How can we prepare for the G7 sanctions against Russian diamonds and stay one step ahead when it comes to diamond traceability?
This was the question posed to leading diamond industry players during a webinar organized by renowned traceability specialist iTraceiT on May 10. Expert Avi Krawitz, who moderated the meeting, asked everyone to talk about the challenges they face.
This webinar is the first in a series of educational events that iTraceiT Academy is holding.
Participants:
Ravi Bhansali, Managing Director of Rosy Blue Belgium
Allison Charalambous, VP for Responsible Sourcing and Sustainability at Brilliant Earth
Frederic Degryse, CEO of iTraceiT
Joey Lager, Chief Officer for Strategic Procurement at Rubel & Ménasché
Moderated by: Avi Krawitz, diamond expert, journalist and analyst
As an introduction to this webinar, Avi Krawitz asked participants about how the sanctions introduced in March are affecting them, and reminded them that from September onwards, the measures will be more restrictive (reminder of the sanctions timetable).
Customs confusion
Without waiting for the sanctions, Allison Charalambous and Joey Lager said that they had immediately halted the purchase and manufacture of Russian diamonds acquired since the conflict began. Since the new rules were implemented, the problem everyone faced was that customs authorities – which seemed to have no clear guidelines – were in a state of panic. Rosy Blue had to begrudgingly put up with goods sometimes being held up for several weeks, including those not affected by the sanctions (De Beers consignments from Botswana, melee diamonds from processing units in China, goods in transit, etc.). Unfortunately, this situation may well continue. Ravi Bhansali mentioned the non-G7 countries that are being overzealous with their incoherent questions that have nothing to do with the sanctions, or countries like Japan that do belong to the G7 but are interpreting the rules in their own way. The picture is one of serious confusion. Rubel & Ménasché has experienced the same problems with poorly coordinated customs authorities, which have often not known which documents to ask for to allow diamonds into France.
The “Grandfather protocol”
Another problem is emerging, whereby the traceability of certain older goods can no longer be proven. Rosy Blue has seen 20-year-old diamonds blocked at customs. Under what conditions will the “grandfather protocol” apply? (Editor’s note – the “grandfather protocol” stipulates that diamonds bought, processed or in transit through Russia before the introduction of sanctions are not affected by them. However, proof must be provided, which is sometimes impossible and places a heavy burden on existing stocks). This exemption has not yet been confirmed, however.
As for more recent diamonds, what about rough bought between March and September, i.e. between the two sanction periods (bearing in mind that in September they will become even more restrictive) and which will return in cut form after September? Rubel & Ménasché is endeavoring to document its entire current stocks as comprehensively as possible, but lacks visibility on the documents that will be required from September 1.
Antwerp: a bottleneck?
The need to go through the Antwerp Bourse is fueling fears that the market could come to a complete standstill, with bottlenecks and major delivery delays. There are also significant additional costs involved, and the situation has left producer countries and industry players with a sour taste. Avi Krawitz pointed out that countries like Namibia, Angola and Botswana are already complaining loudly about the damage caused and calling for the sanctions to be relaxed. Rosy Blue estimates that only 5% of its diamonds from Africa will end up on the European market, but all of them will have to pass through Antwerp. Exporting countries are complaining about a discriminatory attitude (“neo-colonialism” is the term they are using).
Brilliant Earth raised an even more serious problem as a consequence of the first. Some of their suppliers do not intend to absorb the costs and difficulties caused by the implementation of sanctions, and are threatening not to comply with them, or even to leave the blockchain set up with Brilliant Earth. Allison Charalambous was expecting them to cooperate, but admitted that she was taken aback by their reaction and is worried about the future of supply, especially as the “sunrise period” of the sanctions approaches. A single checkpoint in Antwerp is not enough, so why can we not have another, perhaps in Botswana? she added.
How is traceability organized?
Avi Krawitz believes that the Russian crisis will at least have raised awareness of the traceability issue. First of all, where are we with melee diamonds, whose origins are known to be tough to establish? As a melee market specialist, Rubel & Ménasché emphasized its ability to trace this category of diamonds. The diamantaire’s goal is to be transparent with its customers (major jewelry houses), and has been documenting and auditing everything for a long time. To go even further, they have launched a pilot project with iTraceiT. Frédéric Degryse pointed out that, while it is impossible for iTraceiT to guarantee the origin of each melee, the different compositions of each batch (when there are several origins) can be provided reliably.
Generally speaking, the need for traceability has already put companies who attended the webinar to the test, if only due to the sanctions applied in Zimbabwe or in the fight against lab-grown diamonds. Rosy Blue has full control over its production chain, having invested heavily in technology, methods and personnel. Rubel & Ménasché has tightened its list of rough suppliers and only sells diamonds processed by its own teams, thereby controlling the entire chain. This means effectively anticipating customer needs, as nothing is sourced from outside this circle of trusted partners. Brilliant Earth – which has long been using a blockchain to trace the path of its gemstones from the mine to the store window – already has a good grounding in this practice. A blockchain is clearly the most secure tool available and avoids the proliferation of different systems, as long as the information is relevant.
Taking a long-term view
Frédéric Degryse’s message is to get ahead of the game and take the long view.
Demands around traceability and transparency will only increase, even once the sanctions are lifted. Other demands will emerge. The iTraceiT platform makes it possible to track every stage in the product extraction and manufacturing process, and is not limited to gemstones. Precious metals, packaging, watch straps, case components, etc. can all be included. We must not limit ourselves to a “wait and see” approach.
Will a reliable blockchain or a claim to perfect traceability be a marketing advantage? This seems undeniable, and it can be a useful value-based sales pitch for winning the confidence of the market and customers. But we need to be careful to avoid stigmatizing those who simply do not have the means to set these up, even if their practices are entirely responsible and respectable, stressed Ravi Bhansali.
To support this point, Joey Lager added that we need to ensure that these technologies are used intelligently, with real added value and not for purely marketing purposes.
The implementation of the sanctions against Russian diamonds still raises many questions that affect the smooth flow of supplies. If the measures are not clarified and applied more flexibly, there is a risk that the diamond market will become a bottleneck and that smaller suppliers will be squeezed out. Watch this space…
Source iTraceiT
