Sanctions: Still Awaiting More Info

Baffled by the G7 sanctions on Russian diamonds?

You're not alone. Frankly it's been a bit of a muddle, and you'd be forgiven for losing track.

The simple version is that the G7 nations - US, UK, Canada, Japan, France, Germany, Italy, plus the 27 EU countries - agreed last December to outlaw most Russian diamonds. Together they represent 70 per cent of all retail diamond sales.

The first step, on 1 January, was a ban on gem quality diamonds that were "mined, processed, or produced" in Russia. Goods cut and polished elsewhere - primarily India - were still allowed.

From 1 March any Russian diamond - rough or polished, loose or set in jewelry, and of 1.0-cts or above - was banned, regardless of where it was cut and polished.

The final step, on 1 September, will see the size threshold drop to 0.50-cts and a traceability solution introduced to enforce the new restrictions.

This will require all diamonds entering G7 countries to be verified, initially at Antwerp only, though other entry points may be added.

What complicates matters at the moment is that under that umbrella of a G7-wide ban, each individual country decides for itself exactly how to implement it.

The Responsible Jewellery Council has done a fine job of collating information on how different countries are tackling the current 1.0-cts ban. Unfortunately the phrase "more information to be released" crops up again and again.

What we do know is that in EU countries importers must provide documentary evidence on mining country of origin, names of buyer and seller; CN codes (the EU's eight-digit coding system), description of goods, number of parcels, carat weight, value, and shipping route.

Requirements in the USA appear to be less stringent. Importers must provide a statement on company letterhead confirming their shipment contains no Russian diamonds, but do not need to show documentary evidence.

Diamond imports to a Foreign Trade Zone (FTZ) in the US require a self-certification statement, although no specific documentation has been listed. Jewelry also requires a prescribed declaration stating that it is not of Russian origin.

In the UK companies should provide documentation to demonstrate the individual weight of the diamonds within a package.

They may be asked for additional evidence, such as country of origin, date of despatch, where diamonds were processed. But it's not entirely clear.

For businesses in other G7 countries - Canada, Japan, France, Germany and Italy - I'm afraid there's no clear picture at present. More information will, presumably, be released.

So as things stand EU countries require documentation to prove diamonds aren't from Russia, the USA doesn't, and most others haven't said. 

That's not a very effective way to stem the flow of $1.5bn diamond revenue into Alrosa's coffers from G7 every year ($4bn in total worldwide).

But to be fair it's a very temporary fix. The real test will come from 1 September when the G7 countries introduce their "robust traceability-based verification and certification mechanism".

The G7 Certification Scheme will, according to an EU update on 1 March, expand on existing tracing technologies and controls.

"While several scenarios exist, in principle, identifying information of a rough diamond will first be onboarded (registered) into a traceability platform in the producer country," it says.

"Once the rough diamond arrives at the G7 import node, a verification, including a physical check of the diamond, is performed by the competent authorities." More information will, no doubt, be released.

Have a fabulous weekend,