The United States is re-evaluating the most stringent elements of a ban on Russian diamonds agreed to by the Group of Seven (G7) major democracies, following opposition from African diamond producers, Indian gem polishers, and New York jewelry retailers, according to seven sources familiar with the negotiations.
The sanctions package, which includes a ban across the European Union, represents one of the biggest shakeups in the diamond industry in decades. However, the U.S. has now disconnected from the G7 working groups on the implementation of the strict controls, with one source describing the U.S. as “there but not engaging.”
The U.S. State Department declined to comment, but a senior Biden administration official said Washington had not changed its position and would continue working with the G7. However, the official acknowledged the need to “strike the right balance between hurting Russia and making sure that everything is implementable.”
The G7 sanctions aim to cut off another revenue stream for Russia’s war effort in Ukraine, even though diamonds represent a relatively small fraction of Moscow’s profits compared to oil and gas. Since March, importers to G7 countries must self-certify that diamonds do not originate from Russia, the world’s leading producer of rough diamonds.
The EU ban, set to take effect in September, would require diamonds of 0.5 carats and above to pass through Antwerp, Belgium’s centuries-old diamond hub, for traceability certification using blockchain technology. However, sources said Washington has cooled on enforcing this traceability requirement, and discussions on implementing the tracing mechanism have stalled.
The Biden administration official stated that the commitment to implementing a traceability mechanism by September 1st applies to the EU, not the U.S., citing the language in the G7 leaders’ statement from December. The official said the U.S. needs to consider concerns from African partners, Indian and UAE partners, and ensure the system is workable for the U.S. industry.
This potential softening of the phased ban risks leaving loopholes that could allow Russian diamonds to enter the boutiques of New York, London, and Tokyo. Advocates of the sanctions argue that a robust traceability mechanism is necessary to deliver an effective ban, and without full U.S. engagement, it cannot be achieved.