De Beers boss says G7 Russian diamond sanctions could push up prices

Diamond producers De Beers, a unit of miner Anglo American, and Botswana’s state-owned Okavango Diamond Company asked the Group of Seven (G7) to consider unintended consequences as the bloc prepares to impose the second phase of a ban on Russian diamonds, concerned that African prices would be hugely inflated.

In December, G7 nations announced a direct ban on Russian diamonds starting January 1, followed by phased-in restrictions on indirect imports of Russian gems from about March 1.

A new system to trace the origin of the gems will be introduced in September. But there are questions over how a diamond’s country of origin should be checked and where it should be done.

Belgium supports the idea of checks in Antwerp, the world’s main diamond hub.

"Effectively (African producers) would be forced to send all their diamonds in one direction rather than choosing ... (and) ethical African diamonds would become much more expensive," De Beers CEO Al Cook said.

De Beers had previously urged the G7 to engage Botswana, Namibia, SA, Angola and India to develop the framework with input from across the industry.

Russia is the world’s biggest producer of rough diamonds by volume. New restrictions on the trade of Russian gems are part of the bloc’s broader measures designed to limit Moscow’s revenues that aid and fund its invasion of Ukraine.

"We understand and support the need for G7 sanctions on diamonds," Cook said on the sidelines of the African Mining Indaba in Cape Town.

"What’s really important to us is that any sanctions that are put in place achieve their desired effect without creating terrible side effects," he added.

Cook said a G7 delegation had visited De Beers operations to study their systems and certification processes, adding that the company had given them feedback on the measures.

The company suggested that African producers be allowed to certify their own diamonds as non-Russian.

"We believe the system, certainly that we have in Namibia and South Africa and Botswana, have stood the test of time," Cook said.

Currently, De Beers uses blockchain Tracr, a database of transactions shared across a network of computers, to track its production. Once the record of a transaction is added to the database, it is difficult to change.

Botswana’s Okavango Diamond Company (ODC ) also hosted G7 officials.

"Our position has always been very clear ... Whatever measures are taken, they must just be aware that they don’t end up with unintended consequences and taking us backwards," Botswana ODC MD Mmetla Masire said.

Sources in December said India, home to 90% of the world’s diamond cutting and polishing industry, has also urged the G7 countries to delay the incoming ban on Russian diamonds because the rules to trace the origins of gems remain unclear.

Meanwhile, Masire said Botswana plans to holds a diamond auction in February. It resumed the auctions in January after a two-month halt last year as the industry as a whole tackled a glut of inventory.

Demand for mined diamonds has sagged under the pressure of high interest rates in the US, home to 55% of global consumption, China’s sluggish recovery from the pandemic and competition from lab-grown gems. 

The impact has been especially damaging in Botswana, whose economy relies heavily on diamond sales.

The ODC normally holds 10 auctions a year, but its last two in November and December were halted after only about 30% of the diamonds on offer found buyers, Masire said.

At the January auction, about 70% of the stones ODC had on offer were sold.

Reuters