Russian diamonds are for never

Russian diamonds are for never
The latest round of sanctions on Russia will ban the export and sale of diamonds, which earns billions of dollars a year for the Kremlin. / Ben Aris for bne
By bne IntelliNews November 19, 2023

The EU is currently debating a twelfth sanctions package that will ban imports of Russian diamonds for the first time.

Russia is one of the world’s biggest producers of diamonds, but due to lobbying by Belgium, they have been excluded from the previous eleven rounds of sanctions so far. Antwerp is one of the world's major diamond trading centres and makes billions of euros a year, but it is heavily dependent on imports of Russian diamonds.

Diamond traders based in Antwerp have put heavy pressure on the government to exclude the diamond trade from the extreme sanctions on Russia, which is also reluctant to forego the considerable tax revenue it earns from the business. Although the decision to include diamonds has been made, according to leaked reports of the contents of the deal, the wrangling continues and the release date for the latest package has been pushed back again from November 17 to sometime in December.

The proposed sanctions will ban the import, purchase and sale of Russian diamonds and goods made using the diamonds starting from the beginning of the next year. Additionally, the plan includes gradual restrictions on Russian diamonds that have been cut in third countries like India.

The United States has long since imposed a similar ban on Russian diamonds, but the EU has been extremely reluctant to follow suit. The diamond industry in Belgium has thrived for centuries and accounted for over half of Russia's total diamond exports of 28.2mn carats, worth approximately $2.5bn in 2021.

At the same time, the EU is proposing a new certificate of origin system for diamonds that will expand on the “blood diamonds” regime that already exists to prevent Russia selling its stones via friendly country third parties. Belgium is proposing the introduction of a unified marking system that would trace all rough diamonds larger than half a carat.

Russia remains the world's largest exporter of rough diamonds by volume (35%). Sanctions against Russian banks and the state diamond company, Alrosa, which accounts for 90% of Russia’s diamond production, have already resulted in a significant reduction in Russian diamond exports, which decreased by nearly a quarter to 36.7mn carats in 2022. While Alrosa's export volume statistics are not publicly available, industry experts had noted a continuing decline in exports as early as May.

The overall value of Russian diamond exports, estimated at $3.87bn in the past year, of which $1.4bn went to Belgium, according to Kimberley Process data, is considerably smaller than other key exports such as oil and fertilisers, which remain unaffected by sanctions.

However, experts say the experience of trying to ban Russian oil exports has highlighted the difficulty of enforcing sanctions globally to curb Russia’s exports of most products.