World's largest diamond miner Alrosa hit by US sanctions

World's largest diamond miner Alrosa hit by US sanctions
Alrosa has been cut off from the American financial system, and cannot do business with American nationals. / Image: bne IntelliNews
By Theo Normanton April 8, 2022

The US has expanded sanctions on Russian state-controlled diamond miner Alrosa. By adding the company to the Specially Designated Nationals (SDN) list, the US will block Alrosa’s access to its banking system and prevent American nationals from doing business with the company.

Alrosa is the world’s largest diamond producer, accounting for around a third of global diamond extraction by carat volume and almost a quarter of the global market. In 2021 alone it produced 32.4mn carats. The company employs more than 32,000 people.

These sanctions come as an extension of existing curbs on Russian diamond imports. As followed by bne IntelliNews, the US has banned imports of non-industrial diamonds originating in Russia. The US has also banned debt and equity transactions with Alrosa and its CEO Sergey Ivanov

The outlook for Alrosa was looking good for 2022 before Russia’s invasion of Ukraine. The company restarted output at one of its mines in late 2021, and tapped into the state reserves' auctions of stones, anticipating support from rising prices on an improving market. This strategy appeared to pay off as Alrosa posted all-time record sales in 2021, with $4.2bn in revenue that year alone.

Diamonds are one of Russia’s top 10 non-energy exports, so the sanction will make a discernible difference to Russian economic output. However, Alrosa exports mostly to Belgium, India and the United Arab Emirates, with US customers accounting for less than 1% of total 2021 revenue. This is partly because of competition with Anglo American unit DeBeers for the American market.

"Through these designations, the Treasury is cutting off additional sources of support and revenue for the Government of the Russian Federation to wage its unprovoked war against Ukraine," the US Department of Treasury wrote in a press release.

In late February, immediately after Russia started its invasion of Ukraine, Alrosa CEO Sergey Ivanov Jr was sanctioned by the US on a personal basis. Alrosa has also been sanctioned by the UK. The EU, meanwhile, has prohibited the export of luxury goods to Russia, but not their import.

In addition to Alrosa, shipbuilding design bureaus and enterprises of the United Shipbuilding Corporation were also added to America’s SDN list. “USC is responsible for the construction of almost all of Russia’s warships,” the Treasury said in its statement.

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