Diamond Detour

How Russian Diamonds Continue to Reach Europe and the US Despite Sanctions

Starting January 1, 2024, the G7 countries have banned the import of Russian diamonds. Additionally, the European Union has sanctioned Alrosa, Russia’s largest diamond producer and one of the global industry leaders. This decision was based on the company’s long-standing ties to the Russian military: since 1997, Alrosa has been sponsoring a Russian Navy submarine. The company CEO, Pavel Marinychev, was also personally sanctioned.

These weren’t the first restrictions imposed on Alrosa: in 2022, the United States placed the company on its sanctions list as an entity operating in the interests of the Russian government.

Despite the restrictions, Russian diamonds continue to make their way into Europe and the US—but not directly. Instead, they pass through a chain of intermediary countries, companies, and nominal brokers who ensure the shipments are legally permissible yet opaque.

This loophole is contained in the sanctions wording itself. The EU and G7 left a gap: the ban doesn’t apply to the diamonds that were already in the EU, G7 or third-party countries before January 1, 2024, nor to those that were cut outside of Russia before that date. Formally, the measure is designed to protect investors, but in practice, it allows the diamonds to lose their Russian trace.

The Teacher and the Diamonds: How Alrosa Circumvented Sanctions and Maintained Key Connections

In May 2022, a month after the US sanctions were imposed, the First Diamond Company (FDC) was registered in Russia. Though it has no official ties with Alrosa, its owner is Regina Sobol, a school teacher and former employee of Alrosa’s sales division. Moreover, the first CEO of FDC was Evgeny Tsybukov, the former deputy sales director at Alrosa’s Moscow diamond-cutting company Alrosa Diamonds.

The First Diamond Company (FDC), although officially independent from Alrosa, turned out to be closely linked to the state-owned diamond giant and effectively took on the main role in export.

Since late 2022, the FDC has begun exporting diamonds abroad, primarily to Armenia. This country, which has not joined the sanctions, quickly became a transit hub for rerouting Russian precious metals and stones. According to OCCRP, nearly half of all the diamonds imported into Armenia come from Russia.

Between January 2023 and March 2024, FDC exported diamonds worth over $290 million. By comparison, during the same period, Alrosa’s official export totalled only $6.4 million.

Thanks to FDC, Alrosa managed to maintain ties with one of its key international partners, KGK Group. Founded in 1905, the jewelry conglomerate managed by the Kotchari family operates in 35 countries, including the US, Belgium, and the UAE.

Until 2022, KGK had openly worked with Alrosa under long-term contracts and through Russian legal entities (such as DDK LLC and S.D. Diamond). After the start of the war, the company removed all mentions of Russia from its public profiles. However, the supply chain didn’t break—it went underground and continues to function through affiliated entities.

Previously, Alrosa’s website used to publish a list of long-term clients. The latest list, covering 2022–2024, includes the same companies that are now partners of FDC: KGK and Mohit Diamonds structures. In addition, Alrosa’s list of long-term clients for this period includes companies that appeared in the investigation concerning Minister for the Development of the Russian Far East and Arctic Alexei Chekunkov — namely, the Belgian companies Diajewel NV and Dali Diamond.

From Yerevan to Antwerp: How the Evasion Works

Armenia has become the center of Alrosa’s and FDC’s evasion scheme. From here, diamonds are transshipped to the UAE, India, China, and then on to Europe and the US. At least three major intermediaries are involved, working in partnership with FDC.

Imperial Diamond is the largest counterparty of FDC. Between 2023 and 2024, the two companies conducted over a hundred deals.

The founders of Imperial Diamond include Glowmore DMCC from the UAE (99%) and Ramani Vithalbhai Vallabhbhai (1%), an Indian businessman with Russian citizenship. Vallabhbhai is also linked to the KGK Group, listed as a co-founder of Glory DV, a diamond-cutting company, and the founder of Armenian VDA Diamonds. Meanwhile, the CEO of Imperial Diamond, Pavel Vinihin, previously ran an airline and managed Alrosa’s asset management division.

According to the explanatory note of 2024, Imperial Diamond buys diamonds from FDC as well as from Armenian companies ADM Diamonds and Fancy Jewelry, which also work with FDC. Then the diamonds are either returned to the same companies, or sent to VDA Diamonds, completing the cycle within the same group of players. After these steps, the cut diamonds lose their Russian trace and are ready for export to the EU and G7 countries.

The fact that a significant portion of FDC’s diamonds ends up in these countries is evident from its transactions with two other major partners: Indian companies Gloria Gems Trading and Mohit Diamonds. According to customs data, Gloria Gems Trading works with firms from the KGK Group, as well as jewelry houses in Belgium and the UAE. Mohit Diamonds, which previously worked directly with Alrosa, now supplies 20% of its products to the US and another 8% to Belgium.

