Diamond Trade Adapts Amid Looming Russia Sanctions

European capitals are gearing up to apply anticipated penalties on Russia’s diamond exports, and Belgian traders are getting ready for increased scrutiny on their industry. In Antwerp’s renowned diamond district, where approximately 86% of the world’s rough diamonds pass through, polishing ‘labs’ are turning to blockchain technology in order to verify that their gemstones are sourced from legitimate mines in countries such as Africa, Australia, or Canada, and not from Russia.

Before Moscow’s invasion of Ukraine in 2022, Russian stones made up about a third of the global market, but the decision by the G7 to ban trade in Russian diamonds could have significant consequences. Industry insiders in Belgium are anticipating that the sanctions will be gradually implemented, which will help in minimizing market disruptions. Additionally, major traders and jewelry brands have started using advanced tracking technology to verify and certify the origins of their diamonds.

The European Union (EU) is formulating bans on Russian diamonds as part of its 12th package of sanctions to put pressure on Russia’s war economy and to cut off funds that the country is using to purchase munitions and drones from North Korea and Iran. However, there have been challenges in deciding on the best approach to restrict the diamond trade due to the ease with which small, valuable gems can be smuggled or mixed with stones from other sources. Furthermore, rough diamonds undergo changes in weight and appearance as they are cut, polished, and set in jewelry.

See also  U.S. and India silence on Canada dispute during Jaishankar-Blinken meeting

Europe, particularly Belgium, has an additional concern that even with EU sanctions, Russian gems could still find their way to competitors in places such as Dubai and India. As discussions on EU sanctions progressed, the G7 eventually agreed on a global ban.

Frederik Degryse, the CEO of iTraceiT, highlighted the importance of an industry-wide traceability solution or protocol to address potential sanctions related to Russian diamonds. His firm is working to provide market players with a digital way to trace their supply chain. The European Commission has adopted a proposal that will be presented to member states for approval, with the ban on Russian diamonds and diamond jewelry expected to go into effect starting from January 1, 2024. The iTraceiT firm believes that its technology will help ease the supply chain disruptions that may result from such bans.

In Antwerp’s diamond quarter, account manager Sandiah Kangoute demonstrated how miners, traders, polishers, and retailers can trace their diamonds back to their source using a unique filing system incorporated with blockchain technology. This system assigns a QR code to each bag of stones, linking it to its specific source and allows industry workers to access files attached to the codes and add new ones as needed. In this way, exporters can use the iTraceiT system to provide evidence to prove that their diamonds are not sourced from Russia, if challenged.

Despite this, the industry remains skeptical about the effectiveness of the sanctions in hurting Russia, as the country has managed to maintain its war against Ukraine through previous rounds of EU measures targeting its larger oil and gas exports. Nonetheless, the industry believes that its efforts in implementing traceability mechanisms will help in ensuring compliance and minimizing disruptions for market players.

See also  U.N. Court Urges Israel to Prevent Genocide in Gaza

Source link