Alrosa Under Sanctions and the Chain of Armenian-Russian-Arab Diamond Manufacturers

Hetq.am

Since 2022, months after the start of the Russian-Ukrainian war, Armenia has become a transit country for the export of Russian diamonds. The volumes of processed and unprocessed diamonds imported from Russia to Armenia and other countries, mostly exported to the United Arab Emirates, have increased sharply.

With the help of the Vyorstka periodical, Hetq acquired the list of diamond supplies from Russia to Armenia in 2022-2023. It turns out that Armenia buys diamonds not only from Alrosa but also from private companies, which in turn cooperate with Alrosa. A whole chain is operating here, with the participation of Russian, Arab, and Armenian companies, in which Hay-Almast, ADM Diamonds (Abovian’s ADM Diamonds factory), VDA Diamonds, and other companies are involved from Armenia. The sanctions applied to Alrosa have caused problems for Armenian resellers.

Sanctions on Russian Diamonds

In January 2024, it was officially announced that the European Union imposed sanctions against the Russian diamond mining company Alrosa. With that, Europe refuses to import diamonds supplied by this company. According to the data published by the European Council, Alrosa is the largest diamond mining company in the world. Alrosa is a joint-stock company, 66% of whose shares belong to the state, and 34% are in free circulation. The shares are sold on the Moscow Stock Exchange.

Alrosa provides more than 90% of all Russian diamond production and has a significant role in the Russian economy with the income it generates. According to Reuters, the share of Alrosa in the global market is 30%. The ban was included in the 12th package of sanctions imposed by the EU.

Not only Alrosa, but also its CEO Pavel Marinichev, who has been in that position since May 2023, has come under sanctions. The EU Council considers them responsible for “actions that undermine or threaten the territorial integrity, sovereignty, and independence of Ukraine.”

The G7 countries – Great Britain, Germany, Italy, Canada, France, Japan, and the USA – announced phased sanctions against Russian diamonds as early as December 2023. A little later, the European Union and Switzerland joined them. The fact that the Russian diamond was likely to be under sanctions after the Russian-Ukrainian war was known as early as 2022, not long after the start of the war. The USA also imposed sanctions on Alrosa much earlier than the EU sanctions, in 2022.

In other words, restrictions and reservations regarding Russian diamonds have a history of at least two years. According to Reuters, India became the largest buyer of Russian diamonds in 2023. Significant supplies were also made to Belgium, Hong Kong, and Armenia.

Impact on Armenian Re-exporters

Although the companies re-exporting diamonds and other goods from Armenia do not come under sanctions and are convinced that they have no direct connection with these sanctions, there are still risks. According to the former deputy prime minister, economist Vache Gabrielyan, there is always a danger, which should be the center of attention of the Government, the financial system, and the customs service. “So far, I don’t see any reason that Armenia will also come under the sanctions of Western countries, not because they are impossible, but it won’t happen immediately, even if there are such developments,” says the economist.

According to him, in the end, as in other countries, a larger part of the streams served by us will be the center of attention. The West will consistently tighten all restrictions. Simply, Armenians do not have a primary role in that whole process. And the problem here is not only that Armenians are smarter or more cautious, but the issue of the scale of the economy.

Hay-Almast and Its Role

Hay-Almast assures that they will not buy diamonds from Alrosa after EU sanctions. The list in our hands shows that in two years, diamond supplies from Russia to Armenia in 2022-2023 were about 3.6 million carats, with a total value of about 470 million US dollars. The Customs Service of Armenia has not yet published the annual import data for 2023, but the data published by the international UN Comtrade Database on Armenia, which is annual, is somewhat different from the data in the above list. They could not coincide exactly because the terms of Russian supplies and the terms of imports and customs clearance in Armenia are different. In all cases, the data for general conclusions can be compared.

