Alrosa plans to extract gold from its diamond-bearing alluvial deposits in Mirny, in Russia’s Sakha Republic.
The move comes as demand for natural diamond continues to slide, and gold prices reach record highs.
Alrosa, Russia’s state-controlled miner, announced on Friday (24 October) that it was “considering extracting gold as a byproduct during diamond mining at the Mirny-Nyurba Mining and Processing Division”.
Gold was first found in the area in 2020 and Alrosa says a team of geologists has so far recovered 433kg of it.
The proposal is that gold will be recovered as a byproduct from diamond-bearing sands and placer deposits (accumulations of valuable minerals) in the Mirny area. Alrosa will use existing processing facilities.
In 2024, the company bought the Degdekan gold deposit in the Magadan region – in a notable departure from its core activity of diamond mining.
It said it would invest over $100m in the project, which is expected to produce about 3.3 tonnes of gold annually when it reaches full capacity around 2030.
Alrosa is to invest RUB 20bn ($240m) digging deeper to extend the life of the vast underground Udachny mine, just outside the Arctic Circle, until at least 2055.
Mining will eventually take place more than 1km below the surface, extracting 4.1m tonnes of ore annually. The target horizon – the level where mining operations are planned – is 1.13 km below the surface ( at an absolute elevation of -780 m, when taking the surface elevation as a baseline).
Alrosa CEO Pavel Marinychev says annual profit from the planned expansion is estimated at almost RUB 6bn ($73m) a year.
Udachny opened as open-pit mine in 1967 and switched to underground operations in 2014, producing over 10 per cent of Alrosa’s total output. It was due to reach the end of its life in 2039.
Alrosa said the investment committee had approved the project. Udachny is one of the world’s largest kimberlite pipes. Trucks take over 30 minutes to reach the bottom, currently 680 metres below the surface.
“The implementation of the investment project will enable us to significantly extend the duration of mining at the deposit, which currently produces more than 10 per cent of Russian rough diamonds,” said Marinychev.
“From 2025 through 2055, 4.1 million tonnes of ore will be mined here annually and profit is estimated at almost 6 billion rubles per year.”
Alrosa has started operations at additional kimberlite pipe at its Lomonosov deposit, one of the largest diamond mines in Russia.
The state-run miner said on Tuesday (8 July) that the Karpinsky-2 pipe, one of six at Lomonosov, held more than 40m tonnes of diamond bearing ore.
Its subsidiary, Severalmaz, already mines two other pipes at the site in Arkhangelsk, northwestern Russia – Arkhangelskaya and Karpinsky-1 – and is now mining Karpinsky-2.
Alrosa, currently sanctioned by the G7 nations, said in March that it was suspending production at four low-margin mines – Zapolyarny, Magnitny, Khara-Mas and Ochuos – because of a “deep crisis” in the industry.
It is also selling a large proportion of its output to Gokhran, the state repository of precious metals and gemstones.
Gokhran has historically functioned as a buffer, stockpiling diamonds during market downturns and selling them back when demand recovers, for example, during the 2009 financial crisis.
Russia remained the biggest rough diamond-producing country in the world in 2024, by both volume and value, despite the impact of G7 sanctions.
By volume it accounted for 32 per cent of global production in 2024 – or 37.3m carats – according to newly-released figures by the Kimberley Process Certification Scheme.
And by value it accounted for 29 per cent – or $3.335bn.
Botswana came second by volume – 24 per cent, 28.2m carats – and a very close second by value – 28.8 per cent, $3.308bn.
Overall global rough output fell 10 per cent to $11.48bn.
India was the biggest importer (40 per cent by carats, 39 per cent by dollars) followed by UAE (29 per cent by carats, 24 per cent by dollars).
Moscow investigators on Monday said they сharged an employee of the state-run diamond producer Alrosa, her son and two others in connection with a diamond theft scheme at the company.
