Diamond producers warn of pitfalls in G7’s Russia gem ban

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Mining news - The World Federation of Diamond Bourses (WFDB) issued an unfastened missive connected Wednesday calling connected nan G7 nations and nan European Union to rethink nan perchance “irreparable” marketplace outcomes of its prohibition connected Russia-produced diamonds.

Russia is nan biggest world supplier of uncut diamonds by volume. The world organization has imposed caller sanctions targeting Russian gem transactions arsenic portion of a wider strategy aimed astatine reducing Moscow’s income streams, which support its subject actions successful Ukraine.

In December, nan G7 nations of Canada, France, Germany, Italy, Japan, nan U.K. and nan U.S. declared an outright prohibition connected Russian diamonds, effective from Jan. 1. That is to beryllium followed by gradual implementation of restrictions connected indirectly imported Russian diamonds starting from March 1. By September, a caller strategy for verifying nan origins of these gems is expected to beryllium successful place, though specifications regarding nan verification process and its location stay uncertain.

“The G7 must understand that nan guidance they person chosen will origin awesome harm to nan world gem industry. We dream that nan concerns we are voicing will person nan G7 governments that an replacement solution must beryllium found,” WFDB president Yoram Dvash said successful a Feb. 28 connection to The Northern Miner.

Criticism of nan sanctions comes against a backdrop of little request for diamonds from India and China, and falling prices for unsmooth stones, estimated by nan Zimnisky Global Rough Diamond Price Index to beryllium down astir 25% from their early 2022 high.

‘Irreparable’ manufacture harm

The manufacture leaders are worried that enforcing these sanctions could lead to logistical, operational, and financial challenges. Among nan sanctions’ caller effects, 1 norm is that non-Russian diamonds must now beryllium certified successful Antwerp, Belgium earlier being sent to different markets.

They’re concerned astir imaginable proviso bottlenecks and unbalanced advantages to 1 subordinate to nan detriment of others.

Among nan sanctions’ caller effects, 1 norm is that non-Russian diamonds must now beryllium certified successful Antwerp, Belgium. Credit: Adobe

“While powerfully agreeing that nan clip has travel for nan manufacture to beryllium capable to trace nan root of their diamonds, we should beryllium moving together to meet these objectives but consciousness that nan process that has been suggested will origin irreparable harm to nan non-Russian industry,” presidents and members of nan 27 gem bourses wrong nan WFDB said successful nan unfastened letter.

Dvash says nan WFDB is actively seeking manufacture statement to reside nan challenges astatine hand. “Sanctions should activity successful nan correct direction, punishing nan intended statement and not nan full industry,” he said, adding that nan sanctions could inadvertently make Russian diamonds much desirable owed to accrued costs and reduced proviso of non-Russian alternatives.

The effect connected nan costs of unsmooth and polished diamonds from non-Russian sources being forced into 1 node wasn’t considered successful nan calculations, nan WFDB missive argued, voicing beardown guidance to designating Antwerp arsenic nan azygous verification point.

“As gem experts, we cognize that this would adhd nary worth to nan objectives of nan G7 personnel states and would consequence successful a awesome regularisation for each non-Russian diamonds, pinch unspeakable impacts connected nan industry,” nan missive reads.

What’s more, nan higher anticipated costs of shipping nan diamonds to Belgium, which will ostensibly see other financing position for nan gem traders arsenic good arsenic security and freight charges will adhd importantly to nan value of nan stones.

Sovereign interference

The gem bourses opportunity nan process elaborate by nan EU, arsenic it stands, undermines sovereign African governments’ expertise to nonstop their gemstones straight to their chosen market. It besides undermines morganatic section manufacture beneficiation and could promote smuggling, which nan WFDB says would beryllium counterproductive.

Belgium favours conducting these verifications locally. Its support aligns pinch nan Belgian government’s and nan Antwerp World Diamond Centre’s purpose to found a hardy, traceable strategy for verifying nan origins of diamonds to forestall Russian gems from entering nan marketplace nether pretenses.

Botswana, Africa’s gem hub, issued a connection connected Feb. 9, mostly supporting nan initiatives to guarantee that nan gem waste and acquisition is responsible and does not money conflict. Despite perchance facing added costs successful a caller verification system, nan Botswana authorities sees an opportunity for enhanced worth for its earthy diamonds.

While nan state has not straight banned Russian stones, it favours continued speech and partnerships pinch nan G7 and different stakeholders to build a marketplace that benefits improvement and avoids backing forbidden activities. Botswana intends to protect and beforehand its diamonds-for-development communicative while ensuring its gem manufacture remains a affirmative illustration of ethical sourcing and economical benefits.

Reuters reported connected Feb. 8 from nan Cape Town Mining Indaba that De Beers, a portion of Anglo American (LSE: AAL), and Botswana’s state-owned Okavango Diamond Company asked nan G7 to see unintended consequences arsenic nan bloc prepares to enforce nan 2nd shape of nan prohibition connected Russian diamonds, concerned that African prices would beryllium hugely inflated.

“Effectively (African producers) would beryllium forced to nonstop each their diamonds successful 1 guidance alternatively than choosing … (and) ethical African diamonds would go overmuch much expensive,” De Beers CEO Al Cook told Reuters connected nan sidelines of nan conference.

De Beers had antecedently urged nan G7 to prosecute Botswana, Namibia, South Africa, Angola and India to create nan model pinch input from crossed nan industry.

Diamond marketplace outlook

The gem leaders telephone for much definitive guidance and a much global, collaborative attack to guarantee transparency and ethical sourcing without disproportionately impacting nan broader industry. They accent nan request for solutions that do not centralize waste and acquisition to a azygous constituent (such arsenic Antwerp) and petition nan take of exertion that could support nan ethical search of diamonds crossed each regions, including support for artisanal and small-scale miners.

The signatories besides want nan G7 and EU to springiness assurance that whichever provenance-proving exertion they settee connected for gem verification should beryllium shared universally pinch non-Russian gem producers to alteration their continued inclusion successful nan market.

Artisanal and small-scale miners must besides person free entree to nan exertion and should beryllium capable to nonstop their unsmooth stones to immoderate cutting centre.

While nan Russian gem sanctions intensify, De Beers said successful a Feb. 22 marketplace update that manufacture conditions are expected to stay “challenging” successful nan short word but that nan semipermanent outlook is favourable.

De Beers says nan heightened accent connected nan origins of diamonds, peculiarly pinch nan upcoming G7 restrictions, whitethorn boost request for De Beers’ diamonds, particularly those tracked via their blockchain platform, Tracr.

However, nan world proviso of unsmooth diamonds whitethorn alteration owed to aging mines and fewer discoveries.

Further, De Beers says nan marketplace for lab-grown diamonds is experiencing a important value drop, impacting manufacturers and perchance reducing unit prices, which could heighten nan perceived worth of earthy diamonds compared to lab-grown alternatives.

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