Should the industry still sell Russian goods?

Rob Bates

Just before Russia’s invasion of Ukraine, diamond miner Alrosa—which is 33% owned by the Russian government—released its latest sustainability report, which talks about helping communities, respecting the environment, and prioritizing social responsibility.

Which all sounds great, but is overshadowed by the fact that one of its owners has just become an international pariah.

Alrosa has long tried to be a “good actor” in the diamond business. Executives talked up its beneficial social impact and charitable efforts. They even discussed a Russian-origin brand, in part because its diamonds were “conflict-free.”

That, obviously, wouldn’t fly now. For as image conscious as Alrosa has been, and as much as it wants to be considered a modern, transparent company, the head of its one-third owner seems to relish his reputation as a malevolent dictator. And following the invasion of Ukraine, virtually the entire world has turned on both Russian President Vladimir Putin and the country he heads. Alrosa has not been spared from the worldwide backlash.

Russia’s actions in Ukraine have caused widespread revulsion. U.S. bars are pouring Russian vodka down the drain, and governors are calling for Russian products to be yanked from store shelves. And while Russian diamonds have so far received limited attention—and don’t fund its economy as much as natural gas—they could pose a significant PR and legal challenge for the industry. Russia is also a significant source of gemstones, as well as the world’s second largest producer of gold and platinum.

In the last few days, a long list of companies, from Walt Disney to Netflix to Apple, have halted or curtailed their Russian operations. Which shows: There’s no shame in companies saying they’ve done business with Russia, since just about all big ones have, and they felt they had to take a stand.

On Tuesday [March 1], Jewelers of America issued a member advisory warning that, due to “serious ethical, reputational, and legal risks, [it] strongly advises members to take measures to stop buying or selling diamonds, precious metals, and/or precious gemstones of Russian or Belorussian origin.”

It advises jewelers to get written assurances from suppliers that they are not selling Russian diamonds, using tools such as the U.S. Jewelry Council’s Diamond Source Warranty Protocol.

At publication time, among major companies, it seems only e-tailer Brilliant Earth has publicly said it’s pulling Russian gems. Signet and Tiffany, both members of the Alrosa Alliance, did not return requests for comment at the time of publication.

It is still legal for U.S., E.U., and U.K. citizens to deal with Alrosa, as well as any non-sanctioned Russian entities. (The current U.S. sanctions on Alrosa are limited to its issuance of new stocks and bonds.)

That said, it could be difficult for U.S. companies to pay for Russian rough—given how many Russian banks have been sanctioned—and to receive goods, as many jurisdictions are now closed to airplanes and boats coming to and from Russia.

In addition, if Alrosa is hit with further designations—and the sanctioning of its CEO is a signal it could be—they could take effect immediately, meaning any U.S. company directly dealing with the miner might need Treasury Department approval to modify contracts.

Current European Union sanctions specifically exempt Russian diamonds. (Also spared: Italian luxury goods.)

Read full article

Source JCK Online