FDC’s trade volume with each of its three major counterparties—Imperial Diamond, Gloria Gems Trading, and Mohit Diamonds—exceeds roughly the same amount of 90 billion rubles.

Who Else Helps Alrosa Stay on the Global Market

Apart from FDC, Alrosa has set up other structures to circumvent sanctions, including Trading Horizons and Diamond Trading House (DTH). Trading Horizons, registered in February 2024, was initially led by Alexey Podoba, a former official with experience in the Audit Chamber, Moscow Transport, and the Federal Agency for Nationalities. Since March 2024, the company’s director has been Larisa Fierer who had just left Alrosa a month earlier. The company’s founder is Albert Selin, a former Alrosa employee, as well.

Almazny Trading House: Another Layer in the Evasion Scheme

The Diamond Trading House (DTH) was established in November 2022. Like other intermediary companies, its leadership is closely connected to Alrosa. The sole founder of Diamond Trading House is Elena Smirnova, an employee of Alrosa’s unified sales company (according to her LinkedIn profile, she still works there). The director of DTH, Andrey Yablokov, has also worked at Alrosa.

Although DTH, like Trading Horizons and FDC, is formally independent, it channels its revenue to Alrosa under a commission agreement.

A commission agreement is a form of cooperation where one company (the agent) sells goods on behalf of and at the expense of another (the principal), receiving a percentage as compensation.

Diamond Trading House and FDC are also connected through their counterparts. These include VDA Diamonds (Armenia), Gloria Gems (India), and Excel Overseas (India). For instance, DTH purchased diamonds worth over 600 million rubles from Excel Overseas in just one year.

Among the primary buyers of Diamond Trading House products is Enso Global Trading, a signee to more than 200 contracts with DTH, totaling over 30 billion rubles in less than 18 months.

The company is a part of the Indian Enso Group actively investing in Russian projects. For instance, in 2024, Russian Direct Investment Fund (RDIF) and Enso Group agreed to jointly invest in the shipbuilding sector. Prior to this, the Far East and Arctic Development Corporation had signed a cooperation deal with Enso Group to produce pharmaceuticals and build a satellite town on the Nadezhdinskaya TORG in Primorsky Krai.

In addition, DTH has at least six other Indian counterparts with whom it has concluded contracts totaling over 9 billion rubles in recent years.

Some of these companies have signed multi-million-dollar deals despite officially being registered in other sectors.

For example, Divine Impex, which is officially involved in transport (and formerly in paper production), purchased diamonds worth about 649 million rubles from DTH. Divine Impex supplies products to Israel and Germany and also collaborates with Wala Gems LTD, which operates in Belgium, Israel, and Hong Kong. Another major DTH client is Aryan Diamonds, a member of the Indian Diamond Exchange, which signed 16 contracts totaling over 1 billion rubles. This company supplies products to Belgium, the US, and Hong Kong.

Blockchain for Tracking: Why the Control System Doesn’t Work

In order to enforce the sanctions, the G7 and EU countries planned to launch a blockchain platform to accurately track the journey of each diamond. However, the launch has been delayed, and the European jewelry guilds have expressed doubts about its feasibility. Until then, certification in Europe remains manual: diamonds weighing more than 0.5 carats are physically checked in Antwerp.

“The sanctions prohibit the import of diamonds and gemstones into the EU and G7 countries without documentary proof that the stones are not Russian. It was assumed that by 1 September 2024, the G7 would create a blockchain mechanism to track the origin of rough diamonds, but the launch date has been postponed — the EU now plans to launch the mechanism on 1 January 2026,” explains Hans Merket, the IPIS expert. ‘The diamond traceability mechanism, which will become mandatory for G7 countries by 2026, is not just a matter of technical implementation. Control will largely fall on Antwerp (Belgium), which could critically complicate global supply chains.’

At the same time, Merket notes that even at the Antwerp Diamond Centre (AWDC), a key player in the raw material verification process, there is no unity of approach:

‘Antwerp is not monolithic. There are many buyers with different interests and transparency standards. This leaves room for manoeuvre.’

While the “sanctions blockchain” is yet to be implemented, some companies have introduced their own platforms, such as the blockchain-based system Everledger which tracks diamonds and luxury items. However, these systems are not mandatory and only cover a small portion of the market. Attempts to create a universal mechanism face disagreements within the industry and resistance from the countries that do not directly support the sanctions, such as Armenia, India, and the UAE.

Polished and cut diamonds remain the most vulnerable segment. It is at this stage that the stones most often lose their traceability. Their legalization through seemingly neutral jurisdictions allows them to be exported to the EU, US, and Japan, effectively bypassing the ban.

Thus, efforts to create a reliable certification system seem to be too late. Until it is fully operational, documentary control remains fragmented. As a result, Russian diamonds mined in Yakutia will continue to enter Western markets—simply under a different name.

Cover photo: Vedomosti