Editor’s Note
This article details the imminent implementation of a new global certification system for diamonds, a measure tied to sanctions that poses a significant challenge to Antwerp’s diamond industry. The reporting from Brussels provides timely insight into this critical economic development.
The countdown has begun for the implementation of a global certification system to trace precious stones throughout the entire supply chain.
A replica of a diamond displayed at the Jewellery and Diamond Week inaugurated in Antwerp, the European diamond capital, on November 24.
OLIVIER MATTHYS / EFE
Beatriz Navarro | Brussels
Correspondent
The most feared day for the European diamond industry, concentrated almost exclusively in the Belgian city of Antwerp, has arrived. The European Union has today agreed on the twelfth round of sanctions against Moscow in response to the war in Ukraine and, this time, after many attempts, it includes a ban on the trade of diamonds originating from Russia. “Blood diamonds,” Belgian Prime Minister Alexander De Croo recently called them. The measure has been adopted in coordination with the G7 countries and will come into force in phases on January 1, 2024, with the aim of implementing a new traceability system to prevent the laundering of Russian precious stones in other global hubs like India, a practice that to date has rendered the sanctions approved by the United States alone in April 2022 useless.
The decision adopted today by the ambassadors of the Twenty-Seven specifically prohibits the “direct or indirect import, purchase, or transfer of diamonds originating from Russia” and fundamentally impacts one member state, Belgium – in 2021, 30% of the rough diamonds that passed through the Antwerp exchange, through which almost 85% of the world’s trade in this product flows, came from Russia – but it also directly targets a major source of funding for the Russian invasion of Ukraine.
Russia is the world’s largest producer of diamonds and the company that markets them, Alrosa, is publicly owned. According to the European Commission, in recent years Russia has earned about $4.5 billion annually from this trade, hence the strong pressure exerted by Kyiv on the EU to act against this lucrative business and Antwerp’s fear of losing competitiveness against hubs like Dubai or Mumbai if the measures adopted only penalized European operators. Despite US sanctions, Russia has maintained a level of exports similar to pre-war levels because, once polished, diamonds lose the passport of their country of origin and its stones have simply come to be sold as Indian on the world market.
Until recently, unlike other precious stones, there was no way to distinguish the geographical origin of diamonds by observation, but in recent months various companies have developed technologies that allow this, some based on artificial intelligence techniques. Relying on these innovations, the G7 and the EU aim to promote a traceability system that allows tracking the origin of stones throughout the entire supply chain, from when they leave the mine until they reach jewelry stores.
The measure will be deployed gradually. From January 1, 2024, restrictions will apply to direct imports of diamonds of one carat or more that have been mined, processed, or produced in Russia. From March 1, it will be refined a bit more and indirect imports will be prohibited; that is, the buying and selling of Russian diamonds processed in third countries. Throughout next year, a verification and certification mechanism will be launched to trace the provenance of the stones. The certificate will be mandatory for all diamonds purchased or sold in Europe from September 1, when the measure will begin to affect smaller stones, from half a carat, and those manufactured in laboratories.
The uncertainty about the future of the sector (the deployment of these technologies could significantly reduce the value of certain diamond inventories, operators warned a year ago) has ended up taking its toll in recent months on Antwerp, where the trade in these precious stones has been declining for months, hence the sector’s employers’ association, the Antwerp World Diamond Center (AWDC), has given its approval to the Union’s decision. The traceability process promoted by the G7 and the EU will in fact rely on the Belgian diamond industry, which will be responsible for certification.
The Belgian government intends to incorporate all stones, in their rough form, throughout the entire production chain, into a traceability system registered with blockchain technology with a view to processing and selling them through a limited number of centers. This option would penalize diamonds extracted from small mines or polished in a completely artisanal manner, hence other players in the sector prefer systems based on declarations of honor, such as those promoted following the Kimberley Process against diamonds from certain African countries, an alternative against which the major operators in Antwerp and the EU have always positioned themselves.
During the first eight months of 2024, “different verification and certification systems will coexist,” explain community sources, but from September 1, every diamond purchased and sold in the EU must have a certificate of origin based on blockchain technology validated in Antwerp.