According to seven sources quoted by Reuters, the United States is reevaluating the strictest components of a proposed Group of Seven (G7) ban on Russian diamonds in response to protests from African nations, Indian gem processors, and New York jewellers.
The penalties, which were agreed upon in December and include a ban across the European Union, are one of the most serious disruptions to the sector in decades.
Two people involved with the conversations told Reuters that the US has withdrawn itself from G7 working groups on tougher measures, with one describing the US position as “there but not engaging”.
The United States State Department declined to comment.
A senior Biden administration official claimed that Washington had not changed its attitude and will continue to collaborate with the G7. “We need to balance hurting Russia with ensuring implementation is feasible,” said the official, who spoke on the condition of anonymity, according to Reuters.
The G7 sanctions are intended to cut off another cash stream for the Kremlin’s military effort in Ukraine. Although Russian state-run miner Alrosa claimed $3.5 billion in diamond revenues in 2023, this represents only a small portion of Moscow’s oil and gas earnings.
Since March, importers to G7 countries have had to demonstrate that diamonds did not come from Russia, the world’s top producer of rough diamonds. According to Reuters, sanctions on direct imports of Russian gemstones went into effect in January.
Starting in September, the EU will require diamonds weighing 0.5 carat or more to pass via Antwerp, Belgium, for traceability certification utilizing blockchain technology. According to sources, the G7 nations have decided on Antwerp as the initial center, with more to follow.
However, three sources reported that the US had cooled on requiring traceability, causing discussions to stop. The Biden administration source told Reuters that the agreement to develop a traceability mechanism by September 1st only extended to the EU, not the United States.
“We must consider the concerns of African partners, Indian and UAE partners, and ensure it’s workable for the US industry,” stated the official. “We’re still engaged but couldn’t commit to having this in place by September 1st.”
In February, the presidents of Angola, Botswana, and Namibia wrote to G7 leaders, claiming that a predetermined entrance point for the G7 market would be unjust and undermine income. According to Reuters, these countries account for 30% of global diamond production.
Italy, which holds the G7 leadership, declined to comment on the US position.
Any relaxation of the embargo risks creating gaps that allow Russian diamonds to access markets in New York, London, and Tokyo. According to Reuters, Belgian authorities confiscated suspected Russian diamonds worth millions in February, raising concerns.
Sanctions supporters claim that a strong traceability mechanism is required, and that without complete US participation, the prohibition will be useless. They attribute some industry reluctance to concerns about increased market openness.
A Belgian official emphasized the significance of addressing loopholes aggressively.
A prior US embargo on Russian diamonds did not apply to stones polished elsewhere, allowing those produced in India and traded in centers such as Dubai to enter the US market, according to Reuters.
The G7 embargo came after months of negotiations between Western cities. Diamond miners such as De Beers, Indian cutters, and jewellery stores have all expressed strong opposition to the restriction, claiming additional bureaucracy and costs.
De Beers supports the restriction, but recommends that diamond-producing countries certify origin at the source. “The likelihood of Russian diamonds entering the legitimate supply chain increases the further you move from the source,” the business told Reuters.
Virginia Drosos, CEO of Signet, the world’s largest diamond jewelry store, asked the US government to oppose the “G7 Belgian solution” in a letter obtained by Reuters.
Belgium has started a prototype tracking scheme in Antwerp, with some 20 diamond purchasers taking part, including French luxury giants LVMH and Kering, as well as Switzerland’s Richemont.
A spokesman for LVMH confirmed Tiffany & Co.’s participation. Kering and Richemont declined to comment, according to Reuters.
Belgian Prime Minister Alexander De Croo remarked in March that he was willing to consider more certification hubs provided they satisfied Antwerp’s standards, admitting that changes take time to settle concerns.