The World Federation of Diamond Bourses (WFDB) has issued a compelling plea to the G7 nations and the European Union, urging them to reconsider the potentially “irreparable” repercussions of their ban on diamonds sourced from Russia.
Russia holds a dominant position as the largest global supplier of uncut diamonds by volume. In response to Moscow’s military actions in Ukraine, the international community has imposed new sanctions specifically targeting transactions involving Russian diamonds.
In December, the G7 nations, comprising Canada, France, Germany, Italy, Japan, the U.K., and the U.S., announced a comprehensive ban on Russian diamonds effective from January 1st. This ban is set to be followed by a phased implementation of restrictions on indirectly imported Russian diamonds commencing from March 1st. By September, the establishment of a new system for verifying the origins of these gems is anticipated, although details regarding the verification process and its location remain uncertain.
Yoram Dvash, President of the WFDB, emphasized the potentially detrimental impact of these sanctions on the global diamond industry. “The G7 must understand that the direction they have chosen will cause great damage to the world diamond industry. We hope that the concerns we are voicing will convince the G7 governments that an alternative solution must be found,” Dvash stated in a Feb. 28 communication to The Northern Miner.
The critique of the sanctions coincides with a backdrop of diminished demand for diamonds from key markets such as India and China, coupled with a decline in prices for rough stones, estimated by the Zimnisky Global Rough Diamond Price Index to have fallen approximately 25% from their peak in early 2022.
Industry leaders express apprehension that the enforcement of these sanctions could precipitate logistical, operational, and financial challenges. Notably, one new rule stipulates that non-Russian diamonds must now undergo certification in Antwerp, Belgium before being dispatched to other markets. Concerns are raised about potential supply bottlenecks and the creation of unbalanced advantages favoring certain players to the detriment of others.
“While strongly agreeing that the time has come for the industry to be able to trace the origin of their diamonds, we should be working together to meet these objectives but feel that the process that has been suggested will cause irreparable harm to the non-Russian industry,” stated presidents and members of the 27 diamond bourses within the WFDB in an open letter.
The WFDB is actively seeking industry consensus to address the challenges at hand. Dvash stressed, “Sanctions should work in the right direction, punishing the intended party and not the entire industry.” He further noted concerns that the sanctions could inadvertently enhance the desirability of Russian diamonds due to increased costs and reduced supply of non-Russian alternatives.
Moreover, the letter raised objections to designating Antwerp as the sole verification point, contending that such a move would offer no added value to the objectives of the G7 member states while imposing significant restrictions on all non-Russian diamonds, with profound implications for the industry.
As discussions intensify, there’s a growing call for more explicit guidance and a global, collaborative approach to ensure transparency and ethical sourcing in the diamond trade. Stakeholders emphasize the need for solutions that do not centralize trade to a single point and advocate for the adoption of technology facilitating the ethical tracking of diamonds across all regions, including support for artisanal and small-scale miners.
Amidst these developments, De Beers highlighted in a Feb. 22 market update that industry conditions are expected to remain challenging in the short term but expressed optimism about the long-term outlook. The company anticipates increased emphasis on diamond origins, particularly with the upcoming G7 restrictions, which may bolster demand for diamonds tracked via their blockchain platform, Tracr. However, concerns persist regarding the global supply of rough diamonds, which may decrease due to aging mines and limited discoveries.
Additionally, the market for lab-grown diamonds is experiencing a notable price decline, impacting manufacturers and potentially reducing retail prices. This trend could enhance the perceived value of natural diamonds compared to their lab-grown counterparts.
