Russia’s Finance Ministry is considering new purchases of rough diamonds from Alrosa for the State Precious Metals and Gemstones Repository (Gokhran) in 2025, Deputy Finance Minister Alexei Moiseyev told reporters on the sidelines of the Moscow Financial Forum.
“We are considering this possibility,” Moiseyev said in response to possibly resuming purchases. “In order to allow Alrosa the opportunity to be calm and not feel obliged to sell on the market in order to maintain its liquidity position. Because the market looks alarming.”
The government could use budgetary allocations for precious metals and stones to purchase rough diamonds. The purchase limit is planned at 51.5 billion rubles for next year, Moiseyev said.
It became known in March that Alrosa and the Finance Ministry had concluded an agreement to buy out part of the raw materials produced in 2024 and completed a transaction for the first consignment of rough diamonds. There have been no reports since then regarding Alrosa purchasing diamonds from Gokhran.
“There are no plans for this year, though we are considering the possibility for next year,” Moiseyev said. “In general, this is all confidential, so we may not announce it.”
Russian exports of rough diamonds to India increased by well over a fifth, to 4.1m carats, during the first six months of the G7 sanctions.
Total sales were up by 22.23 per cent for January to June 2024, according to the Indian Ministry of Commerce and Industry. But revenue fell by 15.22 per cent, as prices keep declining, from $614m to $520m.
Russian exports for June alone were 347,620 carats, an increase of almost 32 per cent on the same month last year.
The G7 and EU nations imposed sanctions on all Russian diamonds of 1.0-cts and above, regardless of where they were cut and polished, from 1 January. The threshold was lowered to 0.50-cts and above from 1 September.
Rough diamonds imported from Russia to India can only be sold to markets beyond the G7 and EU.
India’s diamond industry has been calling on the government to allow direct payments to Russia so it can more easily buy sanctioned goods.
The Office of Foreign Assets Control (OFAC) has issued new licenses under the Russian Harmful Foreign Activities Sanctions Regulations, allowing for the sale of diamond jewellery and loose gem-quality diamonds imported before recent sanctions were implemented. This significant policy shift permits goods that were previously prohibited to re-enter the market.
Under the new guidelines, diamond jewellery purchased before March 1, 2024, as well as loose diamonds of 1 carat or larger bought before that date, and those of at least 0.50 carats purchased before September 1, 2024, can now be sold. The relaxation for loose diamonds will remain in effect until September 1, 2025.
However, starting September 1, 2024, the next phase of G7 diamond sanctions will impose restrictions on all goods of 0.50 carats or above from Russia, regardless of where they are cut and polished. This phase of sanctions is set to take effect next Sunday, despite substantial opposition from various industry stakeholders.
In response, the Jewelers Vigilance Committee has reported that the United States is considering supporting a delay in the implementation of these sanctions. This potential delay, which aligns with the European Union’s proposed extension to March 1, 2025, aims to provide additional time to resolve the intricacies of the sanctions and their impact on the diamond trade.
Minespider, a leading traceability platform for tracking minerals and raw materials, and Star Diamond Corp., a Canadian corporation engaged in the exploration, acquisition, and development of mineral properties, have partnered to launch the Diamond Passport and comply with the new G7 rules.
G7 countries have put a direct ban on Russian diamonds and agreed to establish a verification and certification mechanism for rough diamonds to prove their origin, ensuring diamonds are not mined, processed, or produced in conflict zones.
Having over 6 years of traceability experience with companies like Google, Minsur, LuNa Smelter, and others, Minespider introduced its own Diamond Passport in March this year. The Diamond Passport contains all key information about the diamond, including its provenance data, the diamond’s unique DNA, such as size, shape, color, carat, clarity, cut, and specific inclusions (natural flaws or imperfections), certificates from gemological laboratories and other documentation about the diamond.
“Through our partnership with Star Diamond, we intend to significantly strengthen the company’s position in diamond mining at large-scale mining spots in Canada. The diamond industry requires a new reliable mechanism for the verification and certification of rough diamonds based on traceability, and we are proud to support this significant change with our robust technology and extensive experience in mineral traceability.” said Nathan Williams, CEO and Founder, Minespider.
Star Diamond Corporation is striving to ensure that diamond mining in Saskatchewan is conducted responsibly, with a focus on improving environmental performance and accompanied by strong social performance.
“Star Diamond is excited to partner with the team at Minespider as we prepare for the eventual production and retailing of our world-class conflict-free Saskatchewan diamonds. It is our aim to provide wholesalers/retailers and end purchasers with a complete provenance report on all of our gem-quality diamonds. This will ensure that end purchasers may rest assured that the diamond they purchase for their loved one is conflict-free and ethically produced in Canada.” added Ewan Mason, President and CEO, Star Diamond Corporation.
