India tells US to unfreeze funds of two firms accused of trading with Russia

India has told the US that it should unfreeze funds worth $26 million belonging to two Indian diamond firms after they were hit by sanctions for allegedly trading with Russian diamond firm Alrosa, Reuters reported.

The funds were frozen earlier this year after the US imposed sanctions on Alrosa last year in April. The sanctions were imposed by the US Treasury's Office of Foreign Assets Control (OFAC).

Indian government officials cited by Reuters declined to identify the two Indian companies involved in the case. This is believed to be the first incident of the US punishing any Indian company for trading with Russia since Moscow’s invasion of Ukraine.

Add WION as a Preferred Source

Why were the sanctions imposed on Indian firms?

The Indian companies ran afoul of OFAC when their units based in the United Arab Emirates (UAE) allegedly attempted to wire money to buy rough diamonds, according to the Indian government official quoted by Reuters. It was not clear whether the money was being sent to Alrosa or any other Russian company.

Watch:Russia's Putin to not visit India for G20 summit next month

However, the banks halted the transactions in US dollars and the money ended up getting frozen. "The government is aware of the OFAC action and has initiated dialogue over it," one of the Indian government sources said, without identifying which US body were the officials engaging. "The problem was suspicion of trade links with Alrosa," added the statement.

What are the Indian firms saying?

As claimed by the Indian officials, the Indian firms didn’t violate the American sanctions. The payments were either meant for non-sanctioned Russian entities or related to orders completed before the sanctions took effect.

Alrosa is the largest global producer of raw diamonds and is backed by the Russian government.

About India’s diamond sector

With the world's foremost diamond processing capacity, India recorded polished diamond exports exceeding $22 billion in the last fiscal year, concluding on March 31.

The industry, primarily centred in India’s western state of Gujarat, acquires rough diamonds from suppliers located in nations like the United Arab Emirates, Belgium, and Russia.

Despite US sanctions, Alrosa has adeptly sustained consistent diamond sales. It must be noted that the European Union didn’t adhere to the US sanctions on Russian diamond traders. Now, some G7 countries are advocating for stricter sanctions concerning Russia's diamond trade.

WATCH WION LIVE HERE