Returning to our list, at least half of the diamonds supplied in 2023 are directly sourced from Alrosa. Why directly? Because, as we will tell in other parts of the material, some of the other private Russian organizations cooperating with Armenian businessmen are partners of Alrosa. Alrosa was the main supplier of the Hay-Almast state company. Hay-Almast CJSC was established in December 2021, by the decision of the Government of Armenia. The goal is the development and activation of the diamond industry. Hay-Almast does not process diamonds itself but helps other companies acquire raw materials from abroad, imports, and sells the raw materials to private companies.

Some of those diamonds are processed and exported back to Russia at a high price. However, as the statistics show, the number of high-priced diamonds in the general index is small. The recipients of part of the diamonds supplied by Alrosa are private organizations: ADM Diamonds, Murad Mirzoyan Diamond, Arsini, VDA Diamonds, Crystalist & Co, New Techno LLC, and other companies. These companies imported diamonds not only from Alrosa but also from other Russian suppliers.

Armenian-Russian-Arab Trade Chain

However, taking into account the fact that Hay-Almast sells its imported diamonds to local producers, it turns out that the mentioned companies and not only them could also receive Alrosa’s diamonds through Hay-Almast. Although the issue of sanctions against the Russian diamond and Alrosa has been discussed since April 2022, as mentioned above, it was officially announced by the EU at the beginning of this year.

In a conversation with Hetq, the director of Hay-Almast, Tigran Khachatryan, assured that after the sanctions, that is, from the beginning of 2024, they will no longer buy diamond raw materials from Alrosa. Hay-Almast cannot answer for all of Armenia, but Hay-Almast certainly does not import. We have not cooperated with Alrosa since the beginning of this year. We are now working with African countries,” Tigran Khachatryan mentioned. He emphasizes that Hay-Almast is only authorized to import raw materials for Armenian diamond manufacturers. Hay-Almast will not be authorized to control what happens to those diamonds after that, whether they become processed diamonds or are re-exported in the form of unprocessed diamonds.

Active Traders and Exporters

From the list received from Vyorstka, we singled out those buyers of the Armenian side of the diamond, who did the most active trade, and also exported processed and unprocessed diamonds from Armenia. It is possible that in addition to direct imports, these companies also bought diamonds from Hay-Almast. Therefore, we cannot specify specific indicators.

Earlier, we found out that the re-exporter of the largest volume is ADM Diamonds LLC. It also turns out that the company has partnership ties with a businessman established in Russia and an Arab company. According to the state register, the owner of 100% of ADM Diamonds is Artur Ohanjanyan, a resident of Yerevan. Until February of this year, the owners were the parents of Artak Baghikyan, a businessman in the field of diamonds, Marine and Asparik Baghikyan. Artak Baghikyan told Hetq that Artur Ohanjanyan is his godfather. Apparently, Ohanjanyan was not known at the factory. During our visit a few days ago, the factory security staff did not understand who we were looking for after hearing his name.

 

Connections and Controversies

The press, business circles, and our sources associate the name of the ADM Diamonds factory with MP Khachatur Sukiasyan. The Baghikyan family is close to the MP. Artak Baghikyan himself, who actually manages the factory today, sharply denies the factory and his business connections with Khachatur Sukiasyan. “There has never been a case before or now that ADM Diamonds had any relationship with Khachatur Sukiasyan. It is at least surprising and puzzling, where such information came from. I am even surprised that a group of people see such a connection in some way. I assure you, it has nothing to do with it. There are very good relations, like with everyone. That’s the end of it. There are personal relationships, zero business relationships. They didn’t even happen,” Artak Baghikyan said in an interview with us. When asked what position he currently holds in ADM Diamonds LLC, he answered that he is actually engaged in management, but does not hold a position at the moment.