Antwerp World Diamond Centre (AWDC) chief executive Ari Epstein resigned unexpectedly on Thursday, the AWDC’s board of directors said in a statement.
A spokesperson for AWDC, Belgium’s main diamond industry group, said on Friday that Epstein, who had been CEO for 13 years, did not wish to communicate about the reason for his sudden departure, but Belgian financial newspaper De Tijd reported that Russian diamond sanctions had been the cause of conflict between the diamond sector and the Belgian government.
AWDC did not say who would replace Epstein as CEO. Epstein did not immediately respond to a request for comment sent via LinkedIn.
Following an EU ban on Russian-origin diamonds that took effect on March 1, rough and polished diamonds have to enter the EU and G7 countries with documentary proof and declarations that the stones are not of Russian origin.
Antwerp’s diamond dealers have said they are facing long and costly delays as a consequence.
The US and the UK will require importers of polished diamonds weighing 1 carat and above to apply a “self-certification” declaring the stones are not of Russian origin, while the UK will also expect documentary proof in some cases.
The new US guidelines are a follow-up to last month’s directive by the US Office of Foreign Assets Control (OFAC) implementing tighter restrictions on loose Russian diamonds and those set into jewelry that had been in part or fully manufactured or “substantially transformed” in another country. The rules address a loophole that had been in place since the US first imposed sanctions in March 2022.
The US Customs and Border Protection released an update to the bans beginning March 1, calling for importers to upload a PDF on official company letterhead, it said last week. For nonindustrial diamonds, the self-certification should state: “I certify that the nonindustrial diamonds in this shipment were not mined, extracted, produced, or manufactured wholly or in part in the Russian Federation, notwithstanding whether such diamonds have been substantially transformed into other products outside of the Russian Federation.”
Those bringing in diamond jewelry or unsorted diamonds should submit a document saying: “I certify that the diamond jewelry and unsorted diamonds in this shipment are not of Russian Federation origin or were not exported from the Russian Federation.”
The UK government’s Department for Business and Trade has followed suit, noting that supplier declaration of compliance with the sanctions “may be acceptable,” but that “traders should be prepared to provide documentation to demonstrate evidence of a stone’s supply chain.” That evidence can include the original Kimberley Process (KP) certificate issued when shipped from the diamond’s origin country, an invoice, a certificate of origin issued by a chamber of commerce, or a diamond origin report. The government also distributed rules for diamonds manufactured in another country that were outside of Russia before March 1.
Last week, the London Diamond Bourse (LDB) held an emergency meeting to discuss the ban due to the “absence of clarity and guidance…as to how we might conform with the restrictions…in terms of paperwork and provenance” before the March 1 launch, it said. The exchange noted it was in an “invidious” position and felt its members and the greater trade should avoid importing polished loose diamonds above 1 carat until there is “less ambiguous guidance.” The bourse may put out updated guidance following the release of the new rules.
While neither the US or the UK has given a timeline as to how long these guidelines will be in effect, it’s likely the less restrictive rules will only be valid during the “sunrise period,” which ends August 31 and allows importers time to become accustomed to the new measures. The European Union has stated that it would accept documentation proving non-Russian origin during the initial timeframe but will expect all stones passing through Antwerp to be placed on a traceability system beginning September 1. At that point, restrictions in all Group of Seven (G7) nations — Canada, France, Germany, Italy, Japan, the US and the UK, as well as the EU — will expand to include diamonds weighing more than 0.50 carats.
For its part, Canada also produced a statement noting it would comply with the March 1 curbs against indirect imports of Russian-origin diamonds.
“Canada has been at the forefront of imposing economic barriers on the Putin regime,” said Mélanie Joly, the country’s minister of foreign affairs. “Along with our allies and partners, we have imposed severe sanctions on the Russian regime, and we will continue to do so to hold [Russian President Vladimir] Putin and his enablers to account.”
The current self-certification rules are likely to provide a temporary solution to concerns industry groups voiced over a proposal that all diamonds would be funneled through Antwerp for screening and certification prior to arriving at their destination countries, a move the organizations feared would harm the rest of the industry.
On Saturday, India’s Gem and Jewellery Export Promotion Council (GJEPC) sent a message to members urging them to “review guidelines meticulously,” and “exercise utmost caution when dispatching shipments to G7 countries.” The council also advised exporters to “maintain meticulous records of all documents of import and purchase.” A large portion of the world’s rough is manufactured in the country before making its way to consumer nations.
“It is crucial to emphasize that while some of the G7 countries/EU have already issued guidelines to their importers, a few are still in the process of finalizing theirs,” the GJEPC said. “We believe even the issued ones are initial guidelines and are subject to changes [and] updates during the course of time.”
