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The Guardian - AU
The Guardian - AU
World
Tess McClure

Major jewellers to cease buying Russian-origin diamonds after increased scrutiny

Alrosa diamonds in Moscow
A host of high-profile international jewellers will stop buying diamonds of Russian origin Photograph: Maxim Shemetov/Reuters

Major jewellers are ditching Russian diamonds after facing increased scrutiny over how Russia’s state-controlled diamond monopoly could fund Putin’s war on Ukraine.

A host of high-profile international jewellers, including American brand Tiffany & Co, Swiss watch and jewellery-maker Chopard, Signet, the largest retailer of diamond jewellery, and Pandora, the world’s largest jeweller, have released statements saying they will stop buying diamonds – or in the case of Pandora, any materials - of Russian origin.

In mid-march, the Guardian reported on growing concerns that trade with Russia’s partly state-owned diamond miner was lining Russian state coffers, and could be funding Russia’s invasion of Ukraine; as well how jewellers could easily – and legally – circumnavigate sanctions by buying Russian stones processed through India. In the days since, multiple major retailers said they would stop sourcing Russian diamonds. This week, Pandora and Chopard were the latest to announce the move, with both saying they had instructed all suppliers to stop sourcing raw materials of Russian origin. They followed moves by Tiffany and Signet earlier in March.

Russia produces about 30% of the world’s diamonds – 98% of which are mined and sold by Alrosa, an enormous mining monopoly with close ties to the Kremlin. A third of Alrosa is owned by the central government, and another third by regional governments – the Russian republic of Yakutia and its administrations. The company brings in significant profits for its government shareholders, reporting sales of $4.16bn in 2021, resulting in a net profit of 91bn rubles ($943m). Putin has said in the past that it “gives serious revenues to the federal budget and regional budget”.

Both the US and UK have introduced sanctions forbidding companies from doing direct business with Alrosa. The sanctions alone, however, are unlikely to stop the flow of Russian diamonds to the west, because the vast majority are exported rough to India, where they are cut and polished. Under US customs rulings, this is considered a “significant transformation” – so polished diamonds can be legally imported as an Indian product, not a Russian one.

Decisions over whether to truly pause trade of Alrosa’s diamonds will therefore fall to the industry, and to key certification bodies. Within the sector, however, a storm has been brewing over “responsible sourcing” groups that have remained quiet on sourcing of Russian diamonds, with multiple high-profile members resigning in protest.

The Responsible Jewellery Council (RJC) – one of the crucial jewellery watchdogs – was set up to help regulate the sector, improve its reputation, promote responsible sourcing, and eliminate “conflict diamonds” from supply chains. The Guardian reported earlier in March that the council had been accused of silence over Russian diamonds although it has issued guidance that members should comply with sanctions. While Alrosa has stepped down from the organisation’s board, it remains a member and has kept its “responsible” certification. The council has a number of past or present long-term Alrosa customers on its board.

Now, the council is facing a wave of exits. Brands that have announced they are leaving over the Russian diamonds issue include Pandora, Richemont, the owner of Cartier, and Kering, the owner of high-fashion brands including Gucci and Saint Laurent. On Wednesday, the organisation’s executive director Iris Van der Veken resigned over its handling of the issue. Van der Veken declined to comment.

In a statement, Richemont, the owner of Cartier, said it was leaving the organisation in protest. “Richemont and its maisons do not wish to be members of an industry organisation that includes companies that contribute to financing conflicts and wars.”

Pandora representatives said the company was leaving the council after 12 years as a member, over its “failure to suspend Russian companies’ memberships and responsible business certifications and urge its members to suspend business with Russia. Pandora had previously requested that RJC take such actions.”

“The war requires all businesses to act with the utmost responsibility regarding any interactions or business dealings with Russia and Belarus. Pandora cannot in good faith be a member of an association that does not share our values,” chief executive Alexander Lacik said.

Gucci and Balenciaga owner Kering said the brand “does not want to be associated in any way with business practices that contribute to an endorsement of war.”

“The RJC is at a crucial crossroads,” said Cristina Villegas, director of the Mines to Markets program at development organisation Pact. “The current definitions of responsibility are silent on what happens when a company’s assets are being used to directly and indirectly fund an unprovoked conflict that’s displaced millions of people.”

RJC chair David A. Bouffard said in a statement that the council had “commenced an arm’s length, independent, third-party legal assessment … to consider the status of Alrosa as an RJC member”.

“The pace of this process may be frustrating, but this is an unprecedented situation, which is constantly changing and requires that the time be taken, to ensure that due process is followed as exhaustively as possible.” Bouffard said the process would conclude “imminently”.

Brad Brooks-Rubin, strategic adviser to the council, said the exodus of members was significant for the industry. “If the current trajectory continues and more members [leave]… there’s not another competing organisation in the industry,” he said. “That leaves the jewellery industry exposed to real concerns about: what standards are you implementing? What does it mean to be responsible, sustainable, ethical? The RJC has provided that – and if it’s not the RJC, what takes its place?”

Brooks-Rubin had spoken out earlier in March to criticise the lack of action or transparency on Russian diamonds, saying the council’s action against Alrosa had been “insufficient”. He said decisions about boycotting diamond-producing countries were complex, with millions of international jobs and livelihoods depending on the flow of diamonds.

“If 30-40% of the supply chain is off the market, then that affects everybody. That affects prices, that affects the supply chain, that affects every entity in the entire industry.” He said the council needed to be clear and transparent about the challenges it faced.

  • This story has been updated to clarify that Pandora’s directive to suppliers applied to all materials, not diamonds specifically. The firm sources lab-made diamonds.

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