G7 Plans Russian Diamond Crackdown, Industry Says ‘Not so Fast’

A G7 plan to crack down on sanctioned Russian diamonds has run into resistance from some of the industry’s biggest players.

(Photo by Akhilesh Sharma on Unsplash)

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You’d think diamonds could take a little pressure.

The Financial Times reports that a G7 plan to crack down on sanctioned Russian diamonds, which is due to come into force next year, has run into resistance from big industry players. Well, they can be an extremely hard bunch.

In The Rough (And the Red)

The problem with banning diamonds from one particular country is that when raw diamonds are mined, they’re usually shipped to another country to be cut and polished. There, they’re mixed in with gems from all over the world and their provenance becomes nigh impossible to ascertain.

Belgium, home of Antwerp where 84% of the world’s rough diamonds pass through, was the country holding off on Russia sanctions but has now relented, and is key to drawing up the new plans for tracking down diamonds’ origins. The Belgian government is close to announcing a traceability system, but 16 major diamond manufacturers and traders have written a feisty letter accusing the Antwerp World Diamond Centre (AWDC) of lacking “transparency, accountability and inclusivity” in its plans. Cutting.

No matter the outcome, Russian diamonds also are contending with market forces. Russian diamond miner Alrosa PJSC announced on Wednesday it’s halting sales of rough diamonds this month and next, citing weak demand. The rough diamond trade as a whole has been feeling a bit of a pinch lately:

  • At the beginning of this month, Bloomberg reported that rough diamonds were experiencing a “pricing free fall” as demand for lab-grown gems eclipsed gems dug from the Earth. Incidentally, canary futures are also down.
  • Diamond giant De Beers brushed the price fall-off as a bit of normal market fluctuation. “There has been a little bit of cannibalization,” Paul Rowley, head of De Beers’ diamond trading business told Bloomberg, but he added: “We see the real issue as a macroeconomic issue.”

Timing’s Everything: Although the market for rough diamonds has lost its shine a little lately, we don’t necessarily need to take Alrosa’s justification at face value, given the timing. Benjamin Moll, an economics professor at the London School of Economics, pointed out to The Daily Upside that Alrosa is majority state-owned. “Whenever a company controlled by the Russian state puts out statements justifying and rationalizing decisions like this, one should take these justifications with a bucket of salt,” he said. Well, that’s one crystal that’ll come a bit cheaper at least.