa, a group of diamond mining companies, contributing one-third of the global diamond supply.
There is already the Kimberley Process, a scheme to try and restrict “blood diamonds” used to fuel conflict where states certify that diamonds are “conflict-free.” However, this process does not allow the diamonds to be traced to the country of origin, the BBC story said.
The decline in Indian diamond exports is part of a broader correction wave, Manohar Annappanavar, an associate director at CareEdge, said.
“The reduction signifies a corrective phase following the peak reached during the robust market conditions of 2021 amid abundant liquidity. We expect this trend of tapered demand for diamonds polished in India to continue for the rest of the year and also the next, barring the holiday season starting from September where export may likely pick up,” he added.
The global diamond industry had surged in 2021, rebounding robustly from the pandemic’s impacts, Bain & Co. said in its 2021-22 report.
Every sector witnessed significant growth, from diamond mining to jewelry retail, with rough diamond sales, led by Russia, Canada, and Botswana, making a notable comeback.
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