Alrosa’s revenue rose in 2023 as the Russian diamond miner continued to sell despite sanctions.
Sales increased 9% to RUB 322.57 billion ($3.55 billion) for the year, the company reported Wednesday. However, net profit fell 15% to RUB 85.18 billion ($939.3 million).
Alrosa and its diamonds have been the subject of sanctions by the US and other Western countries since Russia’s war in Ukraine began in February 2022. Major markets including India and China still permit imports of Russian diamonds. On March 1, the US will introduce stricter measures banning the import of 1-carat and larger stones of Russian origin, even if they went through manufacturing in a third country.
The miner’s announcement was its second full results statement since March 2022. On both occasions, it withheld information on the destination of its sales, which usually shows Belgium, the United Arab Emirates (UAE) and India to be the largest buyers.
Last week, De Beers reported a 36% drop in 2023 revenue for a total of $4.27 billion, with the diamond unit recording a net impairment of $1.56 billion, reflecting a weaker demand outlook.
Russia’s sanctions-hit diamond producer Alrosa, opens new tab on Wednesday reported 2023 net profit of $925 million, down 15.2% from the previous year, Turnover was up 9.2% at 322.6 billion roubles.
Group of Seven leaders agreed in December to ban non-industrial diamonds from Russia by January, and Russian diamonds sold by third countries from March.
The European Union added Alrosa, Russia’s biggest diamond producer, to its sanctions list in January as part of punitive measures it has imposed on Moscow over the war in Ukraine.
The US Treasury has imposed sanctions against nearly 300 Russian entities in its latest round, including a company specializing in the export of rough and polished diamonds.
The new series of restrictions the Office of Foreign Assets Control (OFAC) has applied marks the two-year anniversary of Russia’s invasion of Ukraine, and is also in response to the death of opposition politician and anti-corruption activist Aleksei Navalny, the Treasury said last week.
OFAC has targeted Almazyuvelirexport, Russia’s state-owned exporter of rough and polished diamonds and precious metals. The company was designated for “operating, or having operated, in the metals and mining sector of the Russian Federation economy,” it added.
Other companies that were banned included financial institutions, the defense industry, companies “providing backdoor support for Russia’s war machine,” and those connected to Navalny’s imprisonment.
The diamond industry is bracing for significant change in 2024.
New sanctions on Russia will fast-track the adoption of traceability programs across the supply chain. Should they wish to sell those diamonds into the Group of Seven (G7) countries, companies will have to prove their goods were sourced from non-Russian production.
On December 6, the G7 — comprising Canada, France, Germany, Italy, Japan, the United Kingdom, and the United States — announced its latest sanctions, aimed at “limiting Russia’s ability to fund its illegal war,” the joint statement read.
Diamonds featured prominently in this round of measures, perhaps because the group had delayed a policy decision on how to handle Russia’s diamond supply until then — nearly two years after the war in Ukraine began on February 24, 2022.
Initial sanctions targeted Russia’s oil and gas industry as well as restricting its banking system and the transfer of funds, while touching on diamonds in an ambiguous way.
Still, diamonds contribute to Russia’s government revenue and therefore to the war effort, causing the sector to be entangled in the sanctions discussion.
The Russian Federation owns a 33% stake in mining company Alrosa, the world’s largest producer of rough diamonds by volume. The company generated rough sales of $4 billion from 45.5 million carats in 2021, the last prewar publication of its earnings.
“The goal of this effort remains centered on reducing revenue that Russia earns from diamonds, which fuels Moscow’s war machine against Ukraine,” the European Commission (EC) stressed in a separate statement, which provided additional details about the sanctions.
Sanctions in place The sanctions will replace existing measures some countries implemented earlier.
The US banned imports of diamonds from Russia in March 2022, but left a loophole allowing for polished stones transformed from Russian rough in third countries. The European Union delayed implementing any restrictions out of concern such measures would place Belgium at a disadvantage in its competition with Dubai — as well as Mumbai and Tel Aviv — for market share as the premier rough-trading center. The United Arab Emirates (UAE), India and Israel have not implemented any restrictions on Russian-origin diamonds, though they export goods to those countries with a ban in place.
An EU-only import ban would not have been efficient, the EC added in its explainer. “It would have meant the death of Antwerp,” said an official who requested anonymity. “What is on the table is the survival of Antwerp.”
Consequently, the EU has been the driving force for a fully coordinated approach and timeline within the G7, the European Commission emphasized.
That effort sees the group phase in various levels of diamond sanctions.