 

Diamond Purchases and Partnerships

In 2022-2023, ADM Diamonds LLC bought diamonds both from Alrosa and from other Russian suppliers, mostly from Imperial Diamond LLC, as well as DDK LLC, Glory DV LLC, Gran-95 LLC, Mir Russki Brilliant LLC, and others. They exported unprocessed and processed diamonds mostly to the United Arab Emirates. According to the statistics of the RA Customs Service for January-November 2023, ADM Diamonds exported 1.2 million carats of diamonds, 98% of which were unprocessed diamonds (with a total customs value of 126 million dollars). In total, Armenia exported about 2.1 million carats of unprocessed and processed diamonds in January-November 2023.

Key Players and Trade Dynamics

It is noteworthy that Imperial Diamond is 99% owned by the company Glowmore DMSS registered in the United Arab Emirates, with the remaining 1% owned by Vitkhalbhai Ramani, a Russian businessman in diamond production and construction. Imperial Diamond holds a 25% stake in STK LLC and a 100% stake in LG DIAMONDS LLC.

The re-export chain of Russian diamonds from Armenia involves Russians, Armenians, and a company with Arab roots. Imperial Diamond exemplifies this network, with Vitkhalbhai Ramani playing a crucial role. The well-known company DDK in the Russian diamond market belongs to him, with a minor share (0.01%) and the major share (99.99%) held by Arab Glowmore DMSS. DDK and its subsidiary Glory DV (formerly KGK DV) are among the main suppliers of diamonds to Armenia.

Russian sources report that DDK is a consumer of Alrosa diamonds. The OpenSanctions international database lists DPC as an “interested” organization, highlighting its purchases of raw materials from Alrosa under long-term contracts. The main counterparties of DDK are companies registered in the UAE. Both DDK LLC and Alrosa are mentioned as diamond producers in supply records. This company’s commercial activities are strategically important for the Russian government and significantly contribute to the Russian budget, which is “responsible for the war in Ukraine.”

Vitkhalbhai Ramani’s Connections

Vitkhalbhai Ramani has partnership ties with Artak Baghikyan and ADM Diamonds. DDK, with Ramani’s involvement, supplies ADM Diamonds, and the two also co-own AV Development LLC in Armenia, established in June 2022, shortly after the Russian-Ukrainian war began. This company focuses on constructing residential, public, and industrial buildings, indicating that Ramani’s cooperation with the Armenian side extends beyond diamond production.

 

However, Ramani’s primary interest in Armenia remains the diamond trade. In April 2022, he opened VDA Diamonds LLC in Armenia, facilitating the import of diamonds from his Russian-associated companies and their export from Armenia. The fate of these diamonds remains unclear, but it is evident that Ramani established his presence in the Armenian market following the onset of the Russian-Ukrainian war, likely re-exporting Russian diamonds through his Armenian company. His partners in this endeavor include Artak Baghikyan and associates of ADM Diamonds.

Partnerships and Investments

The official VDA Diamonds page states that Ramani has been collaborating with the renowned Indian jewelry company KGK Group since the early 2000s. Ramani is depicted as a partner and CEO of KGK Group on their official website. In early 2023, Armenian media reported that VDA Diamonds was preparing to open a diamond processing factory in Abovyan, with KGK Group as the project investor, known for its cooperation with Alrosa.

Artak Baghikyan asserts that since Alrosa came under Western sanctions, ADM Diamonds has not engaged in any direct transactions with them. When questioned about the risks of Armenian companies buying from Russian organizations that consume Alrosa diamonds, Baghikyan claimed there are no risks, stating that they conduct business only with non-sanctioned, reputable partners. He emphasized that they cannot investigate the chain of companies beyond their direct partners due to economic secrecy.

Trade Challenges and Adaptations

According to Baghikyan, Russian raw diamond supplies to Armenia effectively ceased in July of this year, and Armenia lacks a diamond import quota for the second half of the year. As a result, they now purchase the same Russian raw materials through a third country at a higher price. He noted that the EU, while imposing sanctions on Russian diamonds, did not provide alternative sources for countries dependent on Russian diamonds.

