After Russian oil, India raises sanctions over Russian diamonds with Europe

Facing mounting losses over sanctions, Indian diamond exporters call for the EU-G7 to allow a local screening process; EAM, MEA raise the issue with the Belgian delegation

Updated - April 11, 2024 05:54 am IST

Published - April 10, 2024 10:13 pm IST - NEW DELHI

Image used for representative purpose only.

Image used for representative purpose only. | Photo Credit: Reuters

Faced with mounting losses and consignment delays due to new European Union-G7 sanctions, Indian diamond exporters are calling for a separate screening process to be set up in India, so that the newly mandated procedures for exports to Western countries can be processed smoothly.

The issue, which could prove as protracted as discussions over sanctions on Russian oil have been, was raised with a delegation from Belgium, one of the main sources of India’s diamond imports, during the visit of the Belgian Foreign Secretary, or President of the MFA Board, Theodora Gentzis (April 9-10), who met with External Affairs Minister S. Jaishankar on Tuesday, held talks at the Joint Economic Council with Commerce Secretary Sunil Barthwal, and held the second India-Belgian Foreign Office Consultations (FoC) co-chaired by the MEA Secretary (West) Pavan Kapoor in Delhi on Wednesday.  

“The G7 diamond file was discussed with our Indian interlocutors. Our cooperation around diamonds is an important theme in our economic relations, about which we continue to discuss regularly,” the Belgium Ministry of Foreign Affairs spokesperson said in response to queries from The Hindu.

While the official readout of the meeting released by the MEA on Wednesday did not specifically mention the problems being faced over diamond processing, where India holds 95% of the market, sources told The Hindu “Indian exporters’ concerns were raised during the visit”.

“The discussions encompassed key areas of bilateral cooperation including trade and economic cooperation, semiconductors, cyber and digital, Science and Tech, UNSC reforms and multilateral cooperation and institutional dialogue mechanisms,” the MEA said, adding that the dialogue had “extended to global and regional affairs” including an exchange on “key global challenges”.

Chief amongst these concerns are the procedures put into place by EU-G7 in their 12th round of sanctions against Russia for the war in Ukraine, that went into effect beginning December 2023, with a four-phase plan. While the first was a ban on importing Russian diamonds into Europe and the U.S., and didn’t affect India, the second phase that went into effect in March 2024 has extended the ban to Russian diamonds that are polished in a third country as well. 

“These proposed sanctions are part of an internationally coordinated G7 diamond ban, aiming to deprive Russia of this important revenue stream estimated at 4 billion Euros per year,” the notification of the 12th round of sanctions released in December 2023 had said.

India’s official policy is that it doesn’t recognise unilateral, non-United Nations sanctions. While Indian exporters are able to separate Russian and non-Russian diamonds for the two markets  (western and non-western), the western grouping’s decision that all rough diamonds must be verified in Antwerp itself through a “rough node” established there is slowing down the process by as much as three weeks, officials at the Gems and Jewellery Export Promotion Council said.

“This is about the livelihood of one million Indians who are involved in the diamond polishing industry, many of whom are poor,” one official, who asked not to be named, explained. 

According to the officials, the EU-G7 sanctions don’t just delay supplies, they have raised the cost of rough diamonds by cutting out Russian gems, even as demand for the industry has been lagging over the past two years due to the global economic downturn. In addition, making the Antwerp “rough” node the only place for screening diamonds for “traceability” and “certification” means that Indian exporters are losing privileged information about pricing, profits and other aspects of commercial security, they added.

According to the EU-G7 sanctions, as of September 1, 2024, the ban will also be expanded to include lab-grown diamonds, jewellery, and watches containing diamonds, indicating smaller diamonds will also come under the purview of sanctions, further constraining India’s options. 

As a result, the GJEPC and other industry bodies have been discussing the possibility of building a second “rough node” point in India, given its control of the processing and polishing market. “Otherwise, the entire industry in India could face a collapse,” one of the council officials told The Hindu. India exports about 65% of the polished diamonds it processes to western countries, while the rest is either sold internally, or goes to China, the Gulf and other destinations. 

The problem of Indian diamond exporters has been taken up before with little effect on the EU-G7 combine that includes most European countries, Canada, Japan and the U.S. In 2023, a delegation of the EU and U.S. Treasury Department officials had even visited Mumbai and Surat to take stock of the impact of the decisions, and had been handed petitions from the diamond workers’ unions as well. Neither the MEA nor the Belgian MFA responded to specific questions on whether a possible solution, including that of the “rough node” location in India, was discussed or considered favourably during the talks.

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