Europe needs to ban Russian diamond imports. What comes subsequent?

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London(CNN) The European Union is poised to impose a ban on imports of Russia’s diamonds — slicing off the world’s largest diamond producer from one in all its key markets.

“Russian diamonds aren’t ceaselessly,” European Council President Charles Michel mentioned on the sidelines of the G7 summit in Hiroshima, Japan, on Friday.

A plan to sanction the Russian trade, value $4 billion in exports, might be unveiled as quickly as this weekend, a senior EU official instructed journalists throughout a briefing on Thursday.

Russia produces round a 3rd of the world’s diamonds, and is the one largest exporter, in keeping with the Antwerp World Diamond Centre (AWDC), which represents the world’s largest diamond buying and selling hub in Belgium.

The EU ban would come as a part of an eleventh bundle of sanctions over Russia’s full-scale invasion of Ukraine in February 2022, and greater than a 12 months after america prohibited its corporations from shopping for Russian diamonds for non-industrial functions.

On Friday, the UK additionally introduced it might ban imports of Moscow’s diamonds later this 12 months, in addition to all imports of copper, aluminum and nickel of Russian origin.

The EU ban will have an effect on Russia’s funds, in addition to European retailers and merchants of diamonds. Patrons of luxurious jewellery and watches may really feel the affect of their wallets.

How a lot of a success?

Russia’s diamond exports generated about $4 billion in 2021, in keeping with the UK authorities. The worth of complete Russian items exports that 12 months was $494 billion, in keeping with the nation’s central financial institution. Oil and fuel accounted for about half that determine.

The nation’s diamond trade already took a giant hit in April 2022, when america banned imports from Alrosa, a Russian state-owned mining firm liable for 90% of Russia’s diamond mining capability.

The US accounts for half of worldwide demand for diamonds utilized in jewellery, mentioned Paul Zimnisky, an impartial diamond trade analyst, whereas Europe and the UK collectively characterize solely round 5% of the market.



An worker holds a tough diamond on the “Diamonds of Alrosa” manufacturing unit in Moscow, Russia, in April 2021.

A ban on Russian diamonds might inflate costs for European customers, particularly if diamond manufacturing elsewhere does not ramp up.

“It prices billions to supply extra diamonds, and it takes as much as two years earlier than that manufacturing actually will be seen out there,” Tom Neys, a spokesperson for the AWDC, instructed CNN.

He famous that demand for diamond jewellery was at the moment “sluggish,” however “the nearer we come to the tip of the 12 months [when demand tends to pick up]… you’ll really feel that squeeze, and that may most likely translate into increased costs.”

The usage of diamonds in trade is unlikely to face extreme disruption, in keeping with Zimnisky, as a result of greater than 90% of these gems are made synthetically in China. Diamonds’ hardness makes them helpful within the manufacture of drills and surgical gear, for instance.

It is attainable that synthetically made diamonds might additionally assist fill the hole within the jewellery market left by Moscow’s exports, Zimnisky mentioned, although a glut of cheaper, lab-grown diamonds are unlikely to compete with their pure options. These will at all times be a “luxurious product,” Zimnisky mentioned.

A blow to Belgium

Europe’s diamond merchants are dismayed on the prospect of sanctions.

“We’re so towards sanctions,” Neys of the AWDC mentioned, including that merchants would merely transfer their enterprise out of Antwerp in response.

The Belgian metropolis has already “misplaced plenty of enterprise to Dubai” over the previous 15 years, he mentioned, as Antwerp has tightened its guidelines on transparency and the moral sourcing of diamonds.

About $40 billion value of diamonds are moved by way of Antwerp yearly, in keeping with the AWDC. Between 5% and 10% of these diamonds are Russian in origin, down from a couple of quarter earlier than the battle.

Corporations are more likely to transfer to essentially the most lively buying and selling hub, Neys mentioned. And “when the large ones transfer, the little ones will comply with, after which you might be left with nothing,” he added.



A 3D-model of a tough diamond is seen on a display on the “Diamonds of Alrosa” manufacturing unit in Moscow, Russia, in April 2021.

A few of the world’s main jewelery makers, together with Pandora — the world’s largest — have already shunned Moscow’s diamonds voluntarily following the invasion.

Different big-name jewelers have additionally rejigged their provide chains, mentioned Zimnisky, so a ban on Russian diamonds will likely be felt most keenly by Europe’s small, impartial jewelers.

“In the end [there’s] going to be a bifurcation within the diamond market… the non-Russian diamonds are going to be routed to the Western world,” he mentioned, whereas Russian diamonds are more likely to find yourself in China, India and the Center East.

Closing loopholes?

The largest activity dealing with Europe is how you can design an air-tight ban that forestalls Russian diamonds from arriving within the bloc by way of circuitous routes.

Chatting with journalists on Thursday, a senior EU official mentioned the “foremost focus” of the bloc’s new sanctions bundle was “circumvention.”

Zimnisky defined: “If you’re, say, a US trade participant… shopping for diamonds from an Indian cutter and polisher, technically you might nonetheless purchase Russian-origin stones.”

About 90% of the world’s uncut diamonds are despatched to India for slicing and sharpening earlier than being reexported to jewellery makers.

That’s the place the present US ban falls brief, in keeping with Neys. “There are plenty of Russian diamonds that also get bought throughout the American financial system,” he mentioned.

“For those who actually need to shut loopholes, it’s essential to discover a system that forestalls [Russian] diamonds going to the G7 market,” Neys mentioned. To make this work, he added, jewelers and merchants would want entry to know-how that would decide the origin of diamonds.

— Jake Kwon, James Frater and Niamh Kennedy contributed reporting.



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