By KYIV. Dec 19 (Interfax-Ukraine) – A ban on the import into G7 countries of diamonds weighing one carat or more, cut in third countries from Russian diamonds, will come into force on March 1, 2024, according to the Q&A for the 12th package of sanctions against Russia, published by the European Commission.
By the same date, as the European Commission expects, a pilot version of the mechanism for tracking the origin of stones will be operational within the G7. It is planned to be fully launched from September 1, 2024, after which certification based on traceability of origin will become mandatory. Before the full launch, any other evidence of the non-Russian origin of diamonds can be used. Consultations on verification methods are ongoing, as specified in the document.
As of 1 September 2024, the ban will be expanded to also include lab grown diamonds, jewellery and watches incorporating diamonds with a weight of 0.5 carat and above.
All G7 members will introduce a direct ban on the import of diamonds from Russia no later than January 1, 2024, the European Commission clarified. So far, only the United States and Great Britain have introduced such a ban.
The European Union is the main initiator of the coordinated approach and schedule of sanctions measures of the G7 countries in relation to diamonds. These measures apply not only to diamonds mined in Russia, but also to diamonds that were produced from Russian diamonds in third countries and are imported into G7 markets with a new country of origin as a result of this cutting.
The EU has also published details of plans for a system of verification of origin and certification of rough diamonds, which is being implemented as part of the 12th sanctions package.
The key points of this scheme coincide with the proposals of the Belgian government, which, being the only major consumer of Russian diamonds in the EU, until recently opposed sanctions. The Belgian option included both traceability of origin through a public blockchain-based registry and preventing the entry of mixed diamond shipments, as well as making Antwerp, one of the key hubs of the global diamond trade, the sole pre-check point for sanctions compliance.
“In order to prevent Russian diamonds from entering the G7 market, diamonds need to be traced from ‘the mine to the finger’,” the Q&A said.
Hence the traceability system includes a mandatory registration, using so called “digital twins” of the real diamond in its rough state and issuing a certificate of its origin. The identifying information and certificate will be entered in blockchain-based ledger. This allows the diamond to be traced through the production process and can be presented at the time of importation of the finished diamond.
“By registering the rough diamond at an early stage and collaborating with producer countries, its proof of origin can be ensured,” the European Commission said. Furthermore, so-called mixed packages of rough diamonds from several origins will not be allowed to be imported without additional proof that the packages do not contain Russian diamonds.
The EU expects that the implementation of the system will provide greater transparency, including in countries with artisanal production, and will have a positive impact on diamond revenues, as well as on the perception of all participants in the supply chain. It aims at depriving Russia of this important revenue stream estimated at EUR 4 billion per year, of which approximately EUR 1.5 billion are annual imports into the EU.
EU direct imports from Russia are down by more than 80% in the period July-2022-April 2023 compared to the same period of 2021 (down from EUR 1.6 billion to over EUR 300 million), due to the deterring effect of our broader sanctions. When looking at 2023, this reduction is even greater, as it approaches 90%.
However, the reduction in bilateral flows with the EU does not mean a loss of income from this business for Russia, as the diamond trade is redirected to other countries: diamonds are cut in other countries and continue to be imported into G7 markets as non-Russian goods. “That is why a ban on Russian diamonds polished in a third country is also necessary,” the document says.
For the import ban of Russian diamonds to be effective, it needed to be agreed with other major international markets for diamonds (the US, Japan, Canada and the UK) which together accounts for 70% of the world diamond retail market.
