In the heart of Antwerp's diamond district, there's a growing reluctance to deal with Russian gemstones. Shortly after Russia's invasion of Ukraine in February 2022, Thierry Tugendhaft, a diamond dealer based in Antwerp, received requests from prominent Parisian jewellers, urging him to cease the supply of Russian stones. This plea extended to other diamond firms in Antwerp, which serves as the world's foremost hub for trading in rough diamonds and the cutting of large gems. The challenge of avoiding Russian stones became apparent, considering that Russia accounts for about one-third of the global demand.
Now, Western powers aim to formalize this boycott through an official ban on Russian stones. An announcement from the G7 has been anticipated for some time, but disagreements over the specifics are causing delays, according to a source knowledgeable about the situation.
Prominent Western jewelers, including Tiffany's, Cartier, and Van Cleef & Arpels, are eager to distance themselves from Russia's lucrative diamond trade. As a result, imports of Russian rough diamonds have dwindled to less than 5% of pre-war levels, as reported by the source.
Thierry Tugendhaft, who leads T. Diamonds BVBA, revealed that approximately 50% of his rough diamonds used to originate from Russia due to their exceptional quality. He had just six weeks to identify alternative sources when his buyers demanded the shift. Tugendhaft's company now secures around 80% of its diamonds from Canada, with the remaining portion sourced from African countries such as Lesotho, South Africa, and Botswana.
Some other Antwerp dealers faced challenges adapting to this change, with European banks refusing to finance their Russian supplies. Presently, around 90% of the world's diamonds are cut in India.
While diamonds contribute only a fraction of the revenue generated by oil and gas, they still bring the Kremlin more than $4 billion annually through the state-owned Alrosa, the world's largest producer of rough stones.
With Russian oil and gas already under sanctions to curb the Kremlin's ability to finance the invasion of Ukraine, the United States, Canada, Japan, and the European Union now aim to restrict Moscow's diamond revenues.
Belgium, notably the port city of Antwerp, is ahead of the game. Despite the outsourcing of gem cutting to India, Antwerp remains the dominant player in the trade of rough and large stones.
Tracking the origin of stones is the primary challenge in banning Russian diamonds from Western markets, which represent 70% of global diamond jewelry demand.
Tugendhaft, a veteran in the diamond business, emphasized that traceability is quite advanced in his firm. They use a helium scanner to create three-dimensional images at each stage of diamond processing, which are then stored in a blockchain ledger alongside dates and invoices for all manufacturing processes. While implementing a complete Western ban on Russian gems would be costly for the industry, it could take another year to fully implement, he said.
The primary issue is dealing with the smaller stones, which are received in parcels of 20,000-40,000 stones. Putting each stone into a blockchain is not a realistic endeavor, according to Tugendhaft.
Most proposals being considered by the G7 currently focus on rough diamonds of 1 carat and larger initially. After a diamond is cut, tracing its origins reliably becomes nearly impossible without information about the rough stone to compare. This places the responsibility on the initial sorting stage of rough stones in Antwerp.
Although new technology may eventually be able to determine the stone's origin by analyzing the unique geology of the mines, such technology is still in development.