Editor’s Note
This article examines Russia’s significant role in the global diamond trade and the international efforts to impose sanctions on this lucrative sector.
Russia is one of the largest producers of diamonds. One in four diamonds worldwide comes from Russia. For President Putin and an oligarch, it’s a billion-dollar business.
The EU and the G-7 now want to impose sanctions on Russian diamonds. The fact that they don’t exist yet has a reason: Many stones from Russia are processed and sold in Belgium. Billions are at stake there too.
With gloves, employees drape jewels on velvet in the window of a shop in the diamond district in Antwerp. The Belgian port city has been a hub for the business with the valuable gemstones since the 15th century. According to the Antwerp World Diamond Centre, 37 billion euros are turned over here discreetly and confidentially every year. When asked where a diamond comes from, a jeweler answers with a laugh:
His reticence has reasons, his laugh is awkward.
Sigal Vantzovski, owner of Binson Diamonds in Antwerp, explains that the rough diamonds come from Angola, Congo, Sierra Leone, South Africa – and from Russia. The rough stones are brought to Belgium to be polished in manufactories here. The diamonds are then processed into pieces of jewelry and sold, among other places, in her shop.
It is a noble niche market – with high billion-dollar revenues. One of the big beneficiaries continues to be Russia – despite the murderous war of aggression against Ukraine. The European Union has imposed numerous sanctions against Russia, against Russian companies and individuals since the start of the war. The import of certain goods such as gold, vodka and caviar was also stopped – but the import of Russian diamonds was not. This is now set to change.
The EU Parliament and the G-7 of the major Western industrialized nations have decided that Russian diamonds should also be subject to sanctions. The fact that this is only happening now has a reason.
According to the Ministry of Finance, Russia exported over 48.6 million carats of rough diamonds abroad in 2021. That was the highest volume since the start of the observation period in 2007. The turnover in money was not quantified. The most important export destinations: The United Arab Emirates and Belgium.
Belgium is the country whose capital, Brussels, also hosts the EU headquarters. It therefore plays a key role in the global diamond industry – and long campaigned for Russian stones to be excluded from sanctions against the warring country.
says Koen Vandenbempt, dean of economics at the University of Antwerp. A stop on the import of Russian rough diamonds would cause an industry in Europe to be lost and relocate to Dubai or Mumbai in India, where less value is placed on transparency or sustainability, says Vandenbempt.
Countries like India, Israel or the United Arab Emirates have not joined a boycott against Russia. Therefore, the Russian stones would ultimately find their way into the world market via these countries, argues Joachim Dünkelmann from the German Federal Association of Jewelers, Jewelry and Watch Retailers (BJV).
The Russian government benefits from the diamond boom. One of the largest producers is the Russian diamond giant Alrosa. According to its own account, it is “partially” owned by the state. Experts estimate the state’s shares in Alrosa at about 33 percent.
Alrosa accounts for 95 percent of Russian diamond production and simultaneously 27 percent of global production. At least one in four stones on markets worldwide comes from Russia. The company operates several mines in the Sakha region in northeastern Russia as well as in Arkhangelsk in the northwest and is involved in mines abroad – for example in Angola.
In contrast to Vandenbempt, raw materials expert Larisa Stanciu emphasizes that a ban on the import of Russian rough diamonds would mean less money flowing into the state treasury via Alrosa.
Alrosa CEO Sergey Ivanov is also no stranger. He was among the first oligarchs from the circles around President Vladimir Putin to be sanctioned by the United States. While the European Union hesitates, the USA imposed sanctions against Alrosa shortly after the outbreak of war and later tightened them further.
Vandenbempt rants: Europeans are naive to think Americans would do something that harms their own economy. Jewelry sales in the USA account for 50 percent of the world market. Therefore, there is a loophole in the US functional regulation. A not entirely clean formulation states that if a diamond has been significantly altered in another country, it may claim that region as its origin.