If you have a diamond on your finger, there’s a good chance it’s Russian. Vast mines in Siberia produce about a third of the world’s supply of rough diamonds and one company, Alrosa, accounts for 90 per cent of them.
The sector has dodged sanctions for the last year. European companies bought an estimated €1.4 billion euros worth of Russian diamonds in 2022. But after more than a year of tussling, the EU is set to ban Russian diamonds next week after gathering sufficient support from the G7 advanced economies.
Alrosa is not your normal diamond company. It’s 33 per cent owned by the Kremlin and run by a Putin-friendly CEO. It even boasts in its company newsletter of paying for the renovations and upkeep of a Russian military submarine called B-871 Alrosa, which helped train submariners to blockade Ukraine’s grain ports in the Black Sea.
Josep Borrell, the EU’s chief diplomat, told the FT that a meeting of G7 foreign ministers in Japan supported the move, clearing a key hurdle that EU countries had demanded.
While Europe sanctioned many other Russian economic sectors after the full-scale invasion of Ukraine in February 2022, diamonds were not touched.
This is partly because dealers in the world’s main diamond trading hub of Antwerp feared they would lose their coveted status to Dubai if the ban went ahead on their largest supplier.
Currently, Antwerp trades around 80 per cent of the world’s rough diamonds.
Antwerp World Diamond Centre, the hub of the global diamond industry, launched a lobbying campaign, much like the Italian luxury goods sector, to be exempt from the sanctions, arguing that it would damage them more than Putin’s Russia.
But the diamond-shaped hole in the sanctions wall seems to have become embarrassing. Ukrainian officials and diplomats from eastern EU member states have frequently raised the issue with Belgian authorities. “Peace is worth much more than diamonds,” Zelensky told the Belgium federal parliament last year.
Another reason the sector has been able to dodge sanctions until now is that the stones, by their very nature, are hard to track.
Rough diamonds do not take their nationality from the place they were mined. Instead, they take it from where they’re processed, which is typically India, where a workforce of some 650,000 cut and polish them for distribution.
It’s easy to mix rough diamonds from a sanctioned country into a pile from a non-sanctioned country.
This process makes the sector almost impossible to sanction for consumer countries, including the US – the largest diamond jewellery consumer market in the world.
In the aftermath of the February 2022 invasion, Washington sanctioned Russian diamonds. However, experts told researchers at the International Peace Information Service in Belgium that it remains perfectly legal for “US companies to import Russian diamonds that have been cut or polished elsewhere”.
The proposed EU sanctions, whose real target is Antwerp’s dealers, would likely have more impact.
aLSO, in the Sensemaker
Israel-Hamas: the view from Kyiv
Indonesia invests in floating solar
House of Lords doubles threshold for declaring shares