The first stage, which took effect on January 1, banned direct imports of diamonds from Russia. On March 1, the sanctions will be extended to diamonds above 1 carat that were sourced from Russian rough but polished in a third country, addressing the loophole that existed in the original US sanctions. Finally, beginning September 1, the restrictions will include lab-grown diamonds, jewelry, and watches containing diamonds above 0.50 carats.
Traceability component The big challenge lies in how to verify that a diamond is not of Russian origin. To that end, the group will establish a “robust traceability-based verification and certification mechanism for rough diamonds,” which will be mandatory from September 1, the EC said in its statement. A pilot program for the system will begin on March 1, it added.
The idea is to create a digital twin of the real diamond in its rough state and to issue a certificate of the diamond’s origin, the commission explained. It is unclear whether that certificate will be a physical printout — as customs officials are used to — or only digital, noted another European official.
The identifying information and certificate will be entered into a stand-alone blockchain-based ledger, which will be inter-operational with several existing solutions facilitating the traceability mechanism, an EC spokesperson explained in an email.
In other words, there will be a centralized blockchain that will be fed with information from traceability service providers.
“This allows the diamond to be traced through the production process and can be presented at the time of importation of the finished diamond,” the spokesperson said.
The commission did not clarify by press time the criteria service providers will have to meet to contribute to the G7 system, or what information will be uploaded to the centralized ledger. Companies with diamond-related traceability programs include De Beers’ Tracr, Everledger, iTraceiT, the Gemological Institute of America (GIA), and Sarine Technologies.
Industry concerns The certification of goods registered on the ledger will be done in Belgium, with some exceptions being considered, an official noted.
As the only producer country among the G7 nations, Canada may be given the option to certify its own production, the official said. It is also understood that rough earmarked for beneficiation — polishing in the country of mined origin — will be exempt from passing through Belgium to be G7-certified.
De Beers is waiting for clarification on several points, most importantly whether its practice of mixing supply from its mines in Botswana, Canada, Namibia, and South Africa — known as aggregation — will be affected.
“We await clarity on how the new import requirements will be implemented in practice and will urge a sensible and practical approach to implementation that recognizes the fundamental importance of aggregation in delivering value for diamond businesses and producer countries, as well as the significance of beneficiation,” a company spokesperson said.
De Beers’ assortments will still have to be certified in Belgium, but it will be an exception in that these goods will be the only “mixed origin” ones that will be allowed, the official noted.
Yoram Dvash, president of the World Federation of Diamond Bourses (WFDB), urged the G7 to include other centers in the registration process.
It is possible to create “a more efficient and effective mechanism” by allowing other major rough diamond centers such as Dubai, Mumbai, and Tel Aviv, as well as producing countries, to conduct the inspection and registration of goods, Dvash stressed in a statement immediately following the G7 announcement.
The Industry’s Russia Crisis: Formulating Sanctions
Ready for volume Among the concerns expressed have been whether Antwerp can handle the large volumes that are expected to accompany the new mechanism. One representative estimated the system would not result in higher volumes than those with which the Antwerp Diamond Office has dealt in the past. That official referenced 2021 as a comparative base, when Belgium imported 68.1 million carats of rough valued at EUR 6.49 billion ($7.1 billion), and exports reached 90.7 million carats worth EUR 7.48 billion ($8.18 billion), according to data the National Bank of Belgium published.
Before the war in Ukraine, Belgium was the largest buyer of Russian rough, importing 27.1 million carats worth EUR 1.57 billion ($1.72 billion) in 2021 — 24% of its total rough imports by value and 40% by volume (see graph). Excluding the Russian goods will mean Antwerp won’t see a significant spike compared to 2021, the official noted. Belgium’s imports of rough from Russia declined 19% in 2022 and have slumped 76% year on year to just EUR 285.1 million ($311.7 million) in the first nine months of 2023, the National Bank of Belgium data showed.
The bigger question is whether the traceability programs can handle such volumes. To date, adoption within the trade has been minimal and largely driven by retail jewelry brands that require thorough source verification.
“We continue to accelerate development of Tracr and engage with the wider industry as we await further details so that Tracr can support the industry’s needs as best as possible,” a De Beers spokesperson said. “However, we also acknowledge that even Tracr, the world’s most advanced diamond traceability platform, does not yet have the breadth of coverage that would be required to meet the G7 objectives in the stated time frames.”
Sarine recently unveiled its Autoscan Plus system, which it claims can scan 1,000 stones per hour for its Diamond Journey traceability program. Autoscan Plus was built for scale and developed as a smaller, cheaper solution, Sarine CEO David Block said.
Extra cost The Antwerp World Diamond Centre (AWDC), the local trade body that incorporates both government and industry elements and oversees operations of the Diamond Office, is reportedly expanding its capabilities to handle the extra volume.
