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THE DIAMOND WORLD

AS EVENTS IN THE RUSSIA-UKRAINE WAR HEAT UP,
PRESSURE BUILDS IN THE EU TO ENACT ROUGH DIAMOND BAN

 

Russia’s highly controversial and suspect referendum in the regions of Donetsk and Luhansk in the east of Ukraine, and in Zaporizhzhia and Kherson in the southeast of the country, as part of its stated intent to immediately annex some 15 percent of Ukrainian territory, have once again raised the issue of European Union sanctions on imports of rough diamonds from the Russian Federation.

While the EU and United States have generally been synchronized in their imposition of sanctions against Russia, in response to its invasion of neighboring Ukraine, the glaring exceptions have been natural gas imports, on which much of the EU is dependent for heat and electricity, and rough diamonds.

To date, the EU has imposed six rounds sanctions against Russa, but diamonds remain absent from the embargo list. Reportedly, the reason for that is a strong behind-the-scenes lobbying by the Belgian diamond sector.

But recent developments in the Ukrainian crisis, including severe Russian losses on the battlefield, new threats by Russian President Vladimir Putin that tactical nuclear weapons may be employed, the mobilization of Russian reserves, and the forced referendum and imminent annexation have all led to calls for added pressure on Moscow.

Leading the charge four of the EU countries that are frontline states, namely Poland, Estonia, Latvia and Lithuania, as well as the Republic of Ireland, who together presented a paper with a list of new sanctions. The most prominent of them is the expulsion of Gazprombank, the Moscow-based bank that acts as intermediary between EU clients and Gazprom, Russia’s gas monopoly to be expelled from the SWIFT system. But they also have called for finally adding rough diamonds to the sanctions list.

Exports of Russian diamonds equaled $4.5 billion in 2021, and the leading destination for such goods was Belgium. Rough diamonds are among Russia top-10 non-energy exports.

MORAL HYPOCRISY CHARGED

While the Belgian government has thus far successfully fended off attempts to ban the import of rough diamonds, diplomats in Brussels, headquarters of the EU, have said that the country’s position is becoming increasingly untenable.

The EU has already sanctioned other luxury goods, including Russian gold. Russia accounts for about 10 percent of the gold produced annually. Its share of rough diamond production is close to 30 percent.

Civil society groups are becoming increasingly vocal about the failure to ban rough diamond imports. Speaking to Politico, Roland Papp, a representative of the Transparency International NGO, said the EU was demonstrating “moral hypocrisy” on the subject.

“Over the summer the EU added Russian gold to the sanctions list, it is not too late to add diamonds,” he declared.

The European Council in session in Brussels.

Papp said that NGO, which was formed to combat corruption in government, wrote to EU officials urging them to include diamonds in its Russian sanctions regime. He said the EU did not respond to the letter.

More public criticism of the EU position had been leveled in April by none other than Ukrainian President Volodymyr Zelenskyy, who spoke in a video address to the Belgian parliament. “There are those for whom Russian diamonds, sometimes sold in Antwerp, are more important,” he said.

Belgian Prime Minister Alexander De Croo addressing the FACETS 2022 conference in Antwerp on September 14, 2022.

10,000 JOBS UNDER THREAT

A spokesperson for the Antwerp World Diamond Center (AWDC), which is the umbrella body representing all sectors of the Begian diamond industry, has said that if a ban of rough diamond imports would be enacted, it could threaten up to 10,000 jobs in the Belgian diamond industry.

Speaking to Andrew Rettman of EUobserver, AWDC’s spokesperson, Tom Neys, said that he would buy a Russian-sourced diamond to protect jobs in Antwerp and in poor regions of Russia.

In any case, said Neys, a Belgian ban of Russian goods would achieve nothing, other than shifting business from Antwerp to Dubai, which pointedly has refused to sanction rough imports from Russia. The shift to of the rough diamond trade away from Antwerp would also set back industry reforms “to the Middle Ages,” Neys said, because Antwerp had the world’s best anti-money laundering regime.

To date the Belgian government is holding its cards close to its chest. The country’s prime minister, Alexander De Croo, visited Antwerp earlier in September to attend the FACETS 2022 diamond conference organized by ADWC.

“For six centuries, Antwerp has proven that it always manages to remain resilient and innovative in turbulent times,” he said in a speech to the conference, but he pointedly did not mention Russia.

But, in the past, De Croo has said publicly that he wouldn’t veto a rough diamond ban if there was overwhelming support for one in the EU. Belgian officials asked by EUobserver whether that position by the Belgian prime minister was still valid, said that “nothing had changed.”

“It’s on the table. A majority wants it in the new sanctions package and the Belgians have said they won’t veto it,” an EU diplomat also told Euobserver.