It has been a year and a half since Russia’s invasion of Ukraine, which had significant implications for the global diamond market. Russia, being the largest diamond exporter in terms of volume, saw its diamond industry face consequences due to various sanctions imposed by countries like the United States and Britain. The European Union also attempted to enforce sanctions, but was hindered by Belgium, as it feared losing its competitive edge in the diamond trade.
Now, the Group of 7 nations and the European bloc are planning to announce further sanctions that would prohibit the import of gemstones mined in Russia, including those cut and polished in other countries. However, current regulations are not as strict as they may seem, as most diamonds are cut and polished in India, making it difficult to track their origins.
The jewelry industry is prepared for these new sanctions, with luxury players like Richemont and LVMH Moët Hennessy Louis Vuitton already refusing to buy Russian stones unless their provenance is disclosed. The G7 nations, which account for almost 70 percent of diamond purchases, are aiming to target Alrosa and Russia’s diamond revenues that could be used for their war efforts.
The formal announcement of the G7 sanctions is expected in September, with negotiations still underway regarding the tracking and tracing of individual gemstones and customs paperwork. If there is a shortage of non-Russian diamonds, jewelry shoppers may see gradual price increases.
However, the diamond industry faces challenges in categorizing stones by origin, especially considering the complex global supply chain and the numerous supply chain loopholes. It can take years to reorganize this supply chain and ensure all diamonds are accurately categorized.
Another challenge is that the new sanctions may only cover finished stones of one carat or larger, leaving smaller gems unaffected. Russian diamonds, which are often sold in large quantities, are now finding new import locations in China, former Soviet states like Armenia and Belarus, and Dubai.
India, the hub for cutting and polishing rough stones, continues to handle Russian diamonds without facing sanctions. The Indian government has increased investments in lab-grown diamonds to mitigate potential damage to the local trade and maintain employment.
The diamond industry is currently facing a lackluster market, with prices down 18 percent from their all-time highs. Sanctions negotiators and the wider industry are exploring new technologies to determine the origins of stones more effectively. Customs officers currently rely on government-issued certificates, but there is a need for more advanced and verifiable solutions.
As the G7 nations and the European bloc prepare to announce these new sanctions, the diamond industry is bracing for further changes in the market. While challenges and uncertainties exist, efforts are being made to ensure ethical and transparent practices within the industry.
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