For the first time in 15 years, Russian authorities are starting to purchase diamonds using federal budget funds to support the state corporation Alrosa, which has fallen under sanctions and an embargo from Western countries.
The Russian Finance Ministry and Alrosa, which is 34% owned by the Federal Property Management Agency and another third by the government of Yakutia, have agreed to purchase diamonds from the State Depository, Reuters reports, citing a source. According to him, the first deal to purchase stones took place in March, and such deals will be made regularly throughout the year.
Alrosa, which controls 95% of diamond production in Russia and more than a quarter of global production, was added to the EU sanctions list in January 2024 and was subject to sanctions from Switzerland. The G7 countries also banned direct imports of diamonds from Russia, and in March they decided to introduce a phased embargo on the supply of processed diamonds of Russian origin.
Alrosa already faced problems with sales last year: the company’s unsold diamond reserves increased 1.6 times in a year, reaching 84 billion rubles. The company reported a 15% loss in profits (85 billion rubles), a 3% reduction in production (to 34.6 million carats) and a 9% decrease in revenue (322 billion rubles).
India remains the largest buyer of Russian diamonds, processing 90% of the world’s production. However, at the end of the year, Alrosa also encountered problems in this market, the local regulator asked to stop deliveries, citing an excess of raw materials.
The European Union estimated Russia’s losses from the loss of part of the diamond market at 4 billion euros. Russian presidential press secretary Dmitry Peskov warned of a “boomerang effect” for Western countries, saying that Alrosa would find ways to circumvent sanctions and new markets.
The last time the state bought diamonds mined in Russia was during the global financial crisis of 2008-2009, when it purchased stones worth $1 billion from Alrosa.