Diamonds may last forever, but not when it comes to imports from Russia to the European Union.
Russia is the largest producer of rough diamonds mined from hundreds of mines under permafrost in Siberia, which accounts for a third of the world’s diamond supply.
The European Commission is currently proposing to extend to the diamond sector a series of sanctions imposed on Russia since its large-scale invasion of Ukraine.
The move is part of a round of 12 EU measures against Moscow, scheduled to take effect in January. It is linked to the G7, which is also discussing the ban. Since 2022, EU sanctions have targeted Russian coal, gas, gold, vodka and even caviar.
But diamonds mined in Russia‘s northeast are still used in engagement rings, necklaces and earrings around the world.
The EU has so far avoided a ban, largely because Belgium wants to protect the city of Antwerp: the diamond capital of the world.
The Flemish-speaking port city has been a diamond center since the 15th century
More than 80% of all rough diamonds mined worldwide are traded here, and before the war, every four rough diamonds were one is from Russia.
The cobbled streets of Antwerp’s diamond district are lined with shops with windows filled with sparkling jewellery.
There are security cameras everywhere, covering an area about a square mile wide.
“Russia represents a very big business for Antwerp: switching your entire operation to a new supplier is a huge headache,” explains Thierry Tugendhaft, a diamond trader for more than 30 years.
“Importing non-Russian diamonds will be very expensive because everyone will goto the same supplier. ”This means they will also become more expensive for the average consumer.
In a corner of his office, Thierry opened a giant safe and took out a small white envelope, folded in half.
Inside are three sparkling, perfectly polished diamonds.
Before the war, half of its stones came from Russia. Their appeal lies in their high quality, shape and availability.
The final decision on the European Commission’s proposed ban will be taken by the 27 EU member states in the coming weeks.
But many Antwerp diamond dealers saw this coming and have come under pressure from the companies they deal with to suspend supplies from Russia.
Mr Tugendhaft now sources his supplies from a mine in Canada, but some of his colleagues are not so lucky.
“Some of the major Russian diamond trading companies have gone bankrupt. They are very dependent on Russia. ”
Critics have long complained that diamond imports from Russia are unethical because most of the money goes straight to the Kremlin.
More than 90% of Russia’s diamonds are produced by a single company called Alrosa, which is largely owned by Russian government agencies. Last April, the US banned rough diamond imports from Russia and imposed sanctions on Alrosa. In the first half of 2023, ALrosa generated revenue of $1. 9billion(£17billion)
“There is a direct link between Russian diamond purchases and the financing of the war in Ukraine,”explains Filip Reyniers, director of IPIS, an Antwerp-based research institute.
“Russian diamonds should be considered conflict diamonds. ”Also known as blood diamonds, conflict diamonds are gems sold to finance war. The ongoing war means Russia needs money.
To bias Kormind, chiefexecutiveof77Diamonds,one of Europe’s largest diamond firms,said:“Russia desperately needs money to finance its war and that’s why Russian diamonds are increasingly cheaper“.
He stopped importing Russian gems weeks after the invasion of Ukraine-leading to a surge in his business costs – and he believes the rest of the industry should have taken a tougher stance. “Because cheaper to buy from Russia, many people turn a blind eye and do not disclose that they are sourcing from Alrosa,” he said.
“Unlike other products, such as coffee, tea or chocolate, the diamond trade has never been transparent,”explains Filip Reyniers of IPIS. “A diamond transshipped with a certificate of origin, diamond packages are often mixed. so it is difficult to know their origin. ”
Diamonds can change hands 20 to 30 times between the mine and the market.
This lack of traceability is why the trade is so attractive to criminal activity and why critics say the European ban is flawed.
“This is something that doesn’t exist today at an industry scale,” Filip Reyniers said. “For this ban to be effective, there needs to be real assurance that you can fully trace the origin of your diamond. ”
The main complication is that 90% of the world’s diamond supply is shipped overseas to be cut and polished, regardless of where it is mined.
And once the diamonds are polished and ready to ship, they are labeled as originating from India.
Analysts say it is essential to fill this huge gap. But so far, Indian Prime Minister Narendra Modi has challenged the West to reduce economic ties with the Kremlin.
“If India does not participate, the ban will not take effect,” Reyniers said. “There are half a million people involved in the diamond industry in India,” said trader Thierry Tugendhaft.
“They need a livelihood, they don’t want to lose their jobs. ”
But Western countries account for around 70% of global demand for diamond jewelery – and something needs to be done urgently.
“Russian diamonds now symbolize war and human rights violations,” Belgian Prime Minister Alexander De Croo said in September.
And some believe EU sanctions will have an impact.
“Some Russian diamonds will still enter the European market,” Filip Reyniers said.
But he believes the ban will cause fewer people to buy the jewelry used to fund the Kremlin’s war in Ukraine.