Editor’s Note
New EU sanctions on Russian diamonds, effective March 1, are causing significant customs delays and supply chain disruptions in Antwerp, the world’s key trading hub. While diamond prices have yet to react, analysts anticipate market impacts later this year.
The new sanctions against Russian diamonds, which came into force on March 1, have caused problems at Belgian customs. The attempt by local authorities to control all stones destined for the international diamond trading center in Antwerp has led to higher costs for traders and supply interruptions. So far, the sanctions have not led to an increase in diamond prices or a decrease in prices for Russian rough diamonds, but analysts expect prices to rise in the second half of the year.
The new European sanctions against Russian diamonds, which came into force on March 1, have caused problems for the entire industry. The new measures are in addition to the import ban on Russian diamonds imposed as part of the 12th G7 summit. The sanctions now prohibit the supply of Russian diamonds processed in other countries up to one carat to the markets of the EU and G7 countries [direct import is already banned]. From September 1, an import ban will apply to lab-grown diamonds as well as jewelry and watches made from Russian rough diamonds.
As reported by the news agency Rapaport citing Antwerp traders, diamonds have been held at Belgian customs for more than a week since March 1 because local authorities want to ensure the stones are not from Russia. In early March, 146 companies signed a letter of complaint to the Antwerp World Diamond Centre (AWDC), which operates the Antwerp diamond office. The letter stated that while the companies support the sanctions, their imposition has had a negative impact on business, as deliveries have slowed and costs have increased.
Among the goods blocked at Belgian customs were diamonds coming directly from African producing countries, diamonds from processing plants, and goods returning to Antwerp from fairs outside the EU.
Sanctions against the Russian diamond industry were imposed in 2022 when Alrosa was placed on the SDN list and the US banned the direct import of rough and polished diamonds from Russia. Alrosa managed to restructure its business: the majority of Russian diamonds are cut in India and sold worldwide from there as Indian diamonds. As shown in Alrosa’s annual reports, the company has remained stable despite the impossibility of conducting business in dollars. Revenue increased by 9% to 322.6 billion rubles, while net profit fell by 15% to 85.2 billion rubles.
As early as June last year, new Alrosa CEO Pavel Marinichev, anticipating increased sanctions pressure from the West, stated that the company would “look at new emerging markets that previously did not seem to be a priority for us, but are now growing rapidly.”
The new sanctions could theoretically have a greater impact, as they prohibit not only direct supplies of Russian polished diamonds to Western markets, but also supplies of stones from third countries. The EU market has historically played an important role in Alrosa’s business, accounting for one third of revenue in 2021. By 2023, the situation had already changed drastically: after nine months, rough diamond supplies from Russia to the EU had quadrupled to 285 million euros.
Market participants assume that the impact of the sanctions will depend on the introduction of a system to trace the origin of diamonds, which does not yet exist. For now, the market has no choice but to make gloomy forecasts. The Gem & Jewellery Export Promotion Council of India (GJEPC), the World Federation of Diamond Bourses (WFDB), the World Diamond Council (WDC), and the International Diamond Manufacturers Association (IDMA) pointed out in an open letter that it would harm the industry if all non-Russian diamonds were sent to Antwerp for certification.
The authors state that non-Russian diamonds would become more expensive due to more complicated and costly logistics and the need to pay for certification. As a result, Russian diamonds will have a competitive advantage in markets that do not support the sanctions. The trade journal Rough & Polished wrote that Western consumers in Dubai, Shanghai, and Mumbai pay 30% less for stones of similar size and quality than in the USA. Although North America is the world’s largest market for polished diamonds, the UAE, China, and India together account for 30% of global gemstone consumption.
To avoid negative impacts, the authors of the letter call for the traceability and certification technology currently being introduced by the EU to be made available to all diamond producing and consuming countries except Russia. Small mining companies should also have access to this technology, as well as the ability to send their rough stones to any cutting center of their choice.