Italy’s fashion council has denied reports that Prime Minister Mario Draghi has successfully excluded luxury goods from the European Union’s tranche of sanctions against Moscow, allowing it to maintain business with wealthy Russians in the aftermath of the Vladimir Putin-led nation’s attack on neighboring Ukraine.
Beatrice Rossaro, PR manager of Camera Nazionale della Moda Italiana, told Sourcing Journal that no such request has been formally made “so far,” contradicting news from the Telegraph on Friday that a carveout was secured. “Apparently selling Gucci loafers to oligarchs is more of a priority than hitting back at Putin,” an unnamed EU diplomat told the British outlet. The Prime Minister’s office did not immediately respond to a request for comment.
Russia is an important market for Italy’s luxury sector, with exports of brands such as Armani, Gucci and Versace bringing in 1.3 billion euros ($1.47 billion) in the first 11 months of 2021 alone, according to the Italian Trade and Investment Energy Agency. Indeed, Carlo Capasa, CEO of Camera Nazionale della Moda Italiana, said that 1 billion euros ($1.13 billion) worth of luxury exports to Russia could hang in the balance.
“If things continue like this, there will be damage,” Capasa told the Associated Press at Milan Fashion Week on Thursday. “But it is not even the moment to think about the economic damage, but instead the damage that man does to himself.”
Italian daily Il Post also reported Friday that Draghi told local journalists that he has made no exclusion request and that Rome is aligned with the rest of the EU. LVMH Moët Hennessy Louis Vuitton, the world’s largest luxury conglomerate by revenue, declined to provide a statement. Kering, the owner of Gucci and other rarified labels, did not respond to a request for comment.
Another bone of contention, first reported by the New York Times on Thursday, involves diamonds, specifically diamonds traded through Belgium, though the newspaper said that any resistance to including them in the sanctions package has “evaporated” in the face of Russia’s military assault on Ukraine.
“Sanctions can have a significant impact on the diamond business,” Tom Neys, spokesperson for the Antwerp World Diamond Centre, told Gazet van Antwerpen on Wednesday, the day before the invasion. “It is a blow that should hurt Russia but there is a chance that we do more damage to ourselves. The Russians can easily trade their diamonds with non-EU countries.” In 2020, Belgium imported over 1 billion euros ($1.13 billion) worth of diamonds from Russia.
Meanwhile, Europe’s top luxury stocks rebounded Friday after slumping Thursday in the immediate aftermath of Russia’s invasion. Gucci owner Kering closed at 638.60 euros ($719.96) Friday on EuroNext Paris after ending Thursday at 620.20 euros ($699.33) while LVMH ended trading up 4.8 percent at 666.60 ($751.52). Chloé parent Richemont’s stock improved 4.8 percent on the SIX Swiss Exchange at 125.75 Swiss francs ($135.77).
Luca Solca, senior research analyst, global luxury goods for Bernstein, a private wealth management firm, told Sourcing Journal that the global luxury market’s exposure to Russian and Ukrainian demand is today “probably close” to 4 percent to 5 percent “as a whole.” He believes companies like Richemont that service the “high end” of the premium market have the most to lose in the geopolitical conflict, whereas LVMH and Kering’s focus on the “aspirational middle class” better insulates them from significant fallout, “all else being equal.”
Additional reporting by Jessica Binns.