Russia's conflict diamonds: Who profits most from the ongoing trade?


Questions are being asked about the origin of the diamonds on sale in Antwerp, Belgium. Photo: dpa

A jeweller wearing gloves carefully drapes diamonds on a bed of velvet in a shop window in Antwerp’s diamond district, a hub for the trade for more than five centuries.

Quietly, discreetly, €37bil (RM173.6bil) changes hands here every year, according to the Antwerp World Diamond Centre.

Asked where the diamonds come from, a jeweller answers drily: “I wouldn’t ask.”

The rough diamonds arrive from Angola, Congo, Sierra Leone, South Africa and also Russia, says Sigal Vantzovski, owner of Binson Diamonds in Antwerp.

They are brought to Belgium to be polished before being processed into jewellery and sold in her shop and many others like it.

It is a niche high-end market worth billions of dollars and Russia continues to profit from the trade, despite the Kremlin’s ongoing war on Ukraine.

Ever since Moscow’s troops marched into Ukraine, the European Union has been imposing sanctions on Russia, stopping the import of goods including gold, vodka and caviar. But Russian diamonds are still flowing into Europe.

Russia’s Finance Ministry says the country exported more than 48.6 million carats of rough diamonds in 2021, the most since it started monitoring the business in 2007. The ministry did not quantify how much money changed hands but says most exports went to the United Arab Emirates and Belgium.

That puts Belgium, where the European Union is headquartered, at the heart of the diamond industry. During talks about sanctions, officials there lobbied for Russian diamonds to be excluded from the measures.

In economic terms, Europe would do itself more harm than good by imposing sanctions, says Koen Vandenbempt, dean of the Faculty of Economics at the University of Antwerp.

Halting the import of Russian rough diamonds would mean the industry would relocate to Dubai or Mumbai, where there would be far less emphasis on transparency or sustainability than in Antwerp, says Vandenbempt.

Countries such as India, Israel or the United Arab Emirates would not join a boycott of Russian diamonds, which means the stones would still make it to the world market, says Joachim Dunkelmann of the German Federal Association of Jewellers, Jewellery and Watch Retailers (BJV).

“Tightening the regulations or laws against Russia would have no influence on this.”

However the Kremlin itself is likely profiting from the world’s appetite for diamonds. One of the biggest producers is the Russian diamond giant Alrosa, which says it “partly” belongs to the state. Industry observers believe the Russian state has a 33%-stake in the business.

Alrosa handles 95% of Russian diamond production, and about 27% worldwide, meaning at least every fourth stone worldwide is from Russia.

The company runs several mines in the Sakha region in north-eastern Russia and in Arkhangelsk in the north-west, and also has stakes in mines abroad, such as in Angola, for example.

Unlike Vandenbempt, commodities specialist Larisa Stanciu says a ban on the import of Russian rough diamonds would mean less money flowing into state coffers through Alrosa.

“This would have both a direct and indirect impact on the budget to support the war, even though revenues from the diamond trade are much lower than revenues from the gas and oil trade.”

Alrosa boss Sergei Ivanov is well-known abroad, and was among the first oligarchs from Russian President Vladimir Putin’s circles to be sanctioned by the United States. While the European Union hesitated, Washington slammed sanctions on Alrosa shortly after the war started, then doubled down and tightened them.

Vandenbempt points out, however, that Europeans are naive to think that the United States would do anything that would harm its own economy, adding that US jewellery sales account for 50% of the world market.

There is a loophole in the US sanctions provision, he says. The wording states that if a diamond has been significantly altered in another country, it may claim that region as its origin.

That means the United States can import Russian diamonds that are polished in India, for example, disguising their true origin.

The trouble is that technically, it is almost impossible to determine a stone’s true country of origin, says Vandenbempt. – dpa/Luise Evers

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Russia , diamonds , conflict diamonds , Alrosa


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