US Sanctions Russian Diamonds [UPSC Current Affairs]

US sanctions were imposed on the Russian diamond producer Alrosa, after the Russia-Ukraine war. How does this development affect the Indian diamond business? Know more in this article. This article is significant for the IAS exam economy as well as IR segments.

US sanctions Russian diamonds – Surat stares at 25% job loss

• The sanctions have led to a crisis in the diamond industry in Surat where there are polishing units.
• At least 30 percent of the diamonds cut in Surat are sourced from Alrosa, thus causing a deficit in the rough diamond resource. 
• This has led to a hefty wage cut for polishers, some of whom have taken loans to run their households.
• Besides, the US has made it mandatory for diamond makers to certify that the rough diamonds are not sourced from Russia.

Significance of Surat in the Diamond Industry

• Globally, the city of Surat is also known as a diamond cutting and polishing hub, as out of 10 polished diamonds found in the world, eight are cut and polished here. 
• In Surat and Mumbai, the rough diamonds enter via various routes. 
• Surat is the hub of India’s diamond industry, which employs around one million people and generates between $22 and $24 billion in revenue annually.
• The polished diamonds are set in jewellery before being exported to the United States, the United Kingdom, Gulf countries, and other countries. Some diamond companies also ship loose polished diamonds to these countries as well as Hong Kong and other places.

Challenges to Diamond Industry

• Impact of Sanctions on Russia: Russia initiated the invasion of Ukraine, and the United States slapped restrictions on a number of Russian exports. The diamonds don’t come from Russian mines because of the sanctions.    
• Dependency leading to the shortage: More than 30 to 35 percent of the rough diamonds supplied from Alrosa are cut and polished in the Indian markets of Surat and Mumbai. The sector now faces a shortage of raw resources as a result. Many industrial owners have lowered their output due to a shortage.
• COVID Impact: After Covid, the diamond industry had only just begun to recover. In the years 2021–2022, the export of cut and polished diamonds increased. But once more, its growth is probably going to suffer.
• Unemployment: The Surat polishing industry in India is facing a potential job loss of 25% as the United States and Europe are expected to impose stricter sanctions on diamonds originating from Russia.
• Policy Loopholes: Most factory proprietors have not self-registered under the Factory Act. The Factory Act regulations apply to the benefits provided to the labourers who work in the units. Because their factories are not registered, the diamond polishers are not eligible for government assistance.

Conclusion

The diamond workers union has sought a “financial package of Rs 1,000 crore for the diamond polishers”. A demand has also been made for the elimination of professional taxes levied by civic organizations in Ahmedabad and Surat as well as payment of diamond polishers’ wages during the lockdown. For the benefit of diamond polishers and their families as well as the relatives of diamond polishers who committed suicide as a result of financial difficulties, the government should establish the Ratnakalakar Kalyan board.

US Sanctions Russian Diamonds:- Download PDF Here