Now Putin has to worry about his blood diamonds

“Diamonds are a girl’s best friend,” Marilyn Monroe once sang. However, this also applies to Vladimir Putin. A quarter of world production comes from his empire. And the gems are currently selling to Europe too.

The EU sanctions against Russia brought the luxury goods business to a standstill: gold, vodka, caviar – all banned. But diamonds have so far been allowed to be sold to Europe. Why this is so has to do with the logic of unanimity in the EU. All member countries have to agree to a sanction, and one country has so far balked when it comes to gems: Belgium.

Because here lies the beautiful city of Antwerp. Small compared to the size of Moscow, but a giant in the diamond market since the 15th century. A hub of global trade, 100 years before Ivan the Terrible, the first tsar ascended the Russian throne. Even today, around nine out of ten stones pass by here on the journey between the mine and the end customer.

Belgium imports gems from Russia worth 1.8 billion euros

30,000 jobs depend on the diamond business in Belgium. In 2021, the country imported gems worth 1.8 billion euros from Russia. No wonder the Belgian government was against the sanctions. There was no doubt that the EU was exerting pressure – Brussels is not far. And even the Ukrainian President Volodymyr Zelenskyj appealed to the Belgian parliament via video link: “Peace is worth more than all diamonds.” So far in vain.

But now things are moving. In the new, tenth round of sanctions, diamonds are also said to be affected. Although Belgium is still against a complete ban on the import of gemstones to Europe, it has signaled for the first time that it will support certain measures. There are rumors about the introduction of a system with which the origin of the diamonds can be better understood.

What sounds like a sophistry could seriously disrupt Russia’s trade in gemstones, because many buyers explicitly do not want stones from Putin’s empire. Who would want to give their loved one a diamond that is used to finance the Ukraine war?

Proceeds from gem trading go directly to Putin’s war chest

Many diamonds are currently lost on their long journeys across the world from the mine to be cut and polished, via dealers, to the point of sale. In the face of the EU, the USA ostensibly only shakes its head on this topic. Russian diamonds have long been banned there. For Washington it is clear that proceeds from the trade in gemstones flow directly into Putin’s war ranks.

And perhaps Belgium’s concession also has something to do with the fact that the USA has broken away as the largest buyer of Russian diamonds. However, there is a loophole in the US sanctions provision thanks to a not entirely flawless wording: If a Russian diamond has been “significantly modified” on its way to a third country, it can be sold in the USA. A proper polish in India is enough.

While the diamond business isn’t nearly as important to Russia as oil and gas, the country needs every ruble for its war machine. As with so many sanctions, however, it is not easy to predict whether the EU would harm itself more than Russia by stopping diamond imports.

Europe embargo will probably not affect Russia much

Alongside Belgium, the United Arab Emirates are the most important customer country. And that did not join the boycott. Experts see it as likely that Russian diamonds will find their way to Dubai, Mumbai or other places where transparency or sustainability is far less important.

Financially, an embargo of Russian diamonds to Europe should not bring about any changes that would significantly change the course of the war. But as a symbol, plugging this gap in the sanctions system should not be underestimated. Making an exception for a product like diamonds because of the proceeds does not put the EU in a good light when it comes to consistently living values. “It’s hard to be a diamond in a world full of toilet blocks,” once again loosely translated, the US country singer Dolly Parton smashed. But you can at least try.

The post “Now Putin must worry about his blood diamonds” comes from WirtschaftsKurier.