New Year, New Sanctions
December 28, 23
Happy New Year! Things seem, finally, to be picking up in the diamond world.
After almost two years of declining prices there is now room for cautious optimism. Mixed with uncertainty.
The big question mark in 2024 hangs over sanctions on Russian diamonds - how they'll be implemented and what effect they'll have.
The G7, including the 27 EU nations, account for 70 per cent of all diamonds sold to consumers.
They have jointly resolved to introduce restrictions on Russian diamonds from Monday (1 January 2024).
But it is down to each of them (and the EU as a single entity) to devise their own method of enforcing those restrictions.
The devil is in the detail, and there's still a lot of uncertainty, anxiety and opposition.
Generally speaking we know that the G7 ban will be expanded form 1 March to cover diamonds of 1.0-ct or larger mined in Russia but polished elsewhere, and that from 1 September the size threshold will drop to 0.50-cts.
Also from 1 September, a traceability mechanism will be introduced to police the sanctions.
But we still don't have details on what it will be or how it will work, either in the EU or beyond.
We're dealing with a set of "known unknowns", as Donald Rumsfeld, former US Secretary of State for Defense, famously put it.
We know what the things are that we don't know - unlike unknown unknowns - but we still don't know what we need to know about those unknowns.
The US left the door wide open when it announced an initial sanctions package back in March 2022, just a couple of weeks into the war.
Last week it said revised restrictions would close the loophole that allowed stones that had been "substantially transformed" - ie cut and polished elsewhere.
That's a blow for India, with the US accounting for 45 per cent of its diamond exports. But many Russian goods will still be exempted because they're below the size threshold.
Meanwhile Africa's 19 diamond-producing countries, accounting for over 60 per cent of all global rough production, say the new G7 sanctions bypass, undermine and substitute the existing Kimberley Process Certification Scheme (KPCS) and impose a new set of restrictive measures on the global diamond trade.
The World Federation of Diamond Bourses (WFDB), representing 27 bourses, fears using Antwerp as a single-entry point for all rough diamonds will be expensive and time-consuming. It suggests multiple points of entry, including Mumbai, Israel, Dubai and African diamond-producing countries.
And Al Cook, CEO of De Beers Group, says the sanctions may prove impractical to implement.
Alrosa, Russia's state-controlled miner, has been riding the storm so far, with negligible impact on its production or sales since the invasion of Ukraine.
It produced 34.6m carats this year, in line with its own forecasts, and ahead of De Beers (23.9m carats in the first three quarters).
First-half sales for 2023 were $1.9bn, largely in line with its full-year $4bn before the war in Ukraine.
Vladimir Putin's press secretary has warned that EU sanctions on Russian diamonds will have a "boomerang effect", with the countries that boycott Russian gems suffering more than Russia itself.
"Russian diamonds are not forever," Charles Michel, President of the European Council posted on X (formerly Twitter) earlier this month.
Time will tell.
Have a fabulous weekend and a fabulous new year.