Enduring Pain to Gain Profit for Industrial Upgrading: Russia's Diamond Industry Embarks on Transformation
The Russian government's imposition of an 8% export tariff on diamonds will temporarily impact the financial performance of Alrosa. Pavel Marinenchev, CEO of Alrosa, believes this is merely a temporary pressure rather than a systemic risk.
This company mines over 90% of Russia's diamonds and accounts for nearly one-third of global production, with almost all its revenue derived from exports. The new tariff covers all categories—from small-sized diamonds to ultra-large rough stones. Due to the highly concentrated global diamond rough processing industry in India, buyers can easily source alternatives elsewhere, making it difficult for the company to pass on costs without losing market share. Analysts forecast that the company’s EBITDA (earnings before interest, taxes, depreciation, and amortization) will decline by 15% to 16% in 2026, and the drop will widen to 29% in 2027.
The policy originates from Russian Finance Minister Anton Siluanov, and Alrosa operates within the same policy framework as the elite bureaucratic class. The core objective is to restructure the diamond supply chain: currently, all Russian rough diamonds are shipped overseas for processing, while the domestic market for finished diamonds is dominated by imported goods. The export tariff aims to enhance the economic viability of Russia’s domestic diamond processing industry.
Although Russia retains some polishing capabilities domestically, the industry has been in continuous decline since the 2016 policy eliminated tariffs. Reviving the sector will require 5 to 7 years. During this transitional period, the tariff effectively functions as an additional tax. In the future, Alrosa will continue exporting rough stones, but the policy will compel the company to aggressively expand the domestic consumer market.
Original article: toutiao.com/article/1868843978851340/
Disclaimer: This article represents the personal views of the author