Still, many in the trade are skeptical whether the industry is ready to implement a digital traceability solution at such a scale. “The government fell for false promises regarding how to work and implement the system,” said one dealer. “Even if it is possible, it will be expensive.”
Early critics of the system have expressed concern about the additional cost of certification and of potential double shipping to Belgium.
“Having only one point for registration and inspection will impose additional costs of time and money to the diamond trade,” the WFDB said. It will lengthen the cycle of trading and getting goods to market, added another dealer.
Vipul Shah, chairman of India’s Gem & Jewellery Export Promotion Council (GJEPC), expects the move will impact the cost of raw materials for local manufacturers. “We are coordinating with the World Diamond Council [WDC] to mitigate such disruption and cost impact,” he said in an email.
Members of the trade cautioned that the cost of certification may even make Russian goods more attractive, while the market bifurcates to a two-tier system.
De Beers said it wants to understand how risks such as the creation of a potential supply bottle neck and additional costs will be managed if the G7 intends to limit the points of admission of rough diamonds into G7 nations. “We advocate for a solution that facilitates the trade of our diamonds into G7 countries, rather than restricting them,” the De Beers spokesperson stressed.
The EC responded that the cost for certification is expected to be negligible, “especially considering the price of diamonds,” according to its spokesperson. “The fee will be cost-bearing, not designed to generate profits.”
As for the double shipping, officials expect the goods will simply pass through Belgium as the main gateway — instead of other centers — before being sent for manufacturing. The extra shipping cost will likely apply for rough designated for tender sale in other rough-diamond locations such as Dubai and Tel Aviv.
Demand for Diamond Traceability Spikes
Artisanal and cottage industry
While the registration of rough will be overseen by the AWDC at the Diamond Office, it is a government-led mechanism, Rapaport understands. That means that it would be required at the point of export, which is significant when dealing with the artisanal mining sector.
So, if the artisanal miner sells his goods to a buyer in the location of mining, it will be up to the buyer to send the goods to Belgium for registration, an official explained.
Trade bodies, along with De Beers, echoed the WDC’s mantra that “no one should be left behind,” expressing concern that artisanal miners will be at a disadvantage under the new system.
“If such a solution is intended to be fully technological, this would be to the detriment of African producers, artisanal miners and the wider industry, with significant risk of unintended consequences,” the De Beers spokesperson added.
Artisanal and small-scale miners, who typically don’t have access to technology, should be able to send their rough into any cutting center to be registered and certified, trade members wrote in a draft letter being prepared for presentation to the G7, which Rapaport saw.
Similarly, the Indian industry is urging the G7 to take into consideration the interests of small and medium enterprises for whom the adoption of technology to track their polished diamonds might be out of reach at this stage. These marginal diamond units support millions of livelihoods, the GJEPC’s Shah stressed.
EU officials expect the program may even help formalize the artisanal mining sector and motivate investment in that segment — such as among G7 government bodies with an interest to make the traceability mechanism work.
Time to engage
But the system will require extensive engagement with the trade in the next few months to make it work. The industry has many questions and concerns, as communications from the WFDB, GJEPC, De Beers and others revealed. Some queries, such as what to do with existing inventory in the market, require urgent attention.
“I call upon the G7 countries to engage with the industry organizations in order to reach a more equitable and balanced mechanism,” Dvash stressed.
The G7 pledged to continue consultations among its members and with other partners, including producing countries as well as manufacturing countries, “for comprehensive controls for diamonds produced and processed in third countries on measures for traceability.”
It would be surprising if such discussions led to a complete overhaul of the planned system, as the industry might desire. As one trader admitted, the G7 is intent on its implementation, while the US and the EU will use the banks to enforce the sanctions — blocking payments within the pipeline in cases of noncompliance.
The governments charged with developing and implementing the system appear confident they’ve reached the optimal solution.
“This strengthened approach will provide certainty to our citizens and consumers that they are not purchasing Russian diamonds,” the EC spokesperson stressed. “It will also deliver stronger transparency to producers, including in countries with artisanal production. This will positively impact both earnings from diamonds and producers’ story and brand throughout the supply chain.”
It will take a lot of convincing for the trade to adopt such sentiment fully before the traceability pilot program goes into effect on March 1. It seems, at this stage, they’ll have little choice.
The European Union on Wednesday imposed sanctions on Russia’s state-run diamond giant Alrosa and its CEO as part of a ban on imports of the precious stones over the Ukraine war.
The EU in December agreed to prohibit diamonds exported from Russia as it tightens sanctions to further sap the Kremlin’s coffers.
The 27-nation bloc added Alrosa, the world’s largest diamond mining company, and its chief executive Pavel Marinychev to a blacklist subject to a visa ban and asset freeze in the EU.
