For a long time, it seemed that diamonds would remain a raw material that would not be significantly affected by anti-Russian sanctions, and that their export would continue to provide Moscow with fat income. Although the United States already banned the import of rough diamonds from the Kremlin-controlled company Alrosa last year, European Union countries have not stopped importing them. Last year alone, according to Eurostat, Russian diamonds worth 1.4 billion euros (about 34 billion crowns) went to the EU.
It is primarily Belgium, specifically the port city of Antwerp, as the main trade hub for the world distribution of worked diamonds. Some EU countries repeatedly wanted to add precious stones to the common sanctions list, but due to the resistance of Belgian representatives, this always failed.
Now, paradoxically at first glance, it is Belgium that is trying to negotiate a ban on the import of Russian diamonds for the G7 group of economically advanced states, which includes the USA, Canada, Britain, Germany, Japan, France and Italy, and which also includes representatives of the entire European Union.
In mid-September, Belgian government officials announced that the G7 would announce a ban on Russian diamond imports within the next two to three weeks. Russia, as the largest exporter of rough gems, is expected to be mainly affected by the ban through downward pressure on prices.
“With this system, we will cut them out and leave them in an inferior market with lower prices,” Reuters quoted a Belgian government official as saying on condition of anonymity.
Prices have already fallen, the Russian exporter has stopped deliveries
Even before the announced ban on the import of Russian diamonds to the West, the demand for gems plummeted. Market leader De Beer already reduced diamond prices by up to 40 percent at the beginning of September. The company attributed this to a natural drop in interest after prices rose during the covid pandemic.
India’s precious metals regulator has announced that Russian exporter Alrosa is suspending rough diamond shipments in September and October due to low demand.
The ban is due to take effect from January next year and, if implemented as proposed by the proposing countries, will transform the world’s diamond trade. The European Union should include this measure in the twelfth package of anti-Russian sanctions, which is to be presented next month, according to Bloomberg.
The goal of the Belgian proposal is understandably that Antwerp should suffer as little as possible and that the ban should not be circumvented if possible.
The problem is that the countries where the stones are processed are currently listed as countries of origin for diamonds, not Russia as the exporter of the raw material. Most of the mined gems are cut and polished in India, which does not apply anti-Russian sanctions.
Belgium therefore proposes that customs controls on rough and cut diamonds in the G7 countries be concentrated at their wholesale entry points. The stones are supposed to go through a three-stage check, the condition for entering the market in the G7 countries will be the granting of a certificate through the blockchain system – one type of confirmation will be for rough, the other for already polished diamonds.
Discovery of a large diamond in Africa
Canadian mining firm Lucara Diamond announced in August that it had unearthed the seventh largest diamond ever found in the world at its mine in Botswana.
At the same time, each cut diamond should have a reference to the country of origin of the raw material, so even if the stone mined in Russia is processed in India, the United Arab Emirates or Israel, it should not reach Western countries.
According to the Financial Times, the Belgian proposal does not sit well with some of the world’s major processors and traders. In a letter signed by 16 such companies, they complain about the Antwerp diamond lobby and criticize the lack of transparency, responsibility and cooperation on the part of the Belgians.
However, the largest diamond trader, De Beers, had previously responded by saying that it would try to support the G7 measures.
Before the war in Ukraine, De Beers, which is part of the AngloAmerican multinational group based in London, accounted for 33 percent of sales in the rough diamond market, according to its calculations, while Russia’s Alrosa accounted for 24 percent.