Washington Tightens Sanctions Against World’s Biggest Diamond Miner in Russia

Diamonds are displayed during the International Diamond Week (IDW) in the Israeli city of Ramat Gan, east of Tel Aviv, on Feb. 14, 2017. Jack Guez/AFP/Getty Images

The U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) has expanded sanctions on Russian company Alrosa, a state-owned enterprise that is the world’s largest producer of rough diamonds.

“All transactions ordinarily incident and necessary to the wind down of transactions involving Public Joint Stock Company Alrosa or any entity in which Alrosa owns, directly or indirectly, a 50 percent or greater interest that are prohibited by Executive Order 14024 are authorized through 12:01 a.m. eastern daylight time, May 7, 2022,” according to a license issued by OFAC on April 7.

All “property and interests in property” of Alrosa and related entities that are in the United States or are in the possession or control of those in the United States will be blocked and reported to OFAC, according to an April 7 press release by the Treasury Department.

Washington had put Alrosa and its CEO on the sanctions list on Feb. 25, a day after Russia’s Ukraine invasion. However, it stopped short of banning the purchase of the company’s diamonds.

On March 11, President Joe Biden signed an executive order that prohibited the import of non-industrial diamonds. The latest action by OFAC tightens Washington’s sanctions on Alrosa.

Alrosa is responsible for 90 percent of Russia’s diamond mining capacity and accounts for 28 percent of the world’s diamond mining. Alrosa generated more than $4.2 billion in revenues in 2021 while Russia exported $4.5 billion worth of diamonds during this time. The Russian government has a 33 percent stake in the company.

The United States is a key diamond market, accounting for roughly half of worldwide sales. The EU and the United Kingdom had previously imposed sanctions on Alrosa after Russia invaded Ukraine.

The sanctions slapped by Washington and London make it technically impossible for Alrosa to honor a coupon payment on its Eurobond of $11.6 million that becomes due on April 9, the company stated. The business is “studying the options” to fulfill its debt obligation, Alrosa said in a statement.

“These sanctions will continue to apply pressure to key entities that enable and fund Russia’s unprovoked war against Ukraine,” Brian Nelson, under secretary of the Treasury for Terrorism and Financial Intelligence, said in the Treasury’s press release.

“These actions, taken with the Department of State and in coordination with our allies and partners, reflect our continued effort to restrict the Kremlin’s access to assets, resources, and sectors of the economy that are essential to supplying and financing Putin’s brutality.”

Alrosa owns a 41 percent share in Catoca, a diamond production firm in Angola. However, OFAC sanctions are not expected to hit Catoca as it only targets entities that are 50 percent or more owned by Alrosa.

American jewelry businesses have also taken action against Moscow. Late last month, luxury jewelry retailer Tiffany & Co. announced its decision to pause sourcing Russian diamonds as well as any serialized diamonds of Russian origin irrespective of where it was cut and polished.