Diamond ring and earrings in Antwerp, Belgium.
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The G-7, the world’s seven most advanced economies, are discussing a ban on Russian diamond exports – a complex measure that could potentially increase prices for the luxury item.
Russia’s diamond exports have been largely shielded from international sanctions following Moscow’s full-scale invasion of Ukraine in February last year. This is despite contrary calls from Ukraine and some European countries, as well as several rounds of measures from the Kremlin targeting energy exports, banks and oligarchs.
In 2021, Russia is expected to earn approximately $4.7 billion from diamond exports, According to data from the Observatory of Economic Complexity, This made Russia the eighth largest diamond exporter in the world. Diamonds are not as commonly traded as oil or gold, but they represent a large market that goes beyond jewelry. The stones are also used for drilling, dentistry, computers, etc.
Some countries – such as Belgium, which buys a significant amount of Russian diamonds – want a “global approach” to Russian exports, in contrast to the EU’s specific measure, to ensure that sanctions do not harm them disproportionately. Deliver it.
“The debate has been going on for some time because there is a clear risk that Russia could divert its exports to non-participating countries,” Edward Gardner, commodities economist at Capital Economics, told CNBC via email.
“If sanctions were implemented [a] The way fraud becomes harder to spot, however, we could see lower Russian supply and higher prices in the market,” he said.
With the prospect of overpaying for the commodity and failing to significantly dent Russia’s revenue from the trade, the diamond industry in Europe is concerned about diverting trade for the stones to other markets such as Dubai.
Therefore, the G-7 is in talks about how to use technology to trace the original source of the stones.
In March, the US and EU said in a statement that “Russia is earning billions of dollars diamond tradeAnd both are committed to “imposing economic consequences on Russia for the unprovoked war in Ukraine.”
Hans Merkett, a Belgian researcher on natural resources at the International Peace Information Service, an independent research institute, said the embargo on Russian diamonds was only a matter of time. If it is not in the next package, then the one after that said.
European Commission President Ursula von der Leyen spoke on Tuesday about the 11th package of sanctions against Russia currently being debated in the 27 EU capitals, but she did not mention that the diamonds in this round will be characteristic of
Instead, the next set of measures will focus on “cracking down on fraud”.
Among several rounds of sanctions, EU measures have targeted Russian oil, coal, banks, wealthy individuals and the media – to name a few.
Tobias Gehrke, senior policy fellow at the European Council on Foreign Relations, a think tank, told CNBC that there are “a lot of problems” with enforcing the ban.
He said the measures against Russia so far have been “more punitive like sanctions”.
Gehrke said, “There is no doubt that Russia will be able to finance the war for many more years.”
The EU will import Russian diamonds worth about 1.4 billion euros ($1.5 billion) in 2022, according to Europe’s statistics office. This was down from 1.8 billion euros in 2021.
Alrosa, a Russian mining and state-owned company, reported sales of rough and polished diamonds in January 2022. $325 million and spoke of “robust demand” for the commodity. The company has not published further results since then.
In April last year the U.S. Treasury Expanded previous restrictions on Alrosa. The UK, Canada and New Zealand also adopted similar measures against one of the world’s biggest mining companies.
European ambassadors debated further sanctions on Russia on Wednesday. Andrzej Sados, Poland’s ambassador to the European Union, said he would ask the EU’s executive branch why the diamonds from Russia were not included in the draft proposal, according to a spokesman.