The EU said the company — which accounts for 90% of Russia’s diamond production — “constitutes an important part of an economic sector that is providing substantial revenue to the government.”
Russia’s diamond exports totaled around $4 billion in 2022.
The EU’s ban went into force on Jan. 1, targeting natural and synthetic diamonds exported from Russia.
A prohibition on Russian diamonds processed in third countries will be phased in by September.
The EU ban came after months of painstaking negotiations with G7 countries to set up a system to trace Russian diamonds.
Belgium, which is home to the world’s largest diamond trading hub, insisted the system needed to be put in place to make any embargo effective.
The EU has so far imposed 12 rounds of sanctions on Moscow since Russian President Vladimir Putin launched the full-scale invasion of Ukraine in February 2022.
India has urged the Group of Seven (G7) countries to delay an incoming ban on Russian diamonds because the rules to trace the origins of gems remain unclear, two sources aware of the matter said.
India, home to 90% of the world’s diamond cutting and polishing industry, is critical to the implementation of the ban.
New Delhi has also sought more clarity in its talks with G7 leaders, said the sources, who did not wish to be identified because they are not authorised to talk to the media.
Earlier this month, G7 nations announced a direct ban on Russian diamonds starting Jan. 1, followed by phased-in restrictions on indirect imports of Russian gems from around March 1. A new system to trace the origin of the gems will be introduced in September.
Russia is the world’s biggest producer of rough diamonds by volume. New restrictions on the trade of Russian gems are part of the bloc’s broader measures designed to limit Moscow’s revenues that aid and fund its invasion of Ukraine.
“The timeline to start restrictions on indirect imports from Russia in three-four months is impractical, as the rules on how the origin for a gem will be traced are not clear,” one of the sources said.
India has also expressed its reservations over G7’s new “traceability-based verification and certification” system, which may require sharing of data about Indian businesses, the first source said.
Some data might be sensitive and businesses might not be comfortable with sharing such information, he said.
The federal trade ministry, which is involved in talks with G7 on proposed restrictions, did not immediately respond to a request for comment.
India mostly processes smaller Russian diamonds, and that’s why the country expects minimal trade disruption, a government official said earlier this month.
Still, the proposed ban would impact the diamond supply chain, industry officials say.
India’s diamond sector already faces weaker demand. The country’s polished diamond exports fell 29% to $10 billion during the first seven months of the current fiscal year that began in April.
It exported polished diamonds worth more than $22 billion last fiscal year that ended on March 31. The industry, based mainly in the western state of Gujarat, employs millions of people across small and medium firms.
Petra Diamonds’ rough prices started to bounce back at its latest tender, indicating the market has “likely bottomed,” it said Thursday.
The company’s third trading session brought in $67.9 million from the sale of 519,397 carats, at an average price of $131 per carat. Prices were 19% higher on a like-for-like basis — comparing similar categories of diamonds — than at the fiscal year’s second tender, which ended in October.
Last week, the miner reported early results from the tender of $58.7 million from 462,794 carats, at an average price of $127 per carat. During the remainder of the tender, it sold an additional 56,600 carats for $9.3 million. That comprised 25,200 carats from the Cullinan and Finsch mines in South Africa, which yielded $3.1 million, and 31,400 carats from the Williamson mine in Tanzania, bringing in $6.2 million.
Total rough-diamond revenue for the first fiscal half, which included three tenders, came to $187.8 million, down 7% year on year, the company noted. Like-for-like prices for the six months fell 13% compared to the equivalent three tenders the year before.
The diamond sorting center in Mirny, Sakha Republic, Russia, November 14, 2013.
De Beers has put its weight behind the World Diamond Council (WDC) plan for sidelining Russian goods amid continued controversy over the competing proposals.
“In pursuit of a collaborative, coherent and collective solution that supports the aims of the G7, we have joined with 22 diamond-industry organizations through the World Diamond Council to progress the ‘G7 Diamond Protocol’ proposal,” De Beers CEO Al Cook wrote in an open letter to Group of Seven (G7) leaders on Thursday. “
The protocol — one of a few plans for keeping Russian diamonds out of G7 nations — calls for importers to declare on invoices that stones do not originate from mining companies operating in Russia. The companies making the claims will undergo audits.
While the WDC-led proposal has received wide industry support, it has also drawn criticism for creating a burden for small-scale industry members — including by Rapaport Group Chairman Martin Rapaport.
One other plan, from the Belgian government and supported by the Antwerp World Diamond Centre (AWDC), proposes using technology to confirm the source of goods, with the European city as a suggested center point for the trade of stones with known provenance.
Two further proposals — from India and a French jewelry group — were also on the table at a G7 meeting on Thursday, Reuters reported.
