G7 expected to announce ban on Russian diamond imports
Belgian officials say restructure of the global market could come into effect in January
Brussels — The Group of Seven (G7) countries is expected to announce an import ban on Russian diamonds in the next two to three weeks, Belgian officials say, in a bid to further cut revenues that could help fund Russia’s war in Ukraine.
The embargo, proposed by Belgium where the city of Antwerp is the world’s No 1 diamond trading hub, will come into effect in January, one of the government officials, who asked not to be named, told reporters in Brussels.
If the ban on the multimillion dollar trade is announced as anticipated, this would lead to a split in the global diamond market as the G7 accounts for close to 40% of this market.
“We’re talking about restructuring a global market,” the official said, acknowledging that the system will not work perfectly right away and the G7 was still evaluating Belgium’s proposed plan.
“Russia is the biggest supplier globally. With this system, we are cutting them out, leaving them in an inferior market with lower prices. We are slashing the financial flows from this sector.”
Efforts to reduce Russia’s revenue from diamond exports and build on Washington’s existing sanctions on Russia’s Alrosa, the world’s largest producer, have been under discussion among leaders of the G7 since last year.
The EU bought €1.4bn worth of Russian diamonds last year, according to Eurostat, as it banned neither the gem imports nor blacklisted Alrosa.
The EU has previously floated a ban of its own but Belgium was concerned that this would divert trading to other centres and away from Antwerp. Further, the EU on its own only accounts for 15% of the global market.
As of now, once the Russian diamonds are cut and polished outside Russia, they are considered originating from the country that “transformed” them. About 90% of the world’s diamonds are cut in India.
Belgium does not want the extra cost to fall on consumers and jewellers, or to limit the stones that India cuts. The EU country has suggested the customs checks be centralised in the G7 rough and polished wholesale nodes or entry points.
There will be three layers of control and blockchain systems that will generate two G7 certificates for rough and polished items and only then will the goods be allowed to freely circulate within the G7.
“The Indian polishers can polish whatever they want but [Russian gems] need to be segregated ... At the point when the polished diamond is offered for export, the reference will be made to the original rough, again using a combination of physical inspection and traceability data,” the second official said.
Further, the system would exempt African diamond producers. If an African seller can show the provenance is local and the output remains in line with production statistics then there is no need for a G7 certificate, the officials added.
Belgium said the trade of Russian diamonds in Europe has already fallen by 95%-98% and is no longer commercially relevant.
“By cutting out Alrosa, we [Belgium] will be as a trading hub cut off from 35%-40% of the market,” one of the officials said. “Are we going to grow? Of course not, we are losing an arm. What we are doing with this [mechanism] is stopping the bleeding and making sure we can still live with one arm.”
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