Valentina Matyushenkova, an Alrosa employee, is accused of swapping high-value diamonds with cheaper industrial-grade stones between September 2024 and January 2025, according to Russia’s Investigative Committee.
Authorities say the stolen diamonds were smuggled to Armenia.
Matyushenkova was caught in the act while attempting to steal a batch of diamonds valued at more than 1.7 million rubles ($21,700), investigators said. Her son, Alexei Matyushenkov, is accused of acting as a middleman.
Two other suspects, Armen Petrosyan and Arman Sahakyan, allegedly transported the stolen stones across the border to Armenia.
A video published by the Kommersant business newspaper showed Matyushenkova confessing to her role in the scheme during questioning. One of the other suspects claimed he was working as a deliveryman at the time of his arrest.
Searches of the suspects’ homes uncovered some 200,000 carats of low-grade industrial diamonds, which investigators say were used to replace the high-quality raw stones.
All four suspects have been placed in pre-trial detention. If convicted, they face up to 10 years in prison on theft charges and up to seven years for the illicit trafficking of precious stones and metals.
Alrosa has concluded the sale of its 41 per cent share in Catoca, Angola’s state-controlled diamond miner, drawing an end to a 32-year partnership.
It has been acquired by Taadeen, a subsidiary of Oman’s sovereign wealth fund.
The move was announced last November, after Angola’s mineral resources minister Diamantino Azevedo described Alrosa, the sanctioned Russian miner, as a “toxic partner”.
The transfer was formalized on 26 May and leaves Angola’s national diamond company Endiama EP retaining a controlling 59 per cent.
Catoca’s updated website now lists its company shareholder structure as: “Endiama EP (National Diamond Company of Angola) – 59% Taadeen (Subsidiary company of the Sovereign Wealth Fund of Oman) – 41%”.
No financial details of the share transfer have been released.
Alrosa acquired 32.8 per cent of Catoca shares in 1992, soon after the country’s long-running civil war came to an end, and increased its stake to 41 per cent in 2018.
Russian diamond producer Alrosa announced Friday that it finished the two year cutting process of the country’s largest ever diamond a 100 carat vivid yellow stone named New Sun.
New Sun was cut from a billion year old 200 carat rough diamond, which was unearthed from an ancient riverbed at the Ebelyakh mine in the Far East republic of Sakha (Yakutia).
Alrosa said 15 of Russia’s top jewelers worked meticulously to “achieve the perfect balance between light, color and the play of shades.”
“Thanks to the highest skill of Russian experts, the diamond has acquired impeccable proportions that accentuate its depth and brightness of its sunny hue,” the company said.
The cutting process marks a “new stage” in the development of the Russian Cut, a gem cutting technique known for its precision and brilliance, Alrosa said.
“New Sun is one of the most significant events in the gemstone industry in recent years, highlighting Russia’s high status in the global diamond industry,” the company said.
Last month, Alrosa announced the temporary suspension of operations at several less profitable sites, reducing annual production by less than 1 million carats. The company still plans to produce 29 million carats of diamonds in 2025.
Alrosa, which is under an EU and G7 import ban, is the world’s largest diamond mining company by volume. It cut production by 2.8% to 34.6 million carats in 2023 and by 4.6% to 33 million carats in 2024.
The high demand for jewelry and a decline of up to 20% in global diamond mining volumes compared to levels recorded 5-6 years ago will drive the industry’s growth, according to Sergey Takhiev, Head of Corporate Finance at Russian diamond giant Alrosa, reported by Rough&Polished.
According to Takhiev, while diamond prices are currently at a low point, demand is expected to grow due to a reduction in diamond inventories at manufacturing centers in India and a decline in diamond production volumes by major mining companies.
When asked about the timeline for market inventory replenishment, Takhiev estimated it would likely occur within a few months. He explained that the restocking of rough and polished diamond inventories is expected to impact the entire value chain, from manufacturers to retailers. Takhiev further emphasized that the depletion of global diamond resources, coupled with growing demand for luxury jewelry, is set to drive long-term price increases.
