US-led Western export controls on Russian diamonds have hit the world’s largest cutting and polishing hub, which had already been left reeling from the Covid-19 slowdown
It was a routine morning at Ketan Patel’s home as he braced for what would have normally been another grueling day as an artisan at a diamond firm in Surat.
Surat, the hub of the global diamond polishing industry, is located in Gujarat, in western India, Prime Minister Narendra Modi’s home state.
The city's diamond industry, the world leader in cut and polished diamonds, had employed a million artisans like Surat and exported precious stones worth $23 billion annually before the West sanctioned rough diamonds from Russia. Fourteen out of 15 diamonds set in jewelry worldwide are processed in India, the national government says.
When Patel left home, neither his wife nor his two school-aged children knew that he was heading to the Tapi River to take his life after having been fired the previous evening after 15 years of service. Business was down and half of the staff had been laid off: their unit had been operating for only 15 days per month for nearly a year.
Ketan Patel was about to plunge into the river but instead took his mobile out and called a special Helpline created by Diamond Workers Union Gujarat. He was counseled and prevented from committing suicide.
“We organized a cheaper house to rent for him, a job, and also arranged for his children’s school fees,” according to Bhavesh Tank, the labor union's vice-president. “As you can understand, we can’t organize this for every artisan who has lost his job and the families of those who committed suicide.”
He claims that at least 65 diamond workers had killed themselves over the past 16 months. All of them used to earn an average of Rs 25,000-30,000 ($300-350) per month. Of course, suicides are not a new thing, and the industry is reluctant to talk about it; but the fact remains that the number of deaths has spiked lately.
The artisans, who work for an estimated 4,000 diamond factories, are facing the pressure of an unprecedented recession, caused over 5,000 km away by the Russia-Ukraine conflict.
Russia’s rough gemstones, which are cut and polished in Surat, are facing worldwide sanctions and the industry in India has taken a big hit.
Surat’s major markets in the US and other G7 countries have sanctioned rough gemstones from the state-owned mining company Alrosa, dismissing them, wrongly, as “blood diamonds”. Also known as conflict diamonds, hot diamonds, red diamonds or brown diamonds, these are diamonds which are mined in a conflict zone to aid in a war effort. This is a deliberate slur against Russian gems, none of which are mined in the conflict area.
When on December 23 last year, US President Joe Biden signed an executive order to shut the door on rough diamonds from Russia, the decision was further aimed at preventing the rough gemstones from being polished in a third country like India (Earlier that month, the G7 countries declared sanctions on Russian rough diamonds effective this year).
The United Kingdom made amendments to its rules to firmly ensure that no attempt is made to produce Russian roughs in a third country, or to eventually push the diamonds in the G7 countries. The amendment put into place on March 1, 2024, applied to diamonds equal to or larger than one carat in weight (0.2 grams or equivalent). The prohibition, from the beginning of this month, applies to relevant diamonds equal to or larger than 0.5 carats (0.1 grams or equivalent).
The rough diamonds sourced from Russia are important, as they are small in size. Smaller diamonds are largely used in jewelry and Russia is the world leader when it comes to small roughs. Industry insiders say this is a huge blow to Surat, which hinges on the US market for over 45% of its sale of polished diamonds.
Surat diamond dealers, most of whom prefer anonymity unlike in other industries, say these sanctions and rules will be a double-whammy since the rough prices have already increased by 10% to 15% since the G7 announced its sanctions.
A leading diamond merchant says for every piece of diamond or jewelry exported to the US, the exporter needs to provide a certificate that the rough has not been imported from Russia. In May 2024, the US let it be known that it was rethinking the ban’s strictest elements since it was hurting the industry, but to date no relaxation has taken place.
India’s Ministry of External Affairs is making efforts to find a solution for the Surat hub, but the Gems & Jewelry Export Promotion Council (GJEPC) is more concerned about the overall slump in the market.
GJEPC chairman Vipul Patel told RT: “We are concerned over Russian roughs but our bigger concern is the sluggish demand in the markets in the US and Europe. Our government is making efforts through minister-to-minister talks.”
He pointed out that the diamond industry is trying out multiple ways, including stepping up the production capacity of non-Russian natural diamond production while simultaneously looking at lab-grown diamonds (LGDs). The demand for lab grown diamonds is gradually increasing as they are one-third the price of real diamonds.
The US and China are major markets for diamonds from Surat. The slow demand in these markets, due to the industry’s incomplete recovery from the Covid-19 recession and the preference for LGDs, have yielded overproduction, which adds to the already severe conditions the diamond industry faces.
Former president of Surat Diamond Association Dinesh Navadiya acknowledges that the business has been affected, coupled with the overall scenario. He cites the GJEPC numbers, which speak for themselves.
The import of rough diamonds has decreased 6.4%, from Rs 35.178 billion ($4.19 billion) in Q1 of the 2023 financial year to Rs 32.94 billion ($3.92 billion) in Q2 2023. However, exports have declined by a whopping 23.6% in the same period, from Rs 48.35 billion ($5.76 billion) to Rs 36.9 billion ($4.4 billion).
The pinch is most felt by the diamond artisans. Many firms are laying off, while quite a few others are declaring holidays in view of the slump in the industry, which has been going on since the Covid-19 outbreak, and has exacerbated over the past year with the conflict in the Middle East.
“What is the crime of the diamond workers?” asks Bhavesh Tank. “Nobody in the industry would want to admit that the artisans have committed suicide due to the crises in the industry.”
Frustrated over the situation, Diamond Worker Union Gujarat dashed off an angry letter in January to Gujarat Chief Minister Bhupendra Patel stating, “It is high time the government woke up from its stupor and looked at the plight of the lakhs (hundreds of thousands) of diamond workers.”
The letter, signed by Union president RD Zilaria and Bhavesh Tank, demanded that the state government immediately announce an economic welfare package for the harried diamond artisans. They also demanded that the bereaved families of those who had killed themselves should be adequately compensated.
Bhavesh Tank said, “It is unfortunate that there is no record of the number of diamond workers or even the exact number of diamond units, since we are all in the unorganized sector and left to the mercy of the diamantaires.” According to him, the government should establish a permanent welfare board for the artisans.
“We are not asking for the moon, though it is our sweat and blood that goes into making the diamond industry a behemoth that earns billions of dollars of foreign exchange for the country,” he said.
Tank goes on to add, “Surat is a global diamond hub and the artisans who put in 12 to 14-15 hours of work a day are equal stakeholders in the industry.”
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September 24, 2024 at 12:28AM
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West’s move against Russia puts thousands of Indian workers at risk
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