Global Tensions and Economic Recession Pose a Double Whammy for Surat’s Diamond Industry
Surat, India – The city of Surat, known as the diamond hub of the world, is facing a severe crisis as sanctions on Russian gemstones could potentially result in the loss of nearly 10 lakh (one million) jobs. More than 90 percent of the world’s diamonds are polished in Surat, making it the epicenter of the global diamond trade. However, with the imposition of sanctions on Russian diamonds due to the conflict in Ukraine, the entire supply chain of the diamond industry in Surat hangs in the balance.
The recent incursion of Russian tanks into Ukraine drew widespread condemnation from NATO and many countries globally. European nations decided to endure an energy crisis rather than acquiesce to Putin’s advance. In response, Russia faced significant economic sanctions from various nations. However, while most countries halted trade with Russia, India continued to purchase oil from the country, with Indian refiners benefitting from discounted Russian crude and selling diesel extracted from it to European nations.
While this policy may have provided advantages to Indian refiners, the repercussions are now being felt in Surat’s diamond industry. As a significant portion of the rough diamonds used for polishing in Surat are sourced from Russia’s Alrosa, which supplies 30 percent of the world’s rough diamonds, the sanctions pose a dire threat to the supply chain. The potential disruption in the availability of rough diamonds could have severe consequences for the diamond units in Surat, which heavily rely on these imports.
The situation in Surat’s diamond industry is further compounded by the ongoing global economic recession, resulting in a slowdown in global diamond demand. This double whammy of sanctions and reduced demand has already started to take its toll. Earlier this year, a 21 percent drop in production forced 10,000 workers in Surat’s diamond units out of their jobs.
This current crisis brings back memories of a dark past for Surat. In 2009, following the economic crash of 2008 and a subsequent decline in demand, lakhs of diamond unit workers were left unemployed, leading to a devastating wave of suicides. Now, with the recession looming and geopolitical tensions escalating, the sparkling city of diamonds faces an uncertain future once again.
Local industry leaders and worker unions are expressing deep concern over the potential loss of jobs and its devastating impact on the livelihoods of a million workers and their families. They are urging the government and international stakeholders to find a swift resolution to the conflict in Ukraine and explore alternative sources of rough diamonds to mitigate the impact on Surat’s diamond industry.
The Indian government, in collaboration with industry associations and trade partners, should proactively work towards diversifying the diamond supply chain and fostering new partnerships to ensure the stability of Surat’s diamond industry. Additionally, providing necessary support and resources to the affected workers and their families will be crucial during this challenging period.
As Surat braces for the potential fallout from the sanctions on Russian gemstones and the prevailing global economic uncertainties, the city’s diamond industry stands at a critical crossroad. The resilience and adaptability of Surat’s diamond workers have been tested in the past, and now, their collective efforts will be crucial in navigating these tumultuous times and charting a path towards a more secure and prosperous future.
