Russian Diamonds: How G7 sanctions on Russian diamonds could affect global market newsbhunt

LONDON: Nineteen months have passed since Russia invaded Ukraine, sending shock waves around the world — and through the global diamond market.
Russia is the world’s biggest diamond exporter by volume, with a state-owned company, Alrosa, mining almost one-third of all diamonds produced in 2021.
To prevent funds from flowing into the Kremlin war chest, the United States — the world’s largest market for finished diamonds — took action last spring when President Joe Biden banned the import of rough diamonds from Russia and the US Treasury Department placed sanctions on Alrosa.
Other countries imposed sanctions of their own, including Britain, which early this year announced an outright ban on Russian diamonds.
Last year the European Union had tried several times to enforce sanctions on Russian diamonds, but was prevented by Belgium because of protests from Antwerp, the Belgian port city that is a leading trade hub for precious stones. Its representatives have expressed concerns that, aside from the difficulty that comes with tracking a diamond’s true origin, sanctions could hand Antwerp’s rivals, like Dubai and India, a competitive advantage on the Russian diamond trade. Not everyone agreed.
“There are people for whom the diamonds sold in Antwerp are more important than the battle we are waging,” President Volodymyr Zelenskyy of Ukraine said last year.
Now, the diamond industry is readying itself for the unveiling of sanctions from the Group of 7 nations — Britain, Canada, France, Germany, Italy, Japan and the United States — and the European bloc that would prohibit the import of gemstones mined in Russia, including those cut and polished in other countries.
“The current US sanctions only covered rough Russian diamonds or those cut and polished inside Russia,” said Paul Zimnisky, a diamond industry analyst based in the New York City area. “Given 90% of diamonds are cut and polished in India, and can therefore be classed as Indian gems, the current regulations aren’t as strict as you might think.”
But some responses were “far more stringent than the government regulations required,” he said, with numerous high-profile luxury players, including Richemont and LVMH Moët Hennessy Louis Vuitton, telling suppliers that they would not buy Russian stones, putting the onus on those suppliers to disclose the provenance of their gems.
More governments with considerable economic firepower are expected to be part of the new effort. Brad Brooks-Rubin, a senior adviser in the Office of Sanctions Coordination in the US State Department, said consumers in the G7 nations account for almost 70% of all diamond purchases.
“By cutting off most of their demand, if an import ban were to be agreed, Russian diamonds would have a narrower lane through which to work their way into the marketplace,” he said. “The focus of all discussions is how to target Alrosa and Russia’s diamond revenues that could then be funneled to their war efforts.”
The formal announcement of G7 sanctions is expected in September, and negotiators are still finalizing the exact terms for tracking and tracing individual gemstones and accompanying customs paperwork. The expectation is that these new sanctions would come into effect in January, after the all-important holiday retail season.
Jewelry shoppers may see prices rise if there is a shortage of non-Russian diamonds after more sanctions are imposed, but increases would likely come gradually rather than suddenly. The industry has been expecting the action.
The question is whether an industry, mainly composed of small businesses, that is organized around the quality, size and color of stones — not their provenance — could segregate stones and accurately produce paperwork that categorizes them by origin. That challenge likely would be further exacerbated by the multiple supply chain loopholes that are possible when diamonds make their multinational journey from a mine, through a hard-to-police global web of middlemen, and ultimately to consumers or into industrial uses.
Diamonds can change hands 20 to 30 times between mine and market, according to Hans Merket, a researcher with the International Peace Information Service, an independent research agency. “It will be important to find the right balance between ambition and realism,” he added, as it could take “years rather than months to get all noses in the right direction and reorganize this complex global supply chain.”
Another headache? Russia is known for producing small diamonds that are mostly sold in very large quantities. The new G7 sanctions likely would cover only finished stones of one carat or larger, Brooks-Rubin said, although smaller gems may be included later.
Tiffany Stevens, the CEO and general counsel of the Jewelers Vigilance Committee, a nonprofit organization based in New York City that focuses on ethics via legal compliance and policy advocacy in the jewelry trade, said the invasion had required the diamond industry to make significant changes in its operations, and it had been given time to prepare for the new requirements that tougher rules would bring.
“The G7 sanctions is a turning up of the heat on Russia and also offers a brightening of the lines for the trade on how to enforce it,” she said. “But our industry is also very fragmented and global, with many in the trade who still won’t fall