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G7 governments are expected to announce a ban on imports of Russian diamonds that will come into force next January in a move that will divide the $74bn global market for the precious stones.
Belgian officials said on Friday that it expected an announcement from the world’s seven largest advanced economies within three weeks that would “fence off the G7 market” from Russian diamonds, a timeframe confirmed by a senior European official.
G7 leaders agreed to restrict trade and use of Russian diamonds at its Hiroshima summit in May, including by using tracing technologies. They aim to clamp down on an important sector of the Russian economy that has not been comprehensively hit by wide-ranging international sanctions.
An EU official said the proposals were now “garnering significant support from G7 members”. The group would need to implement a commonly-agreed scheme to certify rough and polished diamonds and trace Russian-produced gems, Belgian officials said.
“Russian diamonds are not forever and I am delighted that this ban on Russian diamonds is now materialising,” Charles Michel, president of the European Council, said on Friday.
Russia is the world’s largest producer of rough diamonds by volume, with exports totalling $4bn in 2021, according to trade statistics. Some 84 per cent of global rough diamonds traded through dealers in Antwerp and 90 per cent of precious stones polished in India. The global natural diamond jewellery market is estimated to be worth $74bn in 2023, according to independent analyst Paul Zimnisky.
Any eventual solution looks set to open a rift among rival camps in the industry. Proposals from Belgium and the Antwerp diamond lobby rival work undertaken by global industry group World Diamond Council which includes the world’s largest producer De Beers.
While US president Joe Biden banned the import of Russian rough diamonds to the US in April 2022, Belgium has resisted sanctions at an EU level over concerns such a move could boost Dubai’s role as a diamond trading hub at the expense of Antwerp.
Belgian officials warned on Friday that a direct ban on Russian imports would be ineffective and simply divert trading away from Antwerp unless new tracing systems are introduced. Russian imports to Belgium fell by about 45 per cent to €245mn in the first three months of 2023 compared with the same period a year earlier, according to official statistics.
Belgian officials want a combination of physical controls on diamonds and traceability data, including a “public ledger” using blockchain technology “to register and document every step of the journey of a diamond”.
However, any reshaping of the market would hit countries such as India and southern African nations from where the rough stones are sourced.
De Beers said it had “not been consulted on a Belgian solution”, adding that the World Diamond Council had “put forward a comprehensive approach that would not favour one commercial centre over another”.
A major diamond trader in Mumbai complained that Belgium had not consulted the Indian industry over its proposal and had kept “as good a secret as a nuclear bomb”. The trader said industry participants had been told that the January timeline was not yet set in stone.
For India’s diamond industry, he said “it can’t get any worse”, given significant oversupply, low demand and the increasing disruption caused by lab-grown diamonds. The proposals would involve Indian industry continuing the tracing process, potentially increasing their costs.
Both rough and polished diamonds would be certified and customs officials would be able to block imports of any uncertified products to G7 countries. “Adding traceability with physical controls will allow us to cut off Russian rough diamonds” from the G7 and EU, the Belgian officials said.
The measures would apply initially to 1-carat diamonds but officials expected them to expand to smaller diamonds.
Any changes would be a shift from the current system of tracking diamonds, where customs officers only require a government-issued certificate guaranteeing that the stones meet the requirements of the UN-backed trade regime called the Kimberley Process.
G7 nations have complained that the Kimberley Process does not classify gemstones from Russia as “conflict” diamonds since it only prevents the sale of diamonds mined used to fund insurgencies against governments, and not wars perpetrated by governments.
The Kremlin did not immediately respond to a request for comment on the G7’s proposals.