Alrosa clients have continued to buy rough from the miner by sending payment in currencies other than dollars following a range of sanctions on Russia by Western governments.
While punitive measures by the US and other powers don’t ban dollar transactions with Alrosa, the Russian company has asked customers to pay in euros and other currencies, industry insiders told Rapaport News. Banks have executed transfers using alternatives to Swift, a financial communication system from which several Russian lenders have been excluded.
“[Alrosa has] always been nervous that US-dollar assets can be frozen and blocked more easily because it’s the dominant trading currency in the world,” a rough-market source said on condition of anonymity. “So [requesting payment in other currencies] is just about having non-US-dollar reserves.”
This means contract customers were able to complete purchases at the latest monthly trading session, which occurred just as the Ukraine war began on February 24. Alrosa has assured the trade that business could continue as normal.
One Belgium-based buyer said Alrosa had asked his company to send remittance in euros during the sale, even before the crisis took off. The Russian miner had been testing payments in various currencies in recent years. The customer in question paid via an Italian bank.
Although the sale officially ran from February 21 to 25, the vast majority of purchase decisions took place before the incursion began, as global shortages have made customers eager to buy.
“In this market anyway, everybody’s accepting his goods,” the customer said. “The moment they became available, you press ‘yes’ [and] make a contract. Technically you could wait for the 25th, but I don’t think anybody would have done that.”
Most of Alrosa’s contract clients are based in Belgium or India. The Reserve Bank of India (RBI) reportedly held a meeting with lenders in which it asked them to find solutions to enable money transfers between India and Russia.
Letter of assurance
Meanwhile, India’s Gem & Jewellery Export Promotion Council (GJEPC) received a letter from Alrosa [Monday February 28] that said the miner was ready to address concerns about operations, the trade organization said.
“The letter also states that Alrosa’s settlements with foreign partners continue as usual as there are no restrictions on the company’s transactions in dollars, euros or other currencies,” the GJEPC continued. “[Having] diverse banking partners allows the company to operate normally without any delays.”
The supply of rough could suffer if the Ukraine conflict continues for a long time or if sanctions got tougher, a spokesperson for the Antwerp World Diamond Centre (AWDC) noted. At present, the US measures only outlaw debt and equity transactions with Alrosa.
“Being cut off from one of the biggest supplies worldwide will create a market squeeze and prices will go up,” the AWDC said.