Nearly half of the diamonds imported to Armenia come from Russia, with Armenia itself lacking diamond mining resources. Armenian diamond workers have long imported diamonds from Russia, the UAE, Belgium, and other countries, re-exporting them under an outsourcing model. The early 2000s, before the 2007-2008 global economic crisis, marked the peak of the Armenian diamond industry, which later declined. Recent years have seen positive trends in diamond processing indicators, though they are not as prominent as the re-exports post-Russian-Ukrainian war.

After that, the industry experienced a decline. However, over the last five years, certain positive trends have emerged in diamond processing indicators. Despite this, these trends are not as significant as the re-exports through Armenia following the Russian-Ukrainian war.

Foreign trade data reveal that most of the diamonds exported from Armenia are not processed by Armenian diamond makers but are unprocessed. In other words, Armenia functions primarily as a re-exporter or transit country. This is evidenced by the high volume of imports and exports compared to the relatively small number of locally processed diamonds.

The Customs Service of Armenia, which typically provides detailed reports on the quantities of goods exported from or imported into each country, has not yet released the annual data for 2023, even though we are already in the second half of 2024. However, this data is available in the international UN Comtrade Database.

According to the UN Comtrade Database, Armenia imported approximately 3.5 million carats of both processed and unprocessed diamonds in 2023, with a total value of around 561 million dollars. In statistical terms, we use the term “diamonds” to encompass both processed and unprocessed diamonds, as reflected in international statistics. It is important to note that the data indicates that a significant majority, at least 80%, of the imported diamonds are rough.

Of the imported diamonds, 48% (by both quantity and value) came from Russia, totaling 269 million dollars or 1.7 million carats. Of these, only 156,000 carats were precious diamonds, with an average price of 940 US dollars per carat, while the remainder were rough diamonds, averaging 80 dollars per carat.

India and Curaçao (a Dutch island in the Caribbean) are the other major suppliers of diamonds. During the same period, Armenia exported a record 4.5 million carats of diamonds, with a total value of about 589 million dollars. For comparison, official data shows that in 2023, only 170,000 carats were processed in Armenia.

Eighty-five percent of the exported diamonds went to the United Arab Emirates, with a total value of about 319 million US dollars. This equates to approximately 3.8 million carats, mostly rough and low-value diamonds. Notably, a smaller amount of processed diamonds, with significantly higher value, were also exported to the UAE.

The second-largest export destination was Russia, where Armenia exported about 0.5 million carats of diamonds worth 234 million dollars. Most of these were processed diamonds.

The infographic below shows combined indicators of diamond imports and exports by country in 2023, along with trade and processing data for the past ten years.

 

Why Russian miners export diamonds to the UAE through Armenia

For the past two years, goods manufactured in Russia under sanctions have been exported to European, UAE, and other markets through third countries. Armenian experts offer several reasons for why Russia does not export diamonds directly to the UAE.

As a member of the Eurasian Economic Union, Armenia imports diamonds from Russia duty-free. These diamonds are registered as Armenian products and are effectively re-exported to the UAE without being processed. Since the USA and the EU have imposed sanctions on Russian diamonds, particularly those mined by Alrosa, the UAE avoids direct imports from Russia to prevent exposure to Western sanctions. In other words, some countries prefer to avoid direct trade with Russia to maintain favorable relations with Western countries.

Another possibility is that Armenian entrepreneurs find export markets and, through partner networks, manage to export Russian diamonds through Armenia to third countries where direct trade with Russia is undesirable.

Re-exports of Russian diamonds continued in the first half of 2024. According to the Statistical Committee of the Republic of Armenia, in the first five months of 2024 (January-May), diamonds worth about 327 million dollars were imported into Armenia, and diamonds worth 310 million dollars were exported. The UN Comtrade Database indicates that the main export market remains the United Arab Emirates, while Russia continues to be the primary source of imports.

The future of diamond re-exports remains uncertain. It is expected that decisions from the Russian side regarding raw material supplies and new Western sanctions will significantly impact this process.

In the main photo: inside the ADM Diamonds factory.

Photos by Anya Sarkisova