Europe is about to ban Russian diamonds

In a significant step to curb revenue flows to Vladimir Putin's regime and its ongoing conflict in Ukraine, the European Union and G7 countries are close to reaching a solution on the import ban on Russian diamonds. This decision comes after a year-long effort to ensure the traceability of diamonds from Russia, with the goal of implementing the ban, often referred to as targeting "blood diamonds," by Jan. 1, 2024. Alexander de Croo, the Prime Minister of Belgium, stressed the importance of cutting Russian dominance in the diamond trade from retail markets, highlighting the crucial role Belgium plays in this global industry. The ban on diamonds is indeed essential to block another revenue stream to Russia, but it is not without its complexities. Despite various sanctions imposed by the EU and G7 countries on Russia, diamonds have remained untouched because of their intricate supply chain. About a third of the world's diamond supply, worth about €4.5 billion, comes from Siberian quarries and a significant portion transits Antwerp, Belgium bringing significant revenue to Russia. Alrosa, a company in which the Kremlin plays a significant role, plays a key role in this sector, responsible for 90 percent of the country's diamond mining capacity. The European Union is a major destination for Russian diamonds, and according to Euromaidan Press these exports contribute $1.5 billion annually to Russia. Proceeds from diamond exports not only help finance Russia's actions in Ukraine, but also support its armed forces, including the Black Sea Fleet's own combat submarine called "Alrosa."

Before the invasion of Ukraine, Russia supplied 25 percent of the rough diamonds arriving in Antwerp, which is why Belgium's support for the embargo is crucial in this issue, since an estimated 90 percent of the world's diamonds transit through Antwerp and its diamond cutters. However, there has been resistance from the local diamond industry, which fears a 30 percent decrease in turnover and the loss of 10,000 jobs if Russian diamonds are excluded. They argue that trade could simply shift to countries such as Dubai, which do not apply such restrictions. Despite these concerns, Belgium is working on a more global perspective of the issue, promoting G7 involvement and international cooperation to ensure a comprehensive ban on Russian diamonds. The G7, which includes countries such as the United States, the United Kingdom, and Canada, has expressed its commitment to explore further measures against Russian diamonds. The goal is to put pressure on countries such as India, the United Arab Emirates and Qatar, where Russian diamond trade routes could be diverted. Antwerp is also calling for sanctions targeting trading centers, such as Mumbai and Dubai, to prevent Russian diamonds from re-entering the market after being processed elsewhere.

One of the main challenges in implementing the ban lies in tracing the origin of diamonds. Russia's ability to issue certificates masking the true origin of its diamonds has created a complex situation. Even major jewelry houses, which officially banned stones from Siberian mines after the invasion of Ukraine in late February 2022, could be unknowingly handling Russian diamonds with obscure origins. In any case, the Russian diamond trade presents a complex web of economic and political issues that Western countries have been struggling with for a year now. Despite progress in reducing dependence on Russian oil and gas, sanctions on Russian metals and diamonds have been slow to materialize. The reason for this delay is twofold: concerns about the economic consequences and the need for effective tracking mechanisms to ensure the success of the sanctions. The European Union has successfully reduced its dependence on Russian energy resources, thus hitting the Kremlin's finances hard. However, some of Russia's profitable industries, such as the export of precious metals and stones, such as platinum, titanium, iron, and steel, continue to generate significant revenues. Russia still earns about $20 billion a year from exporting precious metals and gems to Western markets, providing a valuable source of income for the government.