Wealthy Russian investors are increasingly purchasing investment-grade diamonds, with demand for polished stones rising by 60% in 2023, according to VTB, Russia’s second-largest bank.
This follows the Russian government’s decision to abolish VAT on diamond purchases, making gemstones a more accessible investment option for high-net-worth individuals.
Rising Demand for Diamonds as Alternative Investments
Oksana Semenenko, vice president at VTB and head of its private banking division, stated that diamonds are attracting investors due to their rarity and ability to hold value. “The uniqueness and rarity of diamonds make them particularly appealing amid rising financial market volatility and restrictions on traditional investments,” she said. She noted that some clients are allocating 5–10% of their portfolios to alternative assets, including diamonds, as part of their diversification strategies.
Impact of Sanctions on Russian Diamond Trade
The increased demand comes as G7 sanctions and currency restrictions continue to affect Russia’s diamond exports. These measures have led Alrosa, the state-controlled diamond miner, to seek alternative markets.
As part of its strategy, Alrosa has introduced the Diamond Exclusive programme, focusing on polishing higher-quality stones, primarily those over 3 carats with D–F colour and IF–VVS2 clarity. Traditionally sold through tenders, these diamonds are now being offered directly to investors via partnerships with VTB and other financial institutions. The programme also includes fancy colour diamonds.
Implications for the Jewellery Industry
This shift towards private investment in diamonds reflects broader changes in the market. As Alrosa increases direct sales to private investors, jewellers and wholesalers may see changes in the availability of high-quality stones through traditional channels. Industry participants will need to assess how this affects supply and pricing.
