Diamond rings and earrings from Antwerp, Belgium.
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Seven of the world’s most developed economies, known as the Group of Seven, are discussing sanctions on Russian diamond exports – a complex measure that could raise prices for the luxury item.
Russia’s diamond exports have largely escaped international sanctions following Moscow’s full-scale invasion of Ukraine last February. Despite calls to the contrary from Ukraine and some European countries, and several rounds of measures targeting Kremlin energy exports, banks and oligarchs.
In 2021, Russia earned about $4.7 billion from diamond exports, According to data from the Observatory of Economic Complexity. This makes Russia the eighth largest exporter of diamonds in the world. Diamonds are not as commonly traded as oil or gold, but they represent a large market beyond jewelry. These stones are also used in drilling, dentistry, computers, and more.
Some countries – such as Belgium, which buys large quantities of Russian diamonds – want “global measures” on Russian exports, rather than EU-specific measures, to ensure sanctions do not hurt them disproportionately.
“The debate has been going on for some time because there is a clear risk that Russia could divert its exports to non-participating countries,” Edward Gardner, a commodities economist at Capital Economics, told CNBC via email.
“However, if sanctions are imposed in such a way that (a) they are difficult to circumvent, then we could see less Russian supply entering the market and higher prices,” he said.
Europe’s diamond industry is wary of diverting gem trade to other markets such as Dubai, as the commodity could pay higher prices and fail to significantly dent Russia’s trade revenues.
So the G-7 is discussing how technology can be used to trace the original source of the gemstone.
In March, the United States and the European Union said in a statement that “Russia continues to diamond trade, and both sides “remain committed to the economic consequences of Russia’s unprovoked war in Ukraine. “
Hans Merket, a Belgian natural resources researcher at the International Peace Information Service, an independent research group, said sanctions on Russian diamonds were only a matter of time. If it’s not in the next package, then the next one, he said.
European Commission President Ursula von der Leyen spoke on Tuesday of the 11th package of sanctions against Russia, which is currently being debated in the capitals of the 27 EU countries, but she made no mention of diamonds that would be a major part of the round .
Instead, the next set of measures will focus on “combating circumvention”.
In the rounds of sanctions so far, EU measures have targeted Russian oil, coal, banks, wealthy individuals and the media, among other things.
Tobias Gerke, a senior policy fellow at the European Council on Foreign Relations think tank, told CNBC there were “a lot of problems” with sanctions enforcement.
The measures against Russia so far have been “more punitive sanctions,” he said.
“There is no question that Russia will still be able to finance the war for many more years,” Gerke said, even with diamond sanctions in place.
According to Eurostat, the European Union imported about 1.4 billion euros ($1.5 billion) of Russian diamonds in 2022. This is down from 1.8 billion euros in 2021.
Russian State Mining Company Alrosa Reports Rough and Polished Diamond Sales for January 2022 $325 million and spoke of “strong demand” for the commodity. The company has not released further results since then.
Last April, us treasury department The previous sanctions against Alrosa were expanded. Britain, Canada and New Zealand have taken similar steps against one of the world’s largest mining companies.
European ambassadors discussed further sanctions against Russia on Wednesday. Poland’s ambassador to the EU, Andrzej Sados, said he would ask the bloc’s executive body why diamonds from Russia were not included in the draft proposal, according to a spokesman.