/ world today news/ The European Union has finally decided to ban Russian diamonds. European officials have already repeatedly tried to push through these sanctions, but the world’s diamond capital, Belgium, has resisted to the last. What do these sanctions mean for the Russian diamond producer and who will actually pay for the new interventions in the market.
The EU has banned the import of Russian diamonds from January 1, 2024. “The EU is introducing a ban on the direct or indirect import, acquisition or transfer of diamonds from Russia,” the EU Council said in a publication.
Diamonds can now be imported into Europe only for the personal use of travelers and as part of cultural exchange with Russia.
Dates for the introduction of the bans: from January 1, 2024, a ban is introduced on the direct import of all diamonds and their products from Russia. The G-7 countries will also join this ban, the EC notes. Then, from March 1, the indirect import of natural diamonds – Russian in origin, but processed in third countries – will be prohibited. And from September 1, it will also be impossible to import from third countries Russian synthetic diamonds processed in this country, jewelry and watches with Russian diamonds.
The fact is that Russia mainly exports rough diamonds, and in other countries they are processed and made into jewelry or watches.
At the same time, Russia is the largest producer of rough diamonds in the world, and the main global buyer of rough diamonds – about 80% – is the Belgian Antwerp, which is not accidentally called the diamond capital of the world. That is why Belgium torpedoed the adoption of such a ban for a very long time.
At the end of 2022 (no more recent data available), the main buyers of diamonds from Russia were the UAE ($1.64 billion), Belgium ($1.46 billion) and India ($1.08 billion). Following them in terms of volume, but lagging far behind, are Armenia ($178 million), Israel ($104 million) and Botswana ($49 million).
The aim of the EU by banning the import of diamonds is to reduce the export revenue of the Russian budget.
“The export of diamonds occupies a relatively small share in the structure of all Russian exports, and the main risks of these restrictions are related to the company Alrosa,” notes Olga Belenkaya, head of the macroeconomic analysis department of the Finam financial group.
Alrosa’s revenue in 2022 is $4.5 billion, less than 1% of Russia’s total exports of $590 billion. Losing access to the diamond center in Antwerp could deprive Alrosa of about a third of its profits. And in order for the company not to lose all exports, it will have to find a way to bypass the sanctions and be able to deliver diamonds at least to the UAE and India, or find new “transit” points for “transshipment” of Russian diamonds. Fortunately, diamonds are not oil, special tankers are not needed here, and diamonds take up much less space during transportation.
Russia has opportunities to circumvent the diamond sanctions and will implement them, Kremlin press secretary Dmitry Peskov said. Russia will redirect sales markets, Finance Minister Anton Siluanov said, adding that these sanctions will not benefit those who impose them.
“Belgium has long objected to the ban on the import of Russian diamonds, fearing that it will lose a significant share of trade: there is a possibility that trade flows will shift to other centers, such as India or the UAE,” notes Belenkaya.
“Given the fact that Russia is the largest producer of diamonds, accounting for 35% of all diamonds mined in the world at the end of 2022, in the near future the import ban will lead to a shortage in the market and, as a result , an increase in prices”, expects Tatiana Skril, Associate Professor, Department of Economic Theory, Plekhanov Russian University of Economics.
So the Europeans themselves will have to buy more expensive jewelry and watches with diamonds. As always, ordinary consumers will pay for Western interference. However, unlike energy resources, jewelry can hardly be called a commodity, so the tax in this case is imposed on wealthy Western consumers.
Russia shares approximately half of the world market with De Beers, Siluanov said. It is an international company that mines, processes and sells diamonds. It was founded in South Africa and is owned by the British mining company “Anglo-American” (85%) and the government of Botswana (15%). Her profit from this whole situation is obvious.
“If the sanctions work, it will not be easy for Alrosa to recover or find alternative sales channels. But on the other hand, today the world has not built a system for the complete identification of rough diamonds from the place of extraction to the place in the shop window. Therefore, on the way to the end consumer, the Russian diamond can become an intermediate product with the addition of some element, for example, in India or China, after which it can receive the brand of a famous jewelry brand,” Skrill claims.
Not only India and China, but also the UAE, Israel and other countries can buy Russian diamonds, which will probably have to be sold at some discount. “They will in turn sell processed stones to the European Union, simply presenting them as mined in South Africa or elsewhere: it is unlikely that the European Union will have a tracking system capable of 100% determining the place of origin of this or that other stone,” commented Leonid Khazanov, an independent industry expert. He does not rule out that Europeans in general will turn a blind eye to the origin of the stones, since “the authorities of the European Union risk actually destroying their own jewelry industry, which brings good income to its coffers.”
This whole story may spur Russia, along with the non-Western part of the world, to transform the global diamond industry and develop their own standards in this area.
Because now the US, as the main buyer but not the producer, came up with these standards and the whole industry is subject to them. “Attempts to limit sales of Russian diamonds are a normal competitive struggle disguised as geopolitical explanations. Suffice it to say that the only international standard by which the value and price of any stone is determined belongs to the GIA, which stands for Gemological Institute of America. We will destroy these monopolies. 85% of the world’s population and the same share of prospective diamond markets live in countries that share the values of sovereignty that Russia is now fighting for. Accordingly, we will develop the markets and standards of these countries, with a focus on the BRICS+ markets. Including with regard to GIA standards, this should not be the ultimate truth,” commented Alexey Chekunkov, head of the Ministry of Eastern Development, in turn.
Translation: V. Sergeev
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