Inside Putin’s £3bn diamond empire exempt from EU sanctions and ‘funding conflict’

Inside Putin’s £3bn diamond empire exempt from EU sanctions and ‘funding conflict’

USA News

AS the EU eyes up a fifth round of sanctions to punish Vladimir Putin for the brutality of the war in Ukraine, targeting Russia’s £3billion diamond empire appears to be off the table.

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Russia exports around £3billion worth of rough diamonds each year, accounting for around a third of global production. This makes it one of the largest diamond exporters in the world. Energy sanctions appear to be at the forefront of discussions around punishing Russia for its Ukraine invasion, with the latest plan targeting coal.

Sanctions do exist on the EU’s diamond imports to Russia.

However, the same cannot be said about Russia’s diamond imports to the EU, which are far more significant.

The willingness of the EU to hold back on sanctioning Russia’s diamond exports to Europe could be handing Putin billions.

Director of the development NGO, Mines to Markets program at Pact, Cristina Villegas, said: “These are objectively conflict diamonds: they’re funding an armed conflict against a peaceful neighbour, by a state actor.”

While the industry definition of “conflict diamonds” refers to those used to fund rebel groups, Ms Villegas said it is not far off.


Russia’s diamond export market is worth about £3billion annually (Image: Getty )


Russia’s diamond industry did have a brief stint in the rough due to US sanctions (Image: Getty )

She told The Guardian: ”The situation with Russian diamonds is that they really became conflict diamonds overnight.”

The import ban, which was announced in the fourth round of sanctions slapped down by the EU, involved banning the importation of luxury items like diamonds and jewellery.

But the ban applied only to rough diamonds extracted or polished exclusively in Russia.

It came after the US slapped down similar sanctions on Russian diamond imports.

Russia’s diamond industry did have a brief stint in the rough because of this, but Moscow found a way to avoid these sanctions.

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Von der leyen

Sanctioning Russia’s diamond exports appears to be off the table as the EU prepares fresh sanctions (Image: Getty )

Traders managed to avoid the sanctions by making payments in euros through German banks.

Alrosa, the biggest diamond mining company on the planet, almost exclusively mines for Russian diamonds.

The company briefly stopped exporting diamonds to India because of the US sanctions, but began to do so again after Russia figured out the sanctions loophole.

Alrosa accounts for 99 percent of all rough diamonds produced in the Russian Federation.

In 2021, when Alrosa raked in £3billion for diamond sales, gifting the company a net profit of 91billion rubles (£828million).

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The US has sanctioned Russia’s diamond industry (Image: Getty )


Russia has re-started exported diamonds to India after a brief hiatus (Image: Getty )

And the Russian state has a 30 percent stake in the company’s shareholdings.

Another third is held by the republic of Yakutia, in Russia’s far east, the location for most of Alrosa’s diamond mines, with the other third owned by minority shareholders.

It may come as no surprise then that Alrosa’s corporate leadership does have close links to the Kremlin.

The company’s chief executive, Sergei Ivanov, was targeted by US sanctions and his father, Borisovich Ivanov a former a Russian minister of defence, KGB colonel general and Putin’s chief of staff, is thought to be one of the Russian President’s closest allies.

And the Gokhran, which is state-owned and operates under the Ministry of Finance, has a repository of precious stones and metals with a large stockpile of diamonds.

Gokhran exists to keep watch over Russia’s resources, purchasing diamonds to assist the industry and avoid plummeting prices.

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