As European capitals gear up to impose sanctions on Russia’s diamond exports, the diamond trading industry in Belgium is taking proactive measures to ensure the legitimacy of their operations. Located in Antwerp’s diamond district, where the majority of the world’s rough diamonds are handled, “labs” specializing in polishing are turning to blockchain technology as a means to verify the origin of their gemstones. With Russia previously accounting for a significant share of the global market, the decision to ban trade in Russian diamonds could have far-reaching implications.
Industry insiders in Belgium anticipate that the sanctions will be gradually phased in, minimizing any disruptions in the market. In the meantime, prominent traders and jewelry brands have started adopting advanced tracking technology to authenticate and certify the provenance of their diamonds. This move comes as the industry continues to strive towards improving its reputation following the controversy surrounding “blood diamonds” that financed civil wars in Africa. If traders are perceived to be facilitating Russia’s evasion of sanctions, it could severely damage the reputation of diamonds once again.
The European Union is presently working on creating bans specific to Russian diamonds as part of its broader efforts to tighten control over Moscow’s war economy. The objective is to sever the funds utilized by Russia to procure munitions and unmanned aerial vehicles from North Korea and Iran. However, implementing these bans poses challenges due to the ease of smuggling relatively small and valuable diamonds. They can be conveniently mixed with stones from other sources and often undergo changes in weight and appearance during the cutting and polishing process. Additionally, concerns persist regarding the potential for Russian gems to find their way to competitors in Dubai and India, even with EU sanctions in place.
To address these concerns, industry experts are placing emphasis on the need for a comprehensive solution supported by all key diamond centers. Companies like iTraceiT are actively developing digital traceability solutions to assist market players in tracing their supply chain. The European Commission has put forward a proposal for a ban on trade in diamonds originating in, passing through, or exported from Russia. The ban would also encompass Russian diamonds that are cut and polished in third countries. If approved by member states, the ban would be implemented on January 1, 2024, with a gradual rollout for diamonds cut or polished in third countries between March and September of that year. The aim is to establish an effective traceability mechanism that minimizes disruptions for market players.
iTraceiT’s technology offers a potential solution to the supply chain challenges that may arise from these bans. By assigning a unique QR code to each diamond, industry workers can trace its origin and include pertinent information such as purchase receipts, export licenses, and certificates of authenticity. This system provides additional evidence to validate that diamonds are not sourced from Russia when faced with scrutiny. Such comprehensive traceability simplifies audits and ensures transparency across the entire supply chain.
While the potential impact of the sanctions on Russia remains uncertain, the diamond industry remains skeptical about their effectiveness. Diamonds only account for a small fraction of Russia’s economy, and the country has managed to continue its conflict with Ukraine despite previous rounds of EU sanctions targeting larger oil and gas exports. Although the industry acknowledges the importance of addressing the trade in Russian diamonds, it remains to be seen how effectively these measures will achieve their intended goals.
Useful links:
– Antwerp World Diamond Centre: https://www.awdc.be/
– iTraceiT: https://www.itraceit.org/
