India may consider an alternative wage system for exporters if the war between Russia and Ukraine goes on for a long time

Gemstone and jewelry exporters have received pledges of support from Russia’s Alrosa, which accounts for about 30% of world diamond production

Gemstone and jewelry exporters have received pledges of support from Russia’s Alrosa, which accounts for about 30% of world diamond production

India may consider alternative payment mechanisms for exporters if the Russia-Ukraine conflict is long-running and key trading sectors like gems and jewelry face a problem transferring funds internationally, government sources said on Tuesday.

This consideration came against the backdrop of the Russia-Ukraine war and sanctions imposed by Western countries, including the Group of Seven (G-7) economies, which have imposed punitive sanctions on the Central Bank of Russia.

The G-7 also decided to remove Russian banks from the international SWIFT banking system – which aims to isolate Russia from global trade.

“India is closely monitoring its foreign trade situation amid Ukraine situation and may consider alternative payment mechanisms if the unfavorable situation lasts long and key trade sectors like gems and jewelry face a problem in international cash transfer,” one of the sources said.

Gemstone and jewelry exporters have received assurances from Russia’s Alrosa, which accounts for about 30% of world diamond production and sells about 10% of its rough diamond production to India.

Diamonds account for about 50% of India’s gem and jewelry exports.

So far, the supply of rough diamonds from Russia has not been interrupted, but the industry is concerned about U.S. sanctions against Russia and the country being banned from the SWIFT financial network, sources said, adding that the bulk of the payments have been made and that the gem and jewelry trade in hubs like Surat is “doing well”.

They added that many deals were completed by Indian industry before February 24 and as a result no payment-related problems have arisen, although banks are cautious.

Many manufacturers have made payments in euros.

While trade has continued without major impact, the government is in constant contact with importers and exporters and stands ready to address their concerns about adverse consequences should the situation turn into a long-term crisis for international trade, they said.

Russian company Alrosa sent a letter to GJEPC (Gem and Jewel Export Promotion Council) on February 28, stating that Alrosa is ready to address concerns related to day-to-day operations amid US restrictions Alrosa is imposing became.

The Russian company has informed the Indian industry that it has been able to operate normally without delays due to its various banking partners and that its settlement with foreign partners has continued normally.

It is estimated that there would be no short-term impact on the Indian diamond industry. However, a long-term crisis may have an impact as the industry is dependent on imports.

Alrosa sells 68% of its rough diamonds by value through commercial hubs (Belgium 40%, UAE 22% and Israel 6%), 77% of sales are through long-term contracts, 12% through tenders and 11% on the spot market.

According to the Federation of Indian Export Organizations (FIEO), rupee-ruble trade is one of the alternative mechanisms for payments between India and Russia.

“We proposed this to the government,” said FIEO Director-General Ajay Sahai. “Decisions have to be made by our central bank. The challenge here would be to set the exchange rates for the currencies. But our banks have experience with payments in local currencies because we did that with Iran,” he added.

Mumbai’s top exporter and founding chairman of Technocraft Industries India, Sharad Kumar Saraf, said India may also explore the possibility of using the BRICS bank to settle bilateral trade.

“We can use a public sector bank as a hub bank that monitors the debits and credits,” Mr Saraf said.

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