Reuters
Eleven packages of sanctions against Russian interests in the EU countries could not stop the import of ALROSA diamonds. They succeeded only on the twelfth attempt: as of January 1, all Russian diamonds in the Old World are formally banned.
The idea was resisted most of all by the Belgian diamond lobby, since Antwerp is one of the world’s and the first European hub of gemstone trading. This is an industry sector with a turnover of 40 billion euros which employs 30,000 people in Belgium alone.
A quarter of all rough diamonds came to Antwerp from Russia. The annual volume of transactions amounted to about 2 billion dollars.
Lithuania and Poland insisted more than anyone else that diamond operations should be banned. There was even a document according to which ALROSA financed the modernization of the B-871 submarine with cruise missiles.
But gemstones are not the proverbial Polish apples, but a whole industry, where not only Belgians, but the whole world, including the United States, their largest buyer, will suffer. As a result, the «diamond» sanctions were included in the 12th package.
«The EU imposes a ban on the direct or indirect import, purchase or transportation of diamonds from Russia. This ban applies to diamonds of Russian origin exported from Russia, transiting through Russia and Russian diamonds processed in third countries», the European Commission communiqué said.
The thing that was supposed to happen took place. According to Brussels’ instructions, supported by G7 experts, all Russian diamonds are banned from January 1. But it was already clear during the discussion of sanctions that the stones would seep into the market.
Therefore, the following scheme came into effect on March 1. Any raw diamonds, and the main miners are Botswana, Russia, Canada and Angola, are sent to Antwerp, where their non-Russian origin must be confirmed. This procedure takes 24–48 hours.
Then they travel to India, the world’s main cutting center. Then they are bought by middlemen, who are mainly based in Antwerp, but may also be in Dubai, Mumbai and Tel Aviv. And from there they are bought by small middlemen, jewelry stores and trading houses.
Now the measure concerns stones weighing more than 1 carat, and from September 1, the threshold will be halved — the same will have to be done for diamonds weighing 0.5 carats. And there are about 4 times more of them.
In fact, a kind of «hole» has formed in Antwerp, through which it is very difficult to get through. Instead of the agreed maximum of two days, the process takes two weeks. Firstly, because there is a huge amount of paperwork to fill out, and secondly, the diamonds are almost impossible to distinguish.
«Here are four handfuls of stones», says Antwerp diamantaire (that’s not a cutter, but a dealer), Hari. — «They are from Angola, Canada, Congo and Botswana. If I took all the blacks out of the Canadian pile and mixed the rest, no expert alive today would be able to tell what is what and where it came from. Physically they are all the same».
What happens next is as follows. Since the diamond market is expensive, it is very «short», reactive and designed for the «buy and sell in 48 hours» scheme. If you take, let’s say, a loan of millions of dollars to buy raw materials at 10–11 percent and wait for 2 weeks for certification, then all this time you will have to pay good interest every day.
As a result, in the time that has passed since the beginning of the year, many diamantaires and cutters in Antwerp have already realized what is going on and started moving to other diamond centers.
«There used to be 4,000 diamond cutters in Antwerp», says Pieter Bombee, one of the oldest craftsmen. — «Now there are 120. Most of the production has gone to India, where labor is cheaper. Now, as far as I know, ten more companies are preparing to move there just because of the new rules».
It has already been estimated that if each shipment is delayed by 2–3 weeks, it will cost the industry about half a billion dollars over the same period.
U.S. retailers of finished diamonds — which represents 55 percent of the consumer, end market — have already moved their buying business from Antwerp to Mumbai. The British ones are not obliged to process diamonds in Antwerp if they are destined for the UK, so they can somehow save themselves too.
It is clear that the registration system was crude. It was decided to develop a new one by September 1. There are two competing approaches to how diamonds should be registered.
The first one is represented by the world giant De Beers, the World Diamond Council and India, where a huge amount of raw materials are concentrated. They believe that it should be a computer system similar to the SWIFT banking system, where every participant in the process anywhere in the world can see the path taken by each shipment.
Europe and Belgium (here it is reasonable to talk about Belgium apart from the EU, as it is the strongest diamond lobby in Europe and it acts as a separate entity), on the contrary, believe that the system should be based on physical customs checks. That is, it will be necessary to open the packaging of each batch of rough diamonds, register their weight, value and so on. Cutters and polishers who process Russian raw materials should also register and report on their work.
Characteristically, the volume of Russian stone exports to Antwerp fell by more than 95 percent, but the prices of rough stones did not fall. This suggests that the market has found alternative ways of working. Other major global centers — India, Dubai and Israel — have not imposed any sanctions. Meanwhile, ALROSA did not notice any significant fluctuations in its sales.