In Antwerp, the world’s largest diamond trading center, Russian gems are experiencing a growing boycott in the wake of Russia’s invasion of Ukraine in February 2022. This boycott was first initiated by jewelers in Paris who contacted Antwerp-based diamond dealer Thierry Tugendhaft, urging him to stop supplying them with Russian stones. Other diamond firms in Antwerp soon followed suit, as the city is a major player in the trading and cutting of diamonds on a global scale. However, completely avoiding Russian stones is proving to be a difficult task, given that Russia currently supplies around one-third of the global demand for diamonds.
Western powers, including renowned jewelers like Tiffany’s, Cartier, and Van Cleef & Arpels, are now advocating for a formal ban on Russian stones. However, the announcement of this boycott by the G7 has been delayed due to disagreements over the specifics. Despite this, imports of Russian rough diamonds have already plummeted to less than 5% of pre-war levels, according to a source familiar with the matter.
For Thierry Tugendhaft, the head of T. Diamonds BVBA, the transition away from Russian suppliers happened relatively swiftly. His company now sources approximately 80% of its diamonds from Canada and the rest from African countries like Lesotho, South Africa, and Botswana. However, not all diamond dealers in Antwerp were able to adapt as quickly. Tugendhaft mentioned that some had to cease their trade in rough stones because European banks refused to finance their Russian supplies. Consequently, around 90% of the world’s diamonds are now being cut in India.
Despite the diamond industry’s revenue being significantly lower than that of oil and gas, the Kremlin still earns over $4 billion annually through its state-owned company Alrosa, which is the largest producer of rough stones globally. With the Russian oil and gas sector already under sanctions, the United States, Canada, Japan, and the European Union are now aiming to curb Moscow’s diamond revenues as well.
Belgium, particularly the city of Antwerp, is taking the lead in these efforts. The city has been a prominent diamond hub since the 15th century, and although gem cutting is now predominantly outsourced to India, Antwerp still dominates the trade of rough and large stones.
The major challenge in implementing a ban on Russian diamonds in Western markets, which account for 70% of global diamond jewelry demand, lies in traceability. Some firms, including Tugendhaft’s, have already made significant progress in diamond origin tracing. Tugendhaft’s company uses a helium scanner to create three-dimensional images at every stage of diamond processing, which are then recorded in a blockchain ledger alongside dates and invoices. However, enforcing a complete ban on Russian gems would be costly for the industry and may take up to another year to fully implement. Currently, Antwerp is the only location equipped to handle the volume of rough diamonds, and customs and shipment costs would accumulate significantly.
Blockchain technology, such as De Beers’ system Tracr, is expected to enhance traceability, although it is not yet widely adopted across the industry. Additionally, the challenge lies in tracing the origins of smaller stones, which are typically packaged in large parcels. Tugendhaft emphasized that individually tracking each stone in a blockchain would be unrealistic. Most current proposals focus on initially banning rough diamonds of 1 carat and above.
Once a diamond is cut, tracing its origins becomes increasingly difficult without information about the rough stone it originated from. Industry insiders suggest that new technology may eventually enable determining a stone’s origin by comparing it to the unique geology of its mines. However, this technology is still in the developmental stage.
As the momentum of the boycott against Russian diamonds grows, the diamond industry must confront significant hurdles in ensuring traceability and establishing a robust supply chain. Antwerp’s position as the global diamond trading center may be jeopardized as Western powers seek alternative sources for their diamond requirements. The G7’s decision regarding a formal ban will undoubtedly shape the future of the global diamond industry and Russia’s role within it.
Useful links:
1. Antwerp Diamond Traders Say Ban on Russian Gems is Impossible
2. Boycott Threat to $1tn Diamond Industry as Traders Push to Ban Russian Stones
