Blogs: Cutting Remarks / Diamonds

Diamond Industry Gears Up for G7 Russia Ban


The World Diamond Council (WDC) and the Belgian government have released dueling plans detailing how the industry might fulfill the Group of Seven’s (G7) desire to bar Russian polished gems from member countries.

At an event Tuesday night at the residence of the Belgian consulate general, Belgian Prime Minister Alexander De Croo told attendees that “Russian diamonds are blood diamonds,” and that he hoped they would be banned from G7 countries beginning Jan. 1, 2024.

“The G7 has a goal of banning Russian diamonds from the market,” De Croo told JCK. “[We still must go] the final mile. We are extremely happy to play a role in this [effort]. We are a partner in this.”

The proposal introduced by the Belgian government—which speakers at Tuesday’s event called “the EU proposal”—is “good and strong and makes sure that we don’t have to have second thoughts about what is being sold,” De Croo told JCK.

Under both the WDC and Belgian proposals, anyone importing rough or polished diamonds into a G7 country, including the United States, would be required to declare on their invoices that their shipments do not contain Russian diamonds. (Current U.S. rules allow Russian polished, under the doctrine of “substantial transformation.”)

Sources say the rules would initially apply to polished diamonds 1 ct. and above, though they would eventually apply to smaller stones.

The Belgian government’s plan, which is backed by the Antwerp World Diamond Centre (AWDC), requires traders to verify their declarations with information from existing tech-based traceability programs, including Tracr, the GIA’s Diamond Origin Report, Sarine Diamond Journey, Everledger, and others. All the tech information would be synthesized into a blockchain-supported “public ledger,” for which the GIA would provide technical support.

Proponents argue this moves the burden of proof “upstream,” toward miners and cutters, and would allow the trade to make far-reaching changes that could extend beyond the current issues with Russian diamonds.

“This will make traceability standard in the industry,” says an Antwerp source, arguing that the trade won’t change unless it’s forced to. “If you’re not told to sort your trash, then you won’t sort your trash.”

The Belgian proposal says that all rough must be tracked and traced by one of these systems and pass through a “rough node.” In a departure from trade custom, it says that “only unmixed [i.e., single-origin] parcels of rough diamonds directly from the source” would be allowed into G7 countries, though it makes an exception for goods from De Beers’ “Botswana sort.” (“Beneficiated goods,” meaning diamonds polished inside the country where they were mined, would not have to pass through this rough node.)

Once cut, the diamonds would pass through a “polished node,” located in a G7 country, which would determine if the shipper has the required backup. On a practical level, this would likely reroute goods to Antwerp for “prescreening,” as Antwerp has a fully staffed Diamond Office, while most other countries don’t.

That has led some to dub the Belgian proposal self-serving, noting that until recently, Antwerp officials vocally opposed sanctions on Russian goods.

The Antwerp source acknowledges that the center would benefit in the short term, but argues the city would probably not serve as the sole node indefinitely.

“It’s now September. I don’t see how New York or Tokyo would be able to set something up in four months. So for maybe the first six months, Antwerp would be the place where verification happens.”

At the event Tuesday, GIA president and CEO Susan Jacques declared that the “EU proposal … is the most robust of all the proposals currently in the market.”

Some saw this as drawing a contrast with the World Diamond Council-endorsed G7 Diamond Protocol.

Devised after consultation with all parts of the pipeline, the WDC-backed plan has been approved by the entire organization, with the exception of the AWDC, which favors the Belgian plan.

The WDC’s declarations would read: “The rough and/or polished diamonds herein invoiced do not originate from mining companies operating in Russia, and have not been processed or produced in Russia, based on adherence to the G7 Diamond Protocol standards, unless these diamonds were purchased prior to [G7-PROVIDED DATE]. The seller hereby supports this Declaration by adhering to the G7 Diamond Protocol Assurance Framework.”

All industry participants will be able to make this declaration, “provided they are able to substantiate it by meeting the requirements,” the plan says. This would require companies to “develop documented policies/procedures or requirements to validate that the G7 Diamond Protocol Declaration is truthful and substantiated.”

Participating companies will be required to keep copies “of the G7 Diamond Protocol Declaration on invoices,” which “must be reconciled on an annual basis.”

These claims also “must be disclosed to the relevant assurance body”—which the WDC says would be the local industry trade association.

The assurance bodies will be responsible for verifying the declarations. It recommended the assurance bodies do “regular spot checks” to verify compliance, which could be conducted by “qualified third part[ies].”

“Material breaches of the assurance framework will require immediate attention and a suspension of the use of the G7 Diamond Protocol Declaration,” it said.

The WDC proposal has received some criticism—including from within the trade.

The Antwerp source called the WDC declaration “a little too similar to the Kimberley Process System of Warranties”—which human rights groups have criticized as weak and too dependent on industry self-governance.

“The industry associations doing checks could present a conflict,” this person says. “I don’t know how it will work.”

Others doubt that officials in countries like the United Arab Emirates or Hong Kong, whose governments have not taken a position on Russia’s invasion of Ukraine, would have much interest in doing the required checks.

A WDC official counters that the proposal is “not trust-based. It has the declarations, it has standards, it has assurances. It has teeth.

“It’s very difficult for one player to monitor the entire global diamond industry. The protocol matches the way things work.”

Martin Rapaport has also criticized the WDC proposal, arguing that it places new burdens on small companies they can’t comply with.

However, the WDC contends that its proposal was specifically designed to protect both the artisanal and small-scale mining (ASM) sector and Indian “cottage” cutting operations, which may not be able to afford expenses associated with some of the more technical systems.

“Everyone needs to be able to participate, both large players and small players,” says the WDC official. “If only a few players participate, how will you stop Russian goods? There needs to be a workable solution that’s inclusive of everyone. This tries to achieve that.”

Top: De Croo speaking at the Belgian consulate’s residence (Photo by author)

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By: Rob Bates

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