How Will G7 Sanction Russia? And When?
October 26, 23
The G7 nations are widely expected to announce details in the coming days of how they intend to outlaw Russian diamonds.
It's been a long time coming - Russian tanks rolled into Ukraine on 24 February 2022 - and it could yet take a long time to implement.
There have been a number of false dawns already. The industry was braced for announcements back in February of this year, and again in May, on sanctions against Russia.
Reuters news agency, citing unnamed diplomatic sources, claimed yesterday that a statement would be made by the end of this month (next Tuesday).
Even if that does happen, it's almost inconceivable that any system could be in place by 1 January 2024, the latest target date for implementation.
The earliest possible date is now March 2024, sources have told teh JCK website, which would be more than two years after the war started.
Bear in mind that Russia's rough diamond exports have so far been unaffected by attempts at sanctions, primarily by the US and by manufacturers going it alone.
A gaping loophole in US sanctions permits the import of diamonds that were mined in Russia but polished elsewhere (ie the overwhelming majority).
And well-intentioned jewelry brands are, it is claimed, unwittingly buying Russian goods in mixed parcels via what's been dubbed the "Dubai laundromat".
The bottom line is that any attempts to prevent Putin using diamond revenue to fund his war have so far failed.
Alrosa, the state-controlled miner, reported first half sales for this year of $1.9bn, which is actually a slight increase on the same period in 2022.
There may be a will among the G7 members - Canada, France, Germany, Italy, Japan, the United Kingdom, the US (and the EU) - which jointly account for 70 per cent of the world's diamond sales. But is there a way?
That appears to be the sticking point. As Al Cook, De Beers CEO, put in it an open letter to G7 leaders: "Throughout our discussions two things have been clear: why we should do this is easy, but how we should do it is hard."
There are a number of proposed methods on the table, which all incorporate a traceability solution of some sort, based on either technology or a system of documents and checks.
G7 officials have been examining the technicalities and legalities of each of them in recent weeks and visited Mumbai and Surat earlier this month to discuss the practicalities of implementing them.
Feelings are running high and there will inevitably be anger, whichever one is chosen.
Belgium initially opposed sanctions, claiming they would harm Antwerp more than Moscow.
But it is now, together with the Antwerp World Diamond Centre (AWDC), backing what it calls the EU proposal, a system regulated by blockchain that would route all diamonds through a single point of entry. Such as Antwerp.
Its main rival, the G7 Diamond Protocol, is another blockchain solution (employing Tracr and Sarine technology), backed by third-party auditing schemes, proposed by the World Diamond Council and supported by De Beers.
India and the French jewelry and gemstones union UFBJOP have also put forward their own proposals, based largely on self-regulation and spot checks rather than hi-tech.
But Africa's diamond producers, accounting for over 60 per cent of all global rough production, aren't happy.
The African Diamond Producers' Association, representing 19 countries, says it's not even been consulted.
In a statement it said the G7 Diamond Protocol would bypass, undermine and substitute the existing Kimberley Process Certification Scheme (KPCS) and impose a new set of restrictive measures on the global diamond trade.
"No initiatives have been taken to engage Africa in an exercise which is clearly targeted at adding supply chain controls on our diamonds," it said.
Have a fabulous weekend.