In another letter earlier this month, the African Diamond Producers Association (ADPA) attacked the process for not consulting people on the continent and claimed some of the plans would harm its members and artisanal miners. It highlighted the “G7 Certificate Scheme” — an apparent reference to the Belgian plan — as well as the WDC protocol.
“The proposed changes will bring supply-chain disruption, added burden, and costs to the ADPA mining nations,” the ADPA wrote in the October 13 letter to the Zimbabwe Minister of Mines and Mining Development, Soda Zhemu, who is chairing the Kimberley Process (KP) this year.
The plans will set a precedent for segregating diamonds by origin and damage producing countries’ ability to cut and polish their rough, the group argued.
In the case of the Belgian proposal, “additional costs will be incurred when a parcel of rough diamonds needs to be first shipped to Antwerp to then be reshipped to the country of origin to be polished,” said the Angola-based ADPA, which represents 19 countries that together account for 60% of global rough production.
Efforts to sift Russian diamonds out of G7 markets have taken on momentum since the bloc — which comprises Canada, France, Germany, Italy, Japan, the UK, the US, and the European Union — pledged to “work closely together to restrict trade” in those goods in May.
Where Are All the Russian Diamonds?
However, while there has been agreement about the need to stop Russia obtaining diamond revenues to fund its war in Ukraine, the process of implementing this has proven complex.
“Throughout our discussions, two things have been clear: why we should do this is easy, but how we should do it is hard,” said Cook.
The executive called for G7 leaders to obtain input from the industry and not exclude relevant groups, including artisanal miners.
“We look forward to further engagement with the G7 around the World Diamond Council proposal and urge those that have submitted proposals to work together to create an effective and practical solution,” Cook continued.
The industry had expected any measures to go into effect in January 2024. However, that schedule is now looking unlikely, JCK reported Friday, citing sources involved in the plans.
“We fully agree with Al [Cook]’s view that the results of our efforts to meet the G7 objectives should be collaborative, coherent and collective,” said WDC executive director Elodie Daguzan in a statement to Rapaport News. “In [the] WDC’s own words, it is what we call ‘an industry proposal that is effective and implementable now and that leaves no one behind.’ Also, we understand that the statement made by ADPA is not against the WDC-facilitated protocol but rather against the G7’s objectives without engagement with African producers.”
Western officials are expected to head to India this week to discuss the technical aspects of a coming G7 ban on Russian diamonds as they come closer to finalising a sanctions package that may kick in as early as January 1.
But sanctions experts have warned that negotiations may drag on past the expected deadline due to the complexity of enforcing a widely accepted mechanism to trace the origin of diamonds.
“If this mechanism is understandable and transparent enough from the beginning, then there are high chances that all G7 countries will sign off on it,” Yuliia Pavytska, who heads the sanctions team at the KSE Institute, a Kyiv School of Economics-affiliated think tank, told The National.
“If there is no agreement in the coming weeks, it will likely take a few more months to make it happen.”
The impact of a ban on the Russian economy would be relatively small but not insignificant.
Russia’s diamond exports account for about $4 billion – or about 1 per cent – of the country’s total exports, according to Ms Pavytska.
But with half of Russia’s exports comprising oil and gas, diamonds are one of the largest trade groups that have yet to be sanctioned.
“There’s been talk for months about a diamonds ban, and now we finally see that the G7 is ready to discuss it and adopt it,” she said.
Belgium has long resisted a ban on Russian diamonds due to their importance for its second-largest city, Antwerp, the largest diamond hub in the world.
But it has recently put forward a proposal that is garnering support among the G7, which may finalise its proposal in the coming weeks. This would be followed by an implementation of the ban at the EU level next year.
As discussions intensify, western officials are expected to travel later this week to India, the world’s diamond-polishing hub, for what EU authorities have described as a fact-finding mission organised by the Indian Gem and Jewellery Export Promotion Council.
Speaking to Reuters last week, US officials said that he delegation would travel to Mumbai and Surat, a city where about 80 per cent of the world’s diamonds are polished.
Belgian officials will reportedly be part of the delegation.
Belgium’s proposal Belgium is not a member of the G7 but is part of the EU, which is represented in the forum that also includes the US, the UK, Canada, France, Germany, Japan and Italy.
The US, the UK and Canada have already banned Russian diamond imports in various ways.
Belgium argues that an outright G7 ban would encourage circumvention, pointing to the fact that while imports of Russian diamonds to the EU have decreased by 95 per cent from pre-war levels, the number of diamonds being traded in Antwerp has not significantly changed.
These figures have fuelled suspicion that Russian diamonds are changing identity before entering western markets.