Meanwhile, ALROSA announced that the company’s Deputy CEO, Vladimir Marchenko, who has held the position since 2018, will step down to take on another role in the mining industry.
The diamond industry, once a symbol of timeless stability, finds itself in a state of flux as prices for natural diamonds hit multiyear lows, driven by a mix of evolving consumer preferences, geopolitical upheaval, and the meteoric rise of lab-grown diamonds (LGDs), a new study shows.
The reversal of fortunes that followed a surge during the covid-19 pandemic has left industry stakeholders grappling with how to adapt to ensure long-term sustainability, consultancy McKinsey & Company says in its latest report.
During the pandemic, diamond prices rose unexpectedly. Supply chain disruptions and the delay of weddings initially dampened sales, but many consumers stuck at home turned to diamonds as a form of self-care. This led to an unanticipated spike in demand and a sharp rise in prices.
The post-pandemic market has painted a very different picture. As traditional engagement and marriage cycles return and supply chains normalize, prices have tumbled amid changing market dynamics, McKinsey & Co. says.
Ten years ago, young customers were an important segment of the overall demand for precious stones. Today, they seek more affordable and ethical alternatives.
With prices up to 80% lower than mined diamonds, LGDs have swiftly carved out a substantial share of the market, challenging traditional producers, the report shows.
Shifting customer values
Increased awareness of environmental, social, and governance (ESG) issues has also driven consumers to demand greater transparency and sustainability in diamond sourcing. Many buyers now insist on proof that their diamonds were mined under fair conditions with minimal environmental impact. This shift is particularly pronounced among younger generations, who are reshaping the jewelry market with their purchasing power and values.
Generation Z is leading a wave of change, favouring ethical and customizable products over traditional offerings. Younger buyers are more likely to seek out jewelry that aligns with their values, including fair labor practices and sustainability.
Many are turning to digital platforms for their purchases, with online fine jewelry sales growing significantly. In 2021, the average online purchase of diamond jewellery in the US was $2,204, compared to $2,994 in physical stores, signalling a growing comfort with digital transactions for high-value items.
The trend of self-purchasing is another key shift. Rather than waiting for significant life events like engagements or weddings, many consumers are now buying fine jewelry for themselves.
Industry actors Beers Group and Signet Jewelers launched in October their “Worth the Wait” campaign, aimed at reigniting demand for mined diamonds from youngsters, particularly amid “zillennials”, the microgeneration born between 1993 and 1998.
Geopolitical and gov’t factors
Adding to the industry’s challenges are geopolitical tensions. Sanctions targeting Russian diamonds have disrupted the global supply chain, particularly for larger stones. Russia’s Alrosa, once the world’s top diamond producer by output, has been heavily sanctioned by the US and the European Union, creating regional dislocations.
McKinsey & Company warns that, by March 2025, these restrictions will tighten further, targeting stones of 0.5 carats and above, exacerbating supply chain issues.
The upheaval comes at a time when natural-diamond production is already constrained. Growth in supply is expected to remain sluggish, with an annual increase of just 1–2% through 2027, far below historical trends. Major mining companies are grappling with depleting resources, forcing them to shift from open-pit mining to more expensive underground operations. Companies like De Beers have invested billions to extend the life of their mines, but these efforts are costly and time-consuming.
Government intervention is also reshaping the industry. In diamond-rich regions, including Botswana, public authorities are taking larger stakes in mining operations, emphasizing the need for transparent and sustainable practices.
Despite the challenges, there are opportunities for companies willing to adapt, the consultancy says. Producers can diversify their offerings by incorporating LGDs or recycled diamonds into their portfolios. They can also emphasize the unique, intrinsic value of natural diamonds, appealing to consumers who value rarity and tradition. Investments in sustainability and digital commerce are likely to pay dividends, as consumers increasingly demand ethical and seamless shopping experiences.
The consultants conclude that by embracing innovation and aligning with shifting consumer values, the industry may find a way to shine brightly once more.
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.
