“Blood diamonds’’ and the need to avoid them on moral and ethical grounds has taken on new meaning with Russia’s invasion of Ukraine.

Russia accounts for about 30% of the world’s rough diamond supply – just behind De Beers – from mines in east Siberia.

And about 90% of Russia’s production is controlled by Alrosa which itself is controlled by the Russian state.

Little wonder then that Alrosa is being hit left, right and centre by sanctions, led by the US, the world’s biggest market for diamonds.

Apart from the wall of government sanctions, leading jewellery chains and consumers around the world are also self-sanctioning Russian diamonds.

They are the new blood or conflict diamonds – that is, diamonds that could fund forces opposed to the legitimate and internationally recognised government of a country.

Blood diamonds were once a major problem with diamond supplies from parts of Africa. But Russia’s invasion of Ukraine has brought the provenance of rough diamonds back into sharp focus.

What the near and longer-term impacts of the sanctions against Russian diamonds are on the $US15 billion global trade in rough diamonds remains to be seen.

Much will depend on when peace arrives in Ukraine. But even then, jewellery chains and consumers are likely to be turned off Russian sparklers for a lot longer, possibly for our lifetimes.

What can be said with more certainty is that the absence of part or all of Russia’s diamond supplies is set to tighten an already tight supply situation. That leads into expectations of diamond prices taking off.

As it is, the diamond market was already on the up and up long before Russia rolled its tanks in to Ukraine.

A Bain & Co industry report released last month estimated that revenue for the diamond miners increased by 62% in 2021, 55% for the cutting and polishing industry, and 29% for the diamond jewellery retailers.

Post-pandemic ‘’emotional’’ gifting with the dollars saved during lockdowns was a big factor in the diamond surge which has continued on in to 2022 on supply issues alone, rather than any coming Russia-Ukraine tailwinds.

Lucapa (ASX:LOM), the only pure diamond producer on the ASX (Rio Tinto produces diamonds in Canada), stands as a major beneficiary of the strong diamond outlook, with doubts over Russian supplies a wildcard.

It last traded at 7.7c for a market cap of $110 million. It has pretty much traded sideways since November, suggesting the market is waiting for confirmation that the diamond market’s turnaround is firing up its financial results – something the situation with Russian supplies could well turbo-charge.

Garimpeiro had a chat during the week with Lucapa managing director Stephen Wetherall. He has been knocking around the diamond industry for two decades, including executive stints at De Beers.

“The diamond market is in a space I have not seen in the past two decades. Usually there has always been a ready supply of rough diamonds to meet the demand, and there has always been an excess supply,’’ Wetherall said.

“But where we stand today, coming out of the pandemic, there appears to be a massive shortage of rough diamond production to meet the returning and growing demand in America, and the emerging markets of India and China.’’

“So the fundamentals are very strong.’’

Wetherall acknowledged that previous price bubbles had burst.

“Now though I am not so sure that there is a bubble because the industry just cannot produce enough diamonds to meet the demand coming from consumers,’’ Wetherall said.

“Prior to Russia-Ukraine we were looking forward to a very good mid-to long term. Now Russia-Ukraine is causing ripples through many commodities and in the diamond space, we all know that Russia speaks for about 30% of world diamond mining production.’’

Ahead of the Ukraine invasion, Lucapa was already enjoying “very, very strong rough diamond pricing.’’

Lucapa is a gem quality producer from mines in Angola and Lesotho. It is also set to become a diamond producer in Australia from a restart of the Merlin mine in the Northern Territory.