The entities that have been directly impacted are UAE subsidiaries of Indian diamond houses. The dollar payments by these UAE firms were stalled amid suspicions that their suppliers have Russian origin, or have investments and other connections with Russian miners and sanctioned entities.
The dollar payments never reached rough diamond sellers, following instructions from US authorities to banks that hold the nostro accounts of the suppliers’ banks, a person in the diamond industry told ET.
Trying to Resolve Issue
A nostro account is a foreign currency account that one bank has with another. It is used to facilitate settlement of cross-border trade and forex transactions.
The close-knit diamond trade across the world is using its influence to put across their point, contain the damage and salvage the situation.When contacted, Vipulbhai Shah, chairman of the Gem & Jewellery Export Promotion Council (GJEPC), said, “We, as the industry body, have taken up the matter with the ministry of commerce and the Indian embassy in the UAE because the payments for imports were made by UAE subsidiaries of Indian diamond companies. Around $26 million, involving about a dozen payments, are stuck.”He added, “We are also trying to explain to OFAC that the payments were made to non-sanctioned entities and even to some Russian entities well before the sanctions came into place. There is very little direct import of diamonds from Russia.”
G7 Stance
The US Treasury Department’s OFAC administers and enforces economic and trade sanctions against targeted countries, regimes and terrorists based on American foreign policy.
Many in the trade link the OFAC action to the stance articulated in the G7 leaders; statement of February 24: “Given the significant revenues that Russia extracts from the export of diamonds, we will work collectively on further measures on Russian diamonds, including rough and polished ones, working closely to engage key partners.”
Kirit Bhansali, founder of Smital Gems and vice-chairman of GJEPC, said, “There will be another round of talks with G7 nations soon, where the Indian government will try to find a middle ground so rough diamond supply can be ensured, while the interests of the US government are protected.”
“Some of our Dubai-based importers who made remittance through banks there have not received payments for almost six months,” Bhansali said. “The UAE government and the Dubai Multi Commodities Centre have taken up the matter with OFAC.”
