A diamond in the Russian company Alrosa in 2019. ALEXANDER NEMENOV/AFP via Getty Images
Russia is one of the largest producers of diamonds. Every fourth stone worldwide comes from Russia. A billion-dollar business for President Putin and an oligarch.
The EU and the G-7 now want to impose sanctions on Russian diamonds. There’s a reason why they don’t exist yet: many stones from Russia are processed and sold in Belgium. There, too, billions are at stake.
So are sanctions damaging Russia? Or rather Belgium? Opinions differ – while the war diamond business is booming.
Employees wearing gloves drape jewels on velvet in the window of a shop in Antwerp’s diamond district. The Belgian port city has been a hub for the valuable gemstone business since the 15th century. According to the Antwerp World Diamond Center, 37 billion euros are turned over here discreetly and confidentially every year. When asked where a diamond comes from, a jeweler answers with a laugh: “I’d rather not ask.” There are reasons for his reticence, his laugh is embarrassed.
The rough diamonds came from Angola, Congo, Sierra Leone, South Africa – and Russia, explains Sigal Vantzovski, owner of Binson Diamonds in Antwerp. The blanks are brought to Belgium to be polished in factories here. The Diamonds are then processed into pieces of jewelry and sold, among other things, in their shop.
It is a noble niche market – with a turnover in the billions. Russia continues to be one of the biggest beneficiaries – despite the murderous war of aggression against Ukraine. Since the beginning of the war, the European Union has imposed numerous sanctions against Russia, against Russian companies and individuals. The import of certain goods such as gold, vodka and caviar was also stopped – but the import of Russian diamonds was not. That should change now.
The EU Parliament and the G-7 of the major western industrialized countries have decided that Russian diamonds should also be subject to sanctions. There is a reason why this is only happening now.
Rough diamonds in the Russian company Alrosa in 2019. ALEXANDER NEMENOV/AFP via Getty Images
In 2021, Russia exported over 48.6 million carats of rough diamonds abroad, according to the Ministry of Finance. This was the highest volume since the beginning of the observation period in 2007. Sales were not quantified in monetary terms. The most important export destinations: the United Arab Emirates and Belgium.
Belgium is the country in whose capital Brussels the EU has its headquarters. It plays a key role in the global diamond industry – and has long advocated that Russian gemstones should remain excluded from the sanctions against the warring country.
Sanctions would harm Europe economically, says Koen Vandenbempt, dean of economics at the University of Antwerp. Stopping the import of Russian rough diamonds would mean losing an industry in Europe and moving it to Dubai or Mumbai in India, where there is less emphasis on transparency or sustainability, says Vandenbempt.
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Countries such as India, Israel or the United Arab Emirates would not have joined a boycott against Russia. Therefore, the Russian stones would ultimately find their way into the world market through these countries, argues Joachim Dünkelmann from the German Federal Association of Jewelers, Jewelry and Watch Shops (BJV). “Tightening regulations or laws against Russia would have no impact on this.”
The Russian government is benefiting from the diamond boom. One of the largest producers is the Russian diamond giant Alrosa. According to his own account, it “partly” belongs to the state. Experts estimate the state’s shares in Alrosa to be around 33 percent.
Alrosa accounts for 95 percent of Russian diamond production and 27 percent of global production. At least one in four stones in markets worldwide comes from Russia. The company operates several mines in the Sakha region in northeastern Russia and in Arkhangelsk in the northwest and is involved in mines abroad – for example in Angola.
One in four diamonds worldwide comes from Russia
The Nyurbinsky diamond mine in Russia is already 375 meters deep. Digging will continue up to 570 meters. ALEXANDER NEMENOV/AFP via Getty Images
In contrast to Vandenbempt, raw materials expert Larisa Stanciu emphasizes that a ban on the import of Russian rough diamonds would mean less money would flow into the state coffers via Alrosa. “This would have both a direct and indirect impact on the war support budget, even though revenues from the diamond trade are significantly lower than revenues from gas and oil trades.”
Alrosa CEO Sergei Ivanov is also no stranger. He was among the first oligarchs from President Vladimir Putin’s circles to be sanctioned by the United States. While the European Union hesitates, the USA imposed sanctions against Alrosa shortly after the outbreak of war and later tightened them.
“I always get a little cynical,” complains Vandenbempt: Europeans are naive to think that Americans would do something that would harm their own economy. Jewelry sales in the USA make up 50 percent of the world market. There is therefore a loophole in the US functional regulations. A not entirely flawless formulation is that if a diamond has been significantly modified in another country, it can claim this region as its origin.
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As a result, Russian gemstones polished in India, for example, could continue to be imported into the United States and their origin would be concealed. It is technically almost impossible to determine the country of origin of a stone, says expert Vandenbempt. However, there are certification procedures for rough diamonds such as the Kimberley Process, which, according to customs, is intended to prevent the import of “conflict and blood diamonds” into the EU.
According to BVJ managing director Dünkelmann, the industry in Germany has a great interest in not purchasing any goods from Russia. “This also includes diamonds.” Many suppliers have assured since spring that their stones do not come from Russia. “Neither retailers nor consumers want goods from Russia and we are doing everything possible to ensure this.”
dpa/ro
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