Nearly a third of the world's diamonds come from Russia

If you're in the market for an engagement ring, odds are you've seen your fair share of Russian diamonds.

Approximately 30% of the total volume of diamonds produced worldwide come from Russian mines, 90% of which are owned by the state-backed diamond mining giant Alrosa, according to the US Treasury.

Last week, Alrosa and its oligarch CEO Sergei Ivanov were sanctioned by the Biden administration to economically punish Russia for the invasion of Ukraine. But the sanctions — described as "unprecedented" and "severe" by the Treasury — have caused no immediate issues to the global diamond trade, The World Diamond Council told Insider.

That's because the Alrosa sanctions only go as far to prohibit debt and equity transactions, meaning it's still entirely legal for US companies to purchase and sell Russia-mined diamonds.

"Under current law, we can continue to do business with Alrosa here in the United States," said Diana Furchtgott-Roth, an adjunct professor of economics at George Washington University and former acting assistant secretary for economic policy at the US Treasury.

She continued: "So the question is not what the Treasury is doing, but what consumers are going to do."

Two days after the Alrosa sanctions were announced, online jewelry company Brilliant Earth, which says it only sells "ethically sourced" diamonds, removed all Russian-mined diamonds from its website. It appears to be the first and only major US diamond retailer to do so.

"Taking this proactive step was the right thing to do, as a company and for our industry," Beth Gerstein, co-founder and CEO of Brilliant Earth, told Insider. "We stand with the people of Ukraine and hope for a peaceful and swift resolution. We hope others in our industry will join us."

The non-profit trade association Jewelers of America said on Tuesday that it "strongly advises its members to take measures to stop buying or selling diamonds, precious metals and/or precious gemstones of Russian or Belorussian origin," citing "serious ethical, reputational and legal risks."

Meanwhile, social media users have called for mass boycotts of Russian goods, from vodka to gas stations.

Furchtgott-Roth said jewelry companies could likely face similar pressure from shoppers to stop selling Russian diamonds. However, she added that boycotts on the individual level would require shoppers knowing where a finished diamond was originally mined.

Diamond industry analyst Paul Ziminsky told Insider that he's seen anecdotal evidence of non-Russian diamonds selling at above-market value due to the conflict.

"If consumers protest buying Russian diamonds I think it would definitely reverberate through the supply chain," he said, adding that almost three-quarters of consumer diamond demand comes from western countries and Japan. "At the end of the day, I think the consumer is ultimately going to determine where this goes."

While the Alrosa sanctions aren't directly disturbing the global diamond trade, Russia's invasion of Ukraine could still lead to shortages and price hikes down the line.

US and EU sanctions targeting Russia's financial infrastructure are making any kind of transaction with Russian companies difficult, which have recently been made even harder by the suspension of FedEx, UPS, and DHL services to and from the country.

"If buyers still want to buy diamonds from Alrosa, there will likely be complications around buyers paying Alrosa which will complicate or at least dry out the delivery of rough diamonds," Ziminsky explained.

For so-called diamond "manufacturers" that purchase and then polish rough diamonds (the majority of which are located in India), that could mean weeks of shipment delays and the risk of frozen funds.

Depending on how long the restrictions stay in place, this could snowball into a shortage of rough diamonds and cause product price hikes around the world, Ziminsky said.

"It will be at least three to four months before the rough diamonds being bought today end up with polished diamond wholesalers and retailers," Ziminsky told Insider. "The longer this plays out, the more complicated and problematic it becomes for the industry."