Russia is moving further towards an integrated diamond industry, with a renewed focus on cutting and polishing more of its diamonds within the country rather than exporting rough stones alone. The strategy centres on building a domestic manufacturing ecosystem that could reshape how Russian diamonds move through the global value chain.
Recent discussions involving ALROSA, government officials and regional leaders have focused on developing a diamond cutting cluster across Smolensk and the Republic of Sakha (Yakutia). The initiative is scheduled to begin on March 1, 2027, creating a framework intended to support local manufacturers with improved access to rough diamond supply and encourage investment in domestic processing.
A key part of the policy is an 8% export duty on certain rough and partially processed diamonds above 0.45 carats. Originally planned for September 2026, the measure has been postponed until March 2027 so it launches alongside the new manufacturing cluster. The objective is to make local cutting more commercially attractive while reducing the incentive to export rough material directly.
For diamond-producing nations, the greatest economic value is often created after mining. Cutting, polishing and jewellery manufacturing generate employment, technical expertise and higher-value exports compared to selling rough stones alone.
Russia's latest push reflects that broader industry reality. By strengthening domestic manufacturing capacity, the country is seeking to capture a larger share of the value generated from its own diamond resources while building a more self-reliant supply chain.
The strategy also arrives during a challenging period for the Russian diamond sector. International sanctions have significantly restricted access to several major consumer markets, forcing Russian producers to adapt their trade routes while navigating weaker global demand for natural diamonds.
The pressure is visible in ALROSA's latest financial performance. During the first half of 2026, the company reported a net loss of RUB 10.67 billion, compared with a profit of RUB 39.03 billion during the same period last year. Revenue declined 36% year-on-year to RUB 74.16 billion under Russian Accounting Standards, highlighting the difficult operating environment facing the world's largest diamond miner.
These figures underline why creating additional domestic demand for rough diamonds has become strategically important. A stronger local cutting industry could provide miners with another channel for supplying rough stones while helping retain more economic activity within Russia. That does not eliminate broader market challenges, but it potentially reduces dependence on traditional export destinations.
Russia is not simply investing in manufacturing capacity; it is redefining where value is created within its diamond economy. The combination of preferential rough access for domestic cutters, coordinated industrial infrastructure and export policy points towards a more vertically integrated model spanning mining through polished production.
For the wider diamond industry, the development is another example of producing countries looking beyond extraction and towards downstream manufacturing as a long-term economic strategy. As global diamond centres continue competing for cutting, polishing and value addition, control over manufacturing may become just as significant as control over rough supply itself.
