Lately, I've been thinking about the diverse interests that people have in the diamond industry. That’s not a critique. Having an agenda to pursue a benefit for oneself is inescapable and human nature. That’s what shapes our approach to a particular challenge and what motivates us to get things done.
This moment of reflection came as I was working on an article for Rapaport about the sanctions on Russian diamonds recently adopted by the Group of Seven (G7) nations.
In short, the sanctions are coming in three waves:
1. A ban on direct imports from Russia as of January 1.
2. A ban on goods sourced from Russian rough polished in third countries, effective March 1.
3. A ban on lab-grown diamonds, jewelry and watches containing diamonds from September 1.
The most important element for the industry is a traceability mechanism that will account for non-Russian goods. The registration and certification of goods on the blockchain will be done in Belgium and will be mandatory from September 1. A pilot program will be launched on March 1. See more details in my article that will be published this week in the Rapaport Research Report and later when it is published on www.rapaport.com.
Speaking to several officials to understand the measures, and judging by the reactions within the trade, exposed the many different agendas that people have in the industry.
In this case, it’s almost impossible to answer – or even ask – the question, “What’s good for the industry?” There are simply too many moving parts. That results in a series of “what abouts and whys.”
What about the artisanal mining sector, and India’s cottage industry are the most prominent – and valid – of questions. Some say the tech component will leave them behind. Proponents argue it will inspire much needed investment in those often-forgotten segments of the industry.
Of course, Belgium stands to gain from the flow of goods that will pass through Antwerp. Faced with competition from Dubai, it needs a boost to its relevance. But many are asking, why not allow for the registration and certification of goods in other centers, especially given that it is a tech-based mechanism? Perhaps more than one registration node would open the system up to manipulation and the mixing of goods – potentially with Russian production, European officials argue.
There are questions of cost and efficiency about which critics are rightfully concerned, and which proponents downplay as being minimal. There will no doubt be teething pains. Frankly, the timeline is too tight to avoid them. One hopes the G7 representatives will consider the industry’s concerns in the next few months of engagement.
But the fact that a tech solution is being adopted should be viewed as a net positive. I suspect it will ease the industry’s burdensome self-auditing, which was a concern regarding other proposals on the table to govern the sanctions protocol.
The artisanal and small-scale mining sector needs greater attention and investment regardless of the sanctions discussion. Let’s hope the new mechanism keeps it on the agenda.
The diamond industry tends to shy away from tech when solutions are initially presented and then fully embrace them. The traceability of goods was gradually creeping into the trade, driven by the brands who use it to enhance their story. Now it is being forced on the rest of the market to ensure source verification of non-Russian supply.
It’s a fast-track to the adoption of traceability programs that was perhaps not expected by many. However, once the dust has settled, the industry can use it as a base to enhance its storytelling. That, I think, is an agenda worth pursuing.
Image: Rough diamonds from Russia. (Alrosa)
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