Mumbai Home For `A Girls Best Friend'

Diamonds - they say - is a Girl's best friend

Egged on by a Russia smarting under European sanctions, India wants to leverage long term buys of rough diamonds worth billions of dollars from the world’s biggest diamond miners -  Alrosa of Russia – to help turn Mumbai into a rival diamond trading hub to Belgium’s Antwerp.
Prime Minister Narendra Modi has announced that his government has decided to create a special notified zone, to which mining companies can import rough diamonds on a consignment basis and re-export unsold ones. The move, Indian diamtaires said could help turn India's financial capital into Asia's diamond trading bourse.
The Modi announcement came at a joint innauguration of a world diamond conference here with Russian president Vladimir Putin, whose Government owns 44 per cent stake in Alrosa, the mining giant which accounts for 30 per cent of the world’s annual yield of rough diamonds. About half  of its output is now sold to India through diamond bourses in Antwerp and Dubai, a fact which both Russia and India want to change by doing business directly.
“We get better margins and have stabler production regimes  if we can get into long term purchase agreements with Indian diamantaires… we used to have three such deals 4 years back, now this year we are increasing it to 12,” said Andrey Polyakov, vice president of the $ 5 billion mining giant which has since long overshadowed the more famous DeBeers in the diamond market.


Rough Diamonds - India Processes 70 % of Global Production

"We (Indian firms) will be buying diamonds worth $2.1 billion from Alrosa in the next three years," Gems and Jewellery Export Promotion Council Chairman Vipul Shah confirmed.
India sees this as a big opportunity to be grabbed to turn Mumbai into a rival to Antwerp and Dubai. “We are talking to the Government to give us a tax regime for diamond traders similar to Antwerp which has a small presumptive tax on trading profits and allows miners to bring sparklers here, sell whatever they can and take back unsold stones without taxes and hassles,” said Pankaj Parekh, vice chairman of the Gems & Jewelery Export promotion Council.
Russia is not averse to this as US and European sanctions means that it may not be able to sell directly in Antwerp, the largest market for diamonds in the world, and may have to resort to the Cold War period subterfuge of selling its diamonds through DeBeers or some other diamond miner.


The Modi-Putin Diplomatic Tango

At the `World Diamond Conference' here, the `Big Boys’ of the global diamond market – Alrosa, DeBeers, Rio Tinto came to mingle with India’s diamantaires. India already processes some 70 per cent of the world’s diamond roughs into polished diamonds or sets them into jewellery to be sold all over the world.
Forecasts by diamond miners’ associations say that the market for retail or finished diamonds in India and China is rising and taken together could equal that of the US, currently the world’s largest market within the next 6-7 years.
Alrosa’s interest in striking direct deals with Indian firms is but natural says Parekh. Polyakov avers : “We follow the trade.”
Parekh and other GJEPC office bearers have been doing the rounds of North Block and global mining capitals to try get their dreams of Mumbai rivalling Antwerp as a trading centre off the grounds. “Does Mumbai have the potential to be a diamond hub?,” asks Polyakov rhetorically. “I think the answer is – yes – you just need to follow rules  that other hubs do.”
There is of course more than `following the trade’ or `potential’ involved here. Russia is perhaps trying to make a statement to both India and the West. Russian analysts in recent weeks have been at pains to stress that sales of helicopters to Pakistan does not mean that the `special relations’ with India are to be endangered and the high profile visit along with help in transforming Mumbai into a diamond trading hub along with key defence, gas and nuclear deals are expected to be part of that statement.


Mumbai- the New Diamond Capital?

Thumbing Russia's nose at western sanctions is of course something which Putin has been working at for quite some time with gas deals with China and East European nations.  A diamond deal with India could well help him teach the European Union with which Russia is locked in a conflict over Ukraine, that in the resources market, it still counts.