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 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.