More than five centuries at the forefront of the global diamond trade provide many lessons on how to survive wars, political conflicts and crises of all kinds. Even so, the Belgian city of Antwerp, the main center in Europe and the world of buying and selling the coveted precious stones, holds its breath these days. What traders had managed to circumvent until now, international sanctions against Russian diamonds for the war in Ukraine, is back on the table of world leaders. "Russian diamonds are not forever," proclaimed European Council President (and former Belgian Prime Minister Charles Michel) at the G7 summit in Hiroshima. And in Antwerp, even the brightest stones paled.
"We are waiting," admit sources in the diamond sector of the Flemish city. For more than a decade now, most of Antwerp's merchants have not carved their own stones; it is much cheaper to send them to polish to the other world diamond centers, Dubai and Bombay, where they do not pay as many taxes as in Europe. Even so, the Belgian port city remains the main hub of precious stones on the planet: around 85% of the world's rough diamonds, 50% of cut diamonds and 40% of synthetic diamonds pass through there.
The meeting of the world's seven largest economies in Japan concluded a week ago with an explicit mention of Russian diamonds, which bring in about 4 billion euros to Moscow each year. But no deadline was set to punish their trade. Still, few doubt that sanctions will come sooner rather than later. The United States banned Russian diamonds in 000. The UK has just announced that it will follow in his footsteps. So far, the EU has not targeted Russian diamonds, especially because of the threat of a Belgian veto, but the government of Alexander De Croo has recently opened up to the possibility of doing so, provided that the sanctions are at the level of the G-2022 – which is the club where 7% of diamonds are sold – and a system of "scientific" traceability of the stones from their origin is guaranteed. to ensure that "loopholes are closed", as Michel put it in Japan.
Because the problem, warn experts in the sector, is that Russian stones arrive in India and, from there, go to the US market, taking advantage of one of those legal loopholes that worry Belgium: "For the United States, when a diamond undergoes a 'substantial transformation', it is no longer a Russian diamond. So from the moment a [Russian] diamond is polished in India, according to American law, it is no longer Russian," they explain. And diamonds are not like Russian oil or gas, which require complex infrastructure to get around sanctions. With precious stones it is much easier: "You put a few diamonds in your pocket and get on a plane that leaves you in India", where the trace to the real origin of the stone is lost.
The aim of the sanctions is to punish Moscow, but if the diamonds end up on the market anyway, "the effect is totally zero in Russia, so the sanctions would have no effect," Belgian diplomatic sources stress.
"Last year, many Americans bought Russian diamonds without knowing it, they thought they were Indians, but the reality is they are Russian. We estimate that all diamonds below one carat sold in the US last year were Russian," confirmed the Belgian diamond sector sources, who spoke on condition of anonymity after the concern caused by the turn in Hiroshima.
However, diamonds will not be in the next EU sanctions package. Since the Ukrainian war began, the name of Russia's state-owned Alrosa, a world leader in diamond production, has fallen again and again from the blacklist of the Twenty-seven. But in Hiroshima the taboo on precious stones has been definitively broken, and the city of diamonds looks with apprehension at measures that, it warns, if not done right, could achieve what history has failed to achieve in the last 500 years: end Antwerp's flourishing diamond business.
The diamond district is just around the corner from Antwerp's spectacular central train station. Jewelry stores, of greater or lesser category, follow one another in the surrounding streets. Almost every business, hotel, parking lot or restaurant, has a diamond in its name or logo. But as soon as you cross the security barrier that leads to the heart of the diamond neighborhood, the brightness of the shop windows is left behind. The street, an alley rather, which has been for more than 500 years the epicenter of the trade of these precious stones of Europe and the world, is a short road closed to traffic surrounded by ugly office buildings where businessmen of multiple nationalities and many ultra-Orthodox Jews, who have been dedicated to this business in Belgium for generations, enter and leave. as told by the Netflix series Rough diamonds.
The heart of Antwerp's diamond district knows how to hide its treasures well, which they have long tried not to come from Russia: even without sanctions, Russian diamonds have stopped flowing to the Belgian city as they did until the Ukrainian war began; Last year, trade in Russian gemstones fell by at least 65%. It is the argument they use before those who criticize that the EU continues not to sanction Alrosa.
What worries Antwerp is not so much that Russian diamonds are banned, but that this is done only at European level while there are still loopholes that allow sanctions to be circumvented. Because then, the sector points out, those who, as in Antwerp, already do "things right" lose out. The terror of an industry that is already high-risk, and that has not yet managed to recover from the pandemic crisis, is that much of the business that continues to concentrate the Belgian city goes, definitively, to other countries with less scruples.
"The industry needs a level playing field. There is international recognition that Antwerp is the only diamond business centre subject to EU rules against money laundering or terrorist financing." With sanctions that do not guarantee that the business of Russian diamonds is stopped everywhere, "it would be punishing companies that are doing things well in the industry and rewarding those who went to other business centers to escape all these rules and that are countries that, in addition, they support [Vladimir] Putin's regime. It would be very strange if the result of sanctions were to reward the bad guys in history," they warn.
To prevent this, the Belgian government and diamond industry demand that sanctions mean the closure of Russian gemstones to the powerful G7 market. And that a "scientific" traceability system be imposed more reliable than the written declarations that are now required, because experts claim that they are easily falsifiable.
Much of the hopes of the sector are placed in a Swiss company, Spacecode, which claims to have designed a device that allows to identify from which lands and, therefore, from which region of the world, the diamond comes. "The entire diamond supply chain is very interested, they recognize the positive contribution it will make to the industry. We have been contacted by mines, producers, laboratories, producers, banks and retailers," its president, Pavlo Protopapa, said by email.
The company hopes to have the first devices small enough to be easily distributed between the end of the year and March 31, 2024, although only over the next year could they be produced at the scale required to make it a requirement to impose sanctions. A timetable that, for those who urge to punish this sector not only profitable for Moscow, but highly symbolic, is too slow.
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