Why Sanctions on One Russian Company Shook Surat

Imagine Surat's diamond cutting and polishing factories, covered elsewhere on this site, depending heavily on rough diamond supply from a single Russian state-linked company, Alrosa, which alone accounts for roughly 90 percent of Russia's domestic diamond production, itself representing 25-30 percent of the entire world's rough diamond output by volume, and Western sanctions following Russia's invasion of Ukraine directly disrupting that supply chain, cutting Surat's access to Alrosa-sourced rough diamonds down to a fraction of prior volumes.

This disruption hit Surat's factories directly and painfully, with reports of roughly 5,000 diamond workers furloughed as rough diamond shortages forced production cutbacks, a genuinely stark illustration of how a geopolitical conflict thousands of kilometres away, involving countries India has no direct dispute with, can nonetheless cascade into real job losses in a specific Indian industrial city entirely dependent on that disrupted supply chain.

Russia's own response has added a further complication, imposing an 8 percent export duty on rough diamonds weighing 0.45 carats or more, effective September 2026, directly raising the cost of whatever Alrosa supply does still reach Indian cutters, forcing renewed reassessment across the entire global diamond supply chain about how much continued reliance on Russian rough diamonds actually makes economic sense given both the sanctions risk and this new direct cost.

This vulnerability connects directly to the broader lab-grown diamond boom covered throughout this page, one genuine, if rarely stated, driver behind lab-grown diamonds' rapid Indian adoption is precisely this natural-diamond supply chain fragility, a laboratory-grown diamond's supply chain runs through domestic or diversified international equipment and technology providers rather than depending on geopolitically exposed single-country rough diamond mining, giving Surat's manufacturers a genuine risk-diversification reason to lean into lab-grown production beyond simply the price and demand trends covered elsewhere on this site.