Fifty-five degrees below zero, the coldest temperatures in the world, winter nights that last nine months, ground frozen so hard it only gives way to explosives: behind each diamond that emerges from the mines of Yakutia, or Sakha, a Russian republic, there’s a story of epic, almost magical, effort. The men who work the mines are almost all natives of north-eastern Siberia, hardened by life in one of the world’s toughest regions.
The men who make those diamonds shine, though, are Indians.
Earlier this month, the United States imposed sanctions against diamonds mined in Russia, directly targeting Alrosa, the state-controlled giant responsible for 90 per cent of the country’s production. Last year, Alrosa sold 32.4 million carats of rough diamonds, just under 30 per cent of world production.
Even though exports to India make up just about 10 per cent of Russian direct sales, Indian diamantaires have reason to fear they could end up on the frontline of the war in Ukraine. An overwhelming majority of stones produced by Alrosa, upwards of 85 per cent, end up in Mumbai and Surat for polishing, funnelled by purchasers from Antwerp city in Belgium to the Far-East.
In the event the sanctions now imposed on Russia extend to stones polished in India, an industry that generates over $25 billion in exports each year could be seriously hurt.
Indians who rule Russian diamonds
The billboard in Yakutsk’s city square was advertising Raj Kapoor’s Shree 420 the day diamantaire Rajesh Gandhi arrived there, in the winter of 1996; it was, he remembered, -40ºC outside. He had travelled on an invitation from the Governor of the province, but in the Russia of that time, it meant little. The country was just beginning to recover from the disintegration of the Soviet Union, and the new order was suffused with large-scale corruption and organised crime.
“Initially,” Gandhi recalled in a rare interview, “my relatives did not like the idea of working in Russia and opposed it. But after [a] few years of successful working they eventually supported me and started joining the business. As of today my elder son, my wife and three of my cousin brothers are already an integral part of the [Choron Diamonds] group.”
To make things worse, there was no English-language school in Yakutia where he could send his children. “Furthermore, our family is vegetarian; we do not eat meat, fish, [or] eggs. This was a problem indeed.”
Even worse problems were faced by other Indian diamond dealers. In one famous case, men armed with machine guns, posing as officers of Russia’s Federal Security Service, robbed an Indian diamond dealer of some $2.8 million in jewellery and $670,000 in cash.
Gandhi didn’t let these problems get in the way of business. Today, his company, Choron Diamonds, operates a state-of-the-art polishing business in Yakutsk, part of a sprawling global empire of polishing and embossing units, as well as retail stores, generating over $200 million a year. Choron has deep ties with the three biggest diamond companies, De Beers (UK), Sodiam (Angola) and Alrosa (Russia).
The vegetarian diamantaire, though, isn’t the only one who built a fortune in Russia. Indian diplomatic sources speak of one diamond dealer who secured a red licence plate for his car, a signifier of status normally given only to high officials. Another endeared himself to Indian students at a Diwali party, allowing them to help themselves to top-end single malt whiskies stored in the boot of his Maybach.
For hundreds of years, India had flourished on the banks of the Volga. From shops in the great trading city of Astrakhan, men with names like Ramdas Dzhasuev and Talaram Alimchandov, the historian Stephen Dale has written, sold cotton, silks, spices, furs and silver. The Indian enclave on Volodarskogo Street — where a two-storey building still stands — was a hub for trading networks that stretched deep into Central Asia and into Kazan and Moscow.
That was, until revolution and war tore their world apart.
India and the Russian diamond market
Ever since the war in Ukraine broke out, élite Russians have been thronging to stores like Bulgari, buying top-end jewellery, watches and luxury products whose value is more enduring than the rapidly depreciating Russian ruble. For high-wealth individuals looking to secretly stash wealth and transport it out of the country if needed, diamonds have obvious advantages: they’re light, easy to transport, and retain value.
“There’s been a lot of Russians looking to buy diamonds from dealers in the United Arab Emirates and East Asia in recent weeks,” one Indian diamond dealer told ThePrint. “I guess that is understandable, because diamonds are a lot harder to seize than bank accounts or yachts.”
From the heights of the Kremlin, the diamond chain stretches all the way to the Yashwant Place market, nestled in one corner of New Delhi’s diplomatic enclave. There’s little truth to rumours that President Vladimir Putin and his ex-wife shopped here, but many Russian tourists and businesspeople indeed do just that. The market is famous, in addition to furs and leather, for its gold and diamond jewellery.
“We have been providing Russians with jewels for decades,” one jewellery dealer said. In the Soviet era, the jewellers also functioned as informal investors, making purchases for their clients and then selling them at a profit. Those relationships, business sources say, have continued into the present, with many Russians using diamonds as a means to store wealth in India.
The collapse of these legitimate and semi-legitimate diamond-trade channels, though, will empower a more dangerous diamond trade network.
The dark side of Russian diamonds
Folk artists, Second World War heroes, writers: the magnificent, gem-embedded gravestones at the Shirokorechenskoe Cemetery, on the outskirts of Yekaterinburg, some 6,500 km from Yakutsk, tell the story of one of Russia’s great centres of the arts. There are some gravestones with less well-known images: men in leather coats, bottles of booze, and diamond-encrusted bling, laser-engraved granite blocks that cost upwards of $15,000.
The magic of diamonds also has something to do with the fact that people are willing to die—and kill—for them. And as sanctions by the US, UK, EU and others kick in, there’s concern that efforts to shut down legitimate trade in Russian diamonds could facilitate an organised-crime takeover of the business.
For many years now, Russian organised crime groups operating in Europe and the US have used diamonds to launder and store their profits. In one recent police operation in Spain, for example, a Russian underworld group was found to have invested drug earnings in properties and diamonds, among other things.
Russian organised crime groups have also demonstrated that they are more than capable of bypassing regulatory systems. Lev Leviev, Israel’s diamond king, has faced allegations of using a legitimate diamond-polishing business in Russia as cover to smuggle millions worth of uncut stones into the country.
The relationship between diamond trafficking and the state apparatus existed even under the Soviet Union. The scholar Marshal Goldman has recorded that former Soviet president Leonid Brezhnev’s daughter, Galia, for a time dated a diamond smuggler who, bizarrely, also held a job as a circus clown. Later, she married Yuri Churbanov, who was then appointed a minister—with a sideline in receiving protection money from the Uzbekistan mafia.
Like then, diamond mining monopoly Alrosa is closely tied with the Kremlin. Its chief executive Sergey Ivanov, who has been individually targeted in US sanctions, is the son of former defence minister Sergei Ivanov, a close aide of President Putin. The Russian State also controls a secretive diamond stockpile, the Gokhran, which it uses to stabilise prices, and to generate revenues at times of crisis.
Alrosa has so far succeeded in ensuring a regular flow of diamonds to Indian dealers, despite the conflict in Ukraine. Payments for the diamonds, too, have continued to be made, mainly through banks in Europe. There’s no telling, though, if anti-Russian diamond sanctions could spread to Europe, and what the impact of gems polished in India for export might be.
In the absence of legal ways to generate revenues, Russia’s diamonds could soon become a means of survival for the regime, working together with organised crime. Legitimate business, though, won’t have that option.
(Edited by Prashant)