Finetuning the Diamond Sanctions
June 27, 24
Finetuning is a great word. It's how the European Union describes the revisions announced earlier this week to its sanctions on Russian diamonds.
Finetuning suggests everything was already close to perfection, but just needed a final tweak, a dotting of the I's and a crossing of the T's.
I'm not so sure. The EU's "14th package of restrictive measures against Russia" extends the so-called sunrise period for the implementation of a certification mechanism by six months from 1 September 2024 to 1 March 2025. That's more than a tweak.
No reason is given, other than to "allow more time to set up the G7 traceability scheme," which suggests the original deadline was impractical. Whether the new deadline is any more achievable remains to be seen.
What message does this send to Russia? That a group of the world's most powerful nations is taking a robust and effective stand by outlawing its diamond exports absolutely?
Or that they're trying very hard. They can't quite get the computer to work, but the guys in IT say it should be fixed by early next year?
Today traders in G7 countries can still, legally, buy as many 0.99-cts Russian diamonds as they want (sanctions currently apply only to stones of 1.0-cts and above, and will include 0.50-cts and above from 1 September).
Vladimir Putin's press secretary has used the term "boomerang effect" to describe the sanctions, insisting G7 nations will suffer more than Russia itself, as it forges closer trade ties with Brazil, India, China, and South Africa Iran, Egypt, Ethiopia, and the UAE (all BRICS nations).
It's true, of course, that a system of sanctions can function without the backing of the sophisticated blockchain verification scheme, as is being proposed. We have sanctions today, without such a scheme.
But pledging to introduce one, and then saying it's too hard and we need more time, comes across as a little weak.
All of this presupposes one thing of course - that the war in Ukraine will drag on and on.
It'll be into its fourth year by the time the certification mechanism becomes mandatory. But what if it comes to and before then?
Will the G7 nations (which includes the EU) quietly ditch the sanctions aimed at depriving Russia of over $4bn a year in diamond revenue?
That's not something the EU addresses in the Q&A issued with its announcement of revised restrictive measures.
It does, however, provide long-awaited clarification on the issue of grandfathered goods - diamonds imported before the first tranche of sanctions came into force on 1 January 2024.
"The ban does not apply to diamonds that were located in the EU or in a third country (other than Russia), or were polished or manufactured in such third country, before the ban on Russian diamonds entered into force (so-called 'grandfathering')," it says.
Such goods no longer provide revenue to Russia, it explains, so this is not a "concession".
The EU is also allowing, temporarily, imports and exports of Russian jewelry, for example for trade fairs or repairs. Presumably another non-concession.
And postponing a ban on jewelry that incorporates Russian diamonds which were cut and polished elsewhere (which had been due to take effect on 1 September).
They don't spell it out, but I'm guessing this isn't a concession either.
Have a fabulous weekend.