Experts such as Agiya Zagrebelska, who heads the sanctions direction at the Ukrainian National Agency on Corruption Prevention, said that there has been an increase in purchases of Russian diamonds from companies based in major trade hubs including India and the UAE.
“What is being sold on western markets are Russian diamonds because it’s impossible that the diamonds traded by these companies come out of nowhere,” Ms Zagrebelska told The National.
The Belgian diamond industry has called for the creation of an improved system to track diamonds – a notoriously difficult process.
Rough diamonds are split before they are polished and then possibly mixed with other diamonds.
The proposal focuses on reinforcing traditional customs inspections with blockchain technology to create a ledger that is impossible to forge.
The aim is to cut Russian diamonds off from the G7 market, which represents more than 75 per cent of the diamond consumer market, and forcibly drive their price down.
“The ban on Russian diamonds will not only reduce the revenue Russia is extracting from the export of diamonds but will simultaneously increase the traceability of diamonds at a global level, which has been a long-standing EU policy ask,” an EU official said.
There are other proposals reportedly under discussion, but the diamond lobby has remained tight-lipped about them.
“We understand that it all depends on what trace and track system the G7 countries will choose,” said Ms Zagrebelska.
The Antwerp World Diamond Centre declined to comment when contacted by The National.
The US-based World Diamond Council did not answer a request for comment.
Alrosa has canceled its next two sales and urged caution from buyers and suppliers amid a steep downturn in the diamond market.
The Russian miner informed India’s Gem & Jewellery Export Promotion Council (GJEPC) of the decision in the past few days, citing low demand. The move follows the GJEPC’s recent call for rough producers to act responsibly.
“Alrosa has decided to temporarily halt the allocation of rough diamonds in September and October 2023,” the company said in a note to the GJEPC, seen by Rapaport News. “We believe that this approach is going to have a stabilizing impact by strengthening the market’s supply-and-demand balance. This will aid the prevention of overstocking, especially with manufacturers closed for Diwali.”
Alrosa has continued to sell despite being under US sanctions since the Ukraine war began in February. The company’s revenue was broadly stable year on year at RUB 188.16 billion ($1.9 billion) in the first half of 2023.
Most of the rough goes to India, market insiders believe. That country’s diamond trade has suffered a serious crisis because of weak US and Chinese demand and competition from lab-grown stones. Inventories have piled up as the sales slump has outpaced manufacturers’ production cuts, leading to falling prices.
The GJEPC wrote to diamond miners earlier this month, asking them to be “responsible” when selling to prevent a worsening of the situation. In response, Alrosa said it “expresses equal concern and strives to reverse the existing trend of diminishing demand.”
The Russian company said it would welcome a similar position from other industry players, such as miners, cutters and retailers, “on the matter of rough-diamond purchases and sales” as a “reciprocal effort.”
The benefits of the miner’s decision should be visible in the market by the beginning of next year, it said in a separate statement Wednesday.
“Alrosa has always followed the practice of supporting market stability and leveling its volatility,” a spokesperson for the miner said. “Our solid and high-quality asset base and stable financial position allow us [to implement] such measures.”
By contrast, De Beers will continue to hold sights but take a “responsible approach” to sales, “just as we have previously when faced with challenging industry conditions,” a spokesperson for the Anglo American unit said. The company, which is holding its September sight this week, has already allowed customers to defer up to half of rough purchases for the rest of 2023.
“We will focus on additional supply flexibility as necessary to meet sightholders’ evolving requirements,” the De Beers spokesperson added.
The news comes amid growing expectations for a Group of Seven (G7) ban on Russian diamonds, with an announcement likely in two to three weeks, Reuters reported last Friday, citing Belgian officials. The World Diamond Council (WDC) is also facilitating a proposal for keeping Russian and non-Russian diamonds separate.
Sanctions-hit Alrosa, the world’s biggest diamond-producing company, said on Sunday it has mined the largest gem-quality diamond in Russia in the past decade.
The 390.7-carat diamond was mined at one of the company’s mines in the Republic of Sakha, Alrosa said in a statement. The region, commonly known as Yakutia, lies in Russia’s Far East along the Arctic Ocean.
“The found diamond is a light crystal of an irregular shape, bordered by a yellow-brown halo – a combination of mass, shape and colour that is unique today,” Alrosa said.
The company mined the largest gem-quality diamond in Russia in 2013, weighing 401 carats, Alrosa said.
The world’s largest gem-quality diamond ever mined – the 3,106-carat Cullinan stone – was recovered in South Africa in 1905.
Alrosa was last year placed under sanctions by the United States, which cut it off from its banking system and banned direct sales to the US market after Russia invaded Ukraine.
Last month the company reported a rise of 0.2% in revenue for the first half of the year but said net profit fell 35% year-on-year to 55.6 billion roubles.
