- EU considers banning Russian diamonds.
- Antwerp dealers face pressure.
- Ethical concerns in diamond trade.
While diamonds may endure indefinitely, this does not apply to Russian imports into the European Union.
Russia is the leading producer of raw diamonds, which are extracted from thousands of mines situated beneath the Siberian permafrost. This region provides one-third of the global diamond supply.
EU’s Response to the Ukraine Conflict
Since its full-scale invasion of Ukraine, the European Commission has proposed extending to diamonds a series of sanctions imposed on Russia.
As of January, the EU will implement its twelfth round of sanctions against Moscow, which includes this action. A moratorium is also being discussed by the G7, with which it is associated.
Since 2022, Russian coal, gas, gold, vodka, and even caviar have been subject to EU sanctions.
North-eastern Russian diamonds continue to be utilised in engagement rings, necklaces, and earrings around the globe.
Antwerp’s Stance and the Role of Belgium
The European Union has thus far managed to avert a prohibition, primarily due to Belgium’s determination to safeguard Antwerp, the diamond capital of the globe.
Since the 15th century, the naval city that speaks Flemish has been a diamond centre. Trade in this region encompasses over 80% of all raw diamonds extracted worldwide; pre-conflict, one in every four of these diamonds originated in Russia.
The stores that line the cobblestone streets of the diamond district in Antwerp are adorned with glistening jewellery displayed in their windows. Security cameras are ubiquitous within a roughly one-square-mile area.
“Russia was a very important market for Antwerp; transferring your entire operation to a new supplier causes a great deal of trouble,” says Thierry Tugendhaft, a diamond dealer with over three decades of experience.
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The cost of importing non-Russian diamonds is expected to increase due to increased competition for the same suppliers.
Consequently, the cost will increase for the typical consumer as well.
Thierry, positioned in a secluded area of his office, unlocks a safe of monumental proportions and removes a folded-in-half white envelope. There are three immaculately polished, gleaming diamonds within.
Before the conflict, fifty percent of his stones originated in Russia. Their appeal resided in their superior quality, form, and accessibility.
Impact of the Proposed EU Ban on Antwerp Dealers
The European Council’s proposed ban will be the subject of a final determination by the 27 member states of the European Union in the future weeks.
However, many diamond dealers in Antwerp anticipated it and were already under pressure from the companies with which they do business to cease importing diamonds from Russia.
While Mr. Tugendhaft now obtains his imports from a Canadian mine, other members of his staff have not been as fortunate.
“Several of the major diamond trading companies in Russia ceased operations.” They depended significantly on Russia.
Long have critics asserted that the importation of Russian diamonds is unethical due to the fact that a substantial portion of the proceeds are transferred directly to the Kremlin.
A majority-owned enterprise known as Alrosa produces over 90% of the diamonds in Russia. This corporation is wholly owned by Russian government entities.
The United States prohibited raw diamond imports from Russia and imposed sanctions on Alrosa in April of last year.
During the initial six months of 2023, Alrosa achieved a revenue of $1.9 billion (£1.7 billion).
“There is a direct correlation between the purchase of Russian diamonds and the financing of the conflict in Ukraine,” asserts Filip Reyniers, director of the Antwerp-based research institute IPIS.
The diamonds mined in Russia ought to be classified as conflict diamonds.
Consensus diamonds, or blood diamonds, are valuable jewels that are traded to fund armed conflict.
The ongoing conflict necessitates the funds for Russia.
Russian diamonds are becoming less expensive because Russia is desperate for funds to finance its war, according to Tobias Kormind, managing director of 77 Diamonds, one of the largest online diamond jewellers in Europe.
His business incurred increased expenses as a consequence of his decision to cease importing Russian gemstones within a few weeks of the invasion of Ukraine; he believes a more resolute stance from the rest of the industry would have been more appropriate.
He says many buy from Russia since it’s cheaper, therefore they don’t reveal that their stones are from Alrosa.
Challenges in Regulating the Diamond Trade
Implementing a prohibition is exceedingly challenging due to the inherent ambiguity surrounding the precise origin of a diamond.
“The diamond trade has never been transparent, in contrast to other industries such as coffee, tea, and chocolate,” explains Filip Reyniers of IPIS. A certificate of origin is not required to transport a diamond, and diamond packages are frequently mingled… Determining the source becomes exceedingly challenging.
Diamonds can undergo twenty to thirty exchanges between the mine and the market. Critics argue that an EU prohibition is flawed due to the trade’s allure to criminal activity, which stems from its lack of traceability.
Currently, this is not a sector-wide phenomenon, according to Filip Reyniers. This limitation only works if the diamond’s origin can be positively identified.
The biggest issue is that 90% of the world’s diamonds are shipped for cutting and polishing.
The majority of these diamonds are processed in Indian facilities.
Once polished and ready for transportation, the diamonds are branded Indian.
Analysts assert that closing this significant loophole is critical. However, Indian Prime Minister Narendra Modi has thus far disregarded Western advice to reduce economic relations with Russia.
“If India does not comply, the ban will fail,” Reyniers stated.
Thierry Tugendhaft, a merchant, estimated that the diamond industry in India employs half a million individuals. They are dependent on their employment and do not wish to lose them.
However, Western nations account for approximately 70% of the worldwide demand for diamond jewellery; therefore, action is urgently required.
“Russian diamonds have come to represent war and human rights violations,” stated Alexander De Croo, the prime minister of Belgium, in September.
Additionally, there is optimism that EU sanctions will have an effect.
Filip Reyniers stated, “Kinds of Russian diamonds will continue to enter the European market.” However, the prohibition will reduce sales of jewellery that funds the Kremlin’s Ukraine conflict, he says.
