JUNE 1, 20
Russia’s diamond trade has been insulated from Western sanctions due to how it would disrupt the global trade, and because it’s tough to track diamond provenance. New efforts by the EU and G7 to effectively sanction the trade could have dire consequences, writes Dr. Maria Rentetzi
he recent war in Ukraine came with an escalation of sanctions on Russia, ranging from economic to science and military technology. One of the last sectors to be affected has been Russia’s rough diamond exports thanks to Belgium’s hesitance to disturb the global diamond trade. Russia has the largest diamond reserves worldwide and is second only to Botswana in the value of diamond production ($3.55 billion in 2022). However, an estimated 86% of the world’s rough diamonds still pass through Antwerp. As Chloe Cornish, Sam Fleming and Harry Dempsey reported on 11 May 2023: “G7 nations are working on an inspections regime to target Russia’s gemstones and halt trade in an effort to cut off a revenue source of Moscow.
But their elaborate plan risks destabilizing the global industry.” Russia’s lucrative diamond industry and exports have been difficult to sanction: diamonds might have first been processed in the country and then relabeled elsewhere in the world before being imported by an EU country. Once again, conflict diamonds, long been accused of causing global inequality, colonial volumetric violence, and environmental degradation, are on the front page.
It remains technologically challenging to track and trace the origins of diamonds in the global market. Nano–markers engraved on every diamond that allow a diamond’s geographic origin to be traced is a technological innovation in the making that is not broadly available. Nevertheless, as of 1 January 2024, the EU and the G7 countries have banned imports of rough diamonds mined in Russia. In September 2024 further bans are expected on the import of cut and polished Russian diamonds that have been processed in third–party countries.
The EU has been engaging with G7 countries and other stakeholders, including the diamond industry, to restrict the circulation of Russian rough diamonds by incorporating modern technologies such as the blockchain. This is an immutable, digital ledger that makes use of cryptographic signatures to record each transaction and ensure traceability of diamonds. When a rough diamond is mined, it will be immediately scanned, registered in a database with an ID number, which will follow the single diamond through the entire pipeline process. De Beers, the giant diamond industry and the world's largest producer of rough stones, introduced this technology in 2022, “empowering jewelry retailers to have confidence in the origin of the diamonds they purchase.” In the meanwhile, the Swiss company Spacecode has become part of the EU solution in that it offers a technological fix to identify the origin of individual diamonds. The company claims to be able to digitalize the diamond chain using Radio Frequency Identification (RFID) technology, also used in retail stores since the late 1980s. This is a wireless system that uses radio frequencies to connect a smart tag—a label that stores information such as serial numbers, short descriptions, and even data in radio wave form— to a reading device. A complex system of storing and sorting diamonds based on RFID technology promises to trace diamonds in real time and identify their geographical origin. Ironically, RFID technology was a World War II Russian innovation used to spy on the U.S. ambassador to the Soviet Union in 1945.
Thanks to EU’s rough diamond lobbying and technological diplomacy that protects Belgium’s diamond lucrative trade, the new regulations elevate Antwerp to a worldwide verification center capable of transforming the global diamond trade. The African producers, led by Botswana, the second biggest diamond producer in the world, have used all possible diplomatic and political means to reverse the joint EU and G7 decision. As Mokgweetsi Eric Keabetswe Masisi, the president of Botswana, recently argued, referring to the joint Western initiative: “They were essentially regulating our industry completely without our participation. You can’t do this without engaging us, particularly Botswana. They did reach out and send people here. The engagement was pretty patronizing. They had essentially made up their minds."
But that is not all. The new regulations seem to disregard the United Nations Fowler Report released almost 25 years ago after concerns that the diamond trade was fueling wars in several African countries. For its part, the UN rough diamond certification scheme (KPCS), known as the Kimberley Process, has lost credibility: It fails to hold countries accountable for shortcomings, it limits its application to only rough diamonds, and permits the global circulation of mixed diamonds shipments from more than one country.
Behind all these events lies a sweeping technological change in an industry that according to The Economist: “for generations it has been run by De Beers as a cartel.” In what is supposedly a postcolonial world, the EU’s tech diplomacy seems not (yet) to have parted ways with a colonial past.
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