G7 Sanctions Against Russia Seek to Centralise Diamond Trade in EU

The 12th round of European Union (EU) sanctions against Russia unveiled this week could cause “unimaginable” disruptions in the global diamond chains as they seek to routing a majority of the stone through the Belgian hub of Antwerp, a global diamond industry insider has told Sputnik India.

Diamond trading analyst Edahn Golan estimated that besides the need for “routing” two-thirds of the global diamond production through Antwerp, the EU sanctions would mean that nearly 85 percent of the lab-grown diamonds would also have to be routed through the Belgian hub for validation that they didn’t originate in Russia.

The new EU sanctions have called for an “import ban” on non-industrial diamonds mined, processed or produced in Russia. The EU has said that the ban on Russian diamond imports is part of an “internationally coordinated G7 diamond ban”, which is set to kick in on 1 January.

In a new announcement, the EU has said that the ban would cover lab-grown diamonds, jewellery and watches containing diamonds.

Further, it calls for setting up a “robust traceability-based verification and certification mechanism for rough diamonds” within the G7 to enforce the ban, a move that would require diamond producers and manufacturers from around the world to set up an office in Belgium.

“The disruption this creates to manufacturing by the delays created from documenting each and every stone would be unimaginable,” Golan expressed concern.

“In addition, how will diamonds in watches be verified after being set?” he wondered.

The analyst further expressed concern that the EU and G7 plan on the ground that they risked creating “two tiers of diamonds”.

“The first is approved. The other is non-approved, that will be less valuable. This potentially calls so much for a shadow market,” he explained.

What Are the Risks for India?

According to data from India’s Commerce and Industry Ministry, the United Arab Emirates (UAE) has ranked the biggest exporter of rough diamonds for India in 2021, 2022 and the first eight months of 2023, with average annual exports around $9 billion.

Belgium has been the second biggest exporter of rough diamonds in the same period, while Russia has occupied the third position. However, analysts have suggested that Russian rough diamonds have been exported into India through Belgium and the UAE, both of which don’t produce diamonds of their own.

As far as exports of cut and polished diamonds are concerned, the US has been India’s biggest market between January 2021 and August 2023, while Hong Kong has occupied the second place. Belgium has been the third-biggest market for Indian cut and polished diamond exports.

An Executive Order (EO) banning Russian diamonds by the US this year has already led to recession-like conditions in India’s diamond trading hub of Surat.

This month, India’s Gems and Jewellery Export Promotion Council (GJEPC) expressed concerns over the “powers” which the G7 would wield once its ban on Russian diamonds kicked in next month.

GJEPC also appealed to the Indian government to take up the matter with G7 so that the interests of Indian industry weren’t “compromised” in any way whatsoever.

Over 2.5 million people depend on the diamond trade in India, most of them centred in the city of Surat. The G7 curbs on Russian diamonds have created economic hardships for many blue-collar workers in the city.

G7 Diamond Ban Detrimental to World Diamond Industry

It is not only India which is worried about the G7 ban on Russian diamonds.

The World Federation of Diamond Bourses (WFDB), representing around 27 bourses globally, has said that the G7 proposal to impose a “single-entry point” for inspection of diamonds would be “detrimental” for the industry worldwide.

“This will oblige companies from around the world who wish to market polished diamonds within the G7 to open an office in this single point of entry. Moreover, having only one point for registration and inspection will impose additional costs of time and money to the diamond trade,” WFDB said in a statement on Tuesday.

WFDB President Yoram Dvash called upon the G7 to allow the creation of additional registration and inspection centres in India and Africa to “streamline